Part I of Staying Relevant in Real Estate discussed the expanding divisions in real estate. The symptoms are clear to almost any industry participant; higher costs, lower margins and a growing distrust between professionals, firms, vendors, and consumers. Technology is disrupting the legacy model, causing an industry-wide battle for control.
However, the irony of the situation is interesting as the very thing driving instability (technology) is also the solution. It’s only requirement for everyone’s success is collaboration. Unfortunately, the industry continues to push hard against change, only expediting its arrival.
“For every action, there is an equal and opposite reaction”. - Issac Newton
We’d be better suited to follow Buckminster Fuller’s advice:
“Don't fight forces, use them”.
I can attest to the validity and accuracy of these statements thanks to my loving wife.
We are now at an inflection point where agents are cannibalizing their commissions, brokerages are hoarding data, mortgage and title companies are fending off hackers and technologists are building tools that further fragment an already fragmented industry.
It’s not all doom and gloom, however. In fact, the opportunity is almost overwhelming. This week I want to focus on data. In the world of digital real estate, data is where every transaction begins and ends.
Today, the industry faces a massive data transfer and data management problem.
It’s February 2020...
I’m real estate agent Kristey Anne and have a new listing on 123 Kent Street.
To market Kent Street, I start by entering the data into my broker’s CRM system followed by my local MLS, who then syndicates it out for national exposure.
Problem #1
Kristey Anne has to enter/manage her listing data via multiple databases that were not designed to communicate with each other.
I’m buyer John Mac and discovered Kristey Anne’s listing online. I call Kristey Anne for details and get routed to a third party who now represents me.
Problem #2
Kristey Anne does not have a direct line of connection to her buyer.
Subsequent to ratifying the contract, John’s agent emails a copy to Kristey Anne, the title company and mortgage firm. John then gets instructions to wire his deposit immediately.
As the transaction proceeds throughout the coming months, documents fly between participant emails and competing transaction rooms increasing cost and decreasing security.
Problem #3
Sensitive data is being transmitted via email where it can be leaked or intercepted by malicious hackers.
Solution
In the above example, Kristey Anne listed her property in three separate databases that were not designed to communicate with each other. Instead, they were optimized to serve the organizations that pay for them, resulting in a chain of misaligned incentives and a major distribution problem for Kristey Anne.
To solve her data distribution problem, Kristey Anne needs an objective system without subjective incentives to bridge her existing platforms together. That system is blockchain.
When people hear the term blockchain they tend to gravitate towards tokens (Bitcoin, Ether, XRP). However, these tokens represent products built on top of the blockchain. The blockchain itself is the infrastructure layer that these tokens rely on for transferability. In its simplest form, the blockchain is really just a global database that is not owned by any one individual or company. If I can use the blockchain to transfer value (like Bitcoin) by locking it onto the blockchain then giving the keys to someone in China, I’ve just found a way to transfer value just as fast as I can transfer information (like an email). Even better, there is no third party like a bank involved, only a public, freely accessible database. What if we apply that same process to the transfer of real estate data?
It turns out we can and we are. These systems are being built and tested as we speak.
Not only will Kristey Anne be able to enter her listing data into one place where her CRM, MLS, and portal all pull from, but she will also have an auditable trail of every event, document, and payment associated with that property.
How does this work?
We’ll start with an address. In the physical world, 123 Kent Street can only exist in one location. It cannot exist in New York if it's physically located in California. However, digitally speaking, 123 Kent Street can (and does) exist on many different applications. Which application has the correct information for 123 Kent Street? Do they all have the most recent price change? Do they know a third bedroom was just added? No, because there is no common thread linking 123 Kent Street between these competing applications.
Until now...
With blockchain, we can create the digital equivalent of 123 Kent Street’s physical address, establishing (for the first time) a single verifiable source of truth that is easily accessible and transferable at any time.
Kristey Anne enters 123 Kent Street into her brokers portal that is linked to the blockchain. 123 Kent Street is assigned a unique digital address then encrypted and stored on the blockchain. Through the encryption process (like the example above of locking a Bitcoin on the blockchain and sharing it with someone in China), Kristey Anne is able to share her property keys with her CRM, MLS, and portal. With 123 Kent Streets’ unique digital identifier, Kristey Anne’s CRM, MLS, and portal can retrieve the right information from the blockchain and unlock her data with the keys. Kristey Anne can then track and manage where her property data is being shared. In addition, Kristey Anne and her firm have an auditable trail of these events. Lastly, whenever Kristey Anne updates the data on 123 Kent Street (like price), everyone holding a set of Kristey Anne’s keys gets an instant update. The result is a new system for storing and transferring real estate data, solving Kristey Anne’s (and her brokers’) data management problem without replacing all of their current workflow tools.
The sooner the industry realizes there is a technology that can solve the data management problem the better off and more productive it will be. All it takes is a collaboration between existing participants. However, if the status quo continues then a new system will eventually overtake the current, replacing many of today’s current workflow tools and drastically altering the transaction process.
I’m personally thrilled about the efficiencies that this will bring to real estate. However, this is just the tip of the iceberg. We will begin to see data marketplaces and new networks emerge where we can monetize our data, time and expertise.