Verifying identity and financial information is a fundamental part of real estate transactions. Anything that undermines the security of such verification is a danger to the industry.
In an analysis published March 24 at Inman.com, staff writer Brad Inman touted blockchain as a way to ease security concerns.
Blockchain is a software solution that connects databases that authenticate everyone involved in a transaction, including buyer, renter, seller and the property.
The need for such a solution was highlighted by a recent revelation that cyber criminals are hacking into agent emails and duping homebuyers into wiring money to illicit bank accounts. That problem was spotlighted in a March 19 Inman.com report by Marian McPherson.
Inman pointed out that the real estate industry relies on insecure modes of communication such as telephone, fax, paper and email for its verification needs. That not only creates problems such as the scam detailed by McPherson, it can put agents at risk when they respond to leads without really knowing their potential customer.
One solution, Inman wrote, is blockchain. As an example of how it all works, he used the real estate niche of subleasing an apartment or breaking a lease with a landlord.
The Flip app hosts a marketplace where renters can buy and sell leases. Sellers’ identities and qualification details are pre-verified by the app. Renters must answer a questionnaire and provide proof of employment, income, savings, references and a credit report.
Then the verified renters are loaded onto blockchain. Renters whose identities are stored on the blockchain can then peruse leases posted for sale by people seeking to move. All have been authenticated – renter, mover and property alike – before being loaded onto blockchain, so everyone can proceed with confidence.
And, Inman pointed out, leaseholders who connect with renters through blockchain can forward a renter’s package – generated by Flip and verified on blockchain — to their landlord or property manager to review, accept or deny.
To apply the principle to the broader real estate market, Inman wrote that if prospects were in a blockchain system, already screened for financial status, it could save agents countless hours of working with unqualified buyers.
Once a blockchain system is up and running, he wrote, additional databases such as sexual offenders could be added, and smart contracts could be included. Blockchain also enables secure, closed messaging platforms open only to authenticated parties.
Inman urged the National Association of Realtors to support blockchain innovation financially, perhaps with a pilot program, and politically as as a strategy for curtailing real estate fraud and promoting agent safety.