(Above) John Heithaus, Heithaus Properties LLC, and Chao Cheng-Shorland, ShelterZoom, discuss “How Blockchain May Change the Future of Real Estate” at RISMedia’s 2019 Real Estate CEO Exchange. (Credit: Korin Krossber of PlanOmatic)
Blockchain has become a buzzword in recent years, and according to two real estate industry experts, the tech phenomenon is worthy of the buzz.
John L. Heithaus, principal of Heithaus Properties, LLC, and Chao Cheng-Shorland, co-founder and CEO of ShelterZoom, discussed this innovative technology at RISMedia’s 2019 Real Estate CEO Exchange in New York City last week.
During a session titled, “How Blockchain May Change the Future of Real Estate,” Heithaus noted blockchain is making “substantive changes” in many other industries, including financial services, healthcare and homeland security. Now, he said, it’s the real estate industry’s turn.
Heithaus suggested the home-buying and -selling process is still too complicated and slow, and it needs to evolve to accommodate today’s consumers, who are used to an increasingly fast-paced, technologically driven world.
“There’s been a tremendous amount of innovation in our business,” Heithaus acknowledged. “Zillow, Trulia, Homes.com and others have done a great job of revolutionizing the searching experience. Yet when it comes to actually buying or selling property, the process needs improvement. We must do better.”
He said blockchain adoption could go a long way toward streamlining real estate transactions.
So, what is blockchain technology? If you search online, you’ll find a definition similar to this one from Harvard Business Review: “Blockchain is an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way.” Depending on where you search, the explanation can get much more complex from there.
Fortunately, according to Heithaus, the beauty of blockchain is that you don’t necessarily need to understand how it works in order to benefit from it. For example, he said consumers don’t know the inner workings of an automated teller machine, yet they still know how to grab cash from an ATM on the go quickly and easily.
“You don’t need a user manual, you don’t have to sit in a training class—you just go up and push the buttons and the darn things work,” Heithaus said of ATMs. He emphasized that the key to blockchain adoption in the real estate industry is to ensure that blockchain-based solutions are as transparent and straightforward as possible for the user.
Cheng-Shorland agreed, adding that ShelterZoom, a developer of blockchain-based solutions for real estate professionals, aims to ensure that users don’t worry about “what’s underneath the surface.”
“You just need to understand the benefits it can give you,” she said.
John Heithaus, Heithaus Properties LLC, and Chao Cheng-Shorland, ShelterZoom, discuss “How Blockchain May Change the Future of Real Estate” at RISMedia’s 2019 Real Estate CEO Exchange. (Credit: Korin Krossber of PlanOmatic)
As for those potential benefits, Cheng-Shorland said blockchain enables interconnectivity, speed, trust and security throughout the entire real estate transaction process.
“One of the first things I observed about the real estate industry,” Cheng-Shorland said, “was that it is truly fragmented.” She suggested that the buying and selling of homes can take months, in large part, because “there’s no interconnectivity between all the contracts, the forms, the people.”
According to Cheng-Shorland, blockchain technology could provide the necessary interconnectivity and interoperability, enabling real estate transactions to be done digitally and allowing documents and data, all in one place, to “talk to each other.” It could help eliminate paperwork, manage offers and negotiations, and ultimately save a significant amount of time.
“Blockchain is very much built around agents to help them streamline their operations, cut down huge costs and speed up their process,” she said. “Speed is your friend. If you have the speed, you’ll have more listings, you’ll get more sales done and you’ll get more commission checks.”
Cheng-Shorland pointed out that the iBuyer business model is growing popular among industry stakeholders and consumers due to its expediency, but she claimed “in order to really enhance that model, you need the blockchain because it enables that speed, which other traditional technology does not have.”
Cheng-Shorland said blockchain could also help real estate professionals build trust with clients and colleagues because “everything is self-governed” and the technology enables instant communication. Furthermore, she said blockchain is a secure transaction platform that allows users to hold onto their own data.
“Even we, as a service provider, don’t see any data going through your system,” she added.
Cheng-Shorland said the fragmentation issue across the whole real estate transaction process is the “immediate problem we’re trying to solve. It is a big task to tackle.”
For its part, ShelterZoom has developed a suite of blockchain-based solutions to help spur interconnectivity in the industry. Most recently, the tech company announced its Contract of Things (CoT), designed to “transform forms, documents and contracts into fully digital and interoperable assets.”
Because it’s relatively new—and rather complicated—blockchain may be confusing or seem intimidating. But during the CEO Exchange session, Heithaus reminded the 300-plus attendees about another once-mysterious tech innovation people were wary of: the internet.
Heithaus showed a slide displaying Coldwell Banker’s very first website. He explained that the site was launched back in 1998. With its bland colors and clunky layout, it looked like a technological relic in 2019.
Heithaus told the crowd, “Part of my job was to go around the country and convince all the directors we worked with that this internet thing was a good thing.
“They chased me out of there with pitchforks,” he quipped. “Now fast-forward almost 25 years later, imagine an agent, a team, a brokerage without a website.”
Will blockchain change the future of real estate? Only time will tell. Meanwhile, Heithaus urged anyone interested in blockchain to reach out to Cheng-Shorland and ShelterZoom for more in-depth information.
For CEO Exchange continuing coverage, visit RISMedia.com.
Joe Bebon is RISMedia’s associate editor. Email him your real estate news ideas at jbebon@rismedia.com.
Comment
And the lending process? This really seems to be the most time consuming, without a loan the transaction would or could be only a few days. Unlike an ATM a client seems to want to understand the inner workings more so because of the scale or liabilities.
Comment A residential real estate transaction as opposed to a commercial transaction is very often an emotional sale, both on the Sellers and especially on the Buyer’s side. Speed is not necessarily a friend to that residential process. The negotiation between the buyer and seller being facilitated by the Brokers takes time for each party to fully understand what the clauses in a contract mean and how that will benefit or hurt their interests. Taking the human interaction out of the process to the point that technology removes the Broker from that human communication face to face will not necessarily build trust in the transaction as Ms. Cheng is claiming. I have negotiated thousands of residential contracts over 40 years and the above opinions are a reflection of what goes on behind the scenes. I support efficiency, but not to the loss of the Broker’s true role as transaction party for the highest and best for both parties. If we are a buyers broker or a Sellers broker, legal terms, then that brings an entire different reflection on my comments.
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In NY metro the problem is not the time to transmit the documents but the quantity of them. All have to be read and signed and I don’t see how block chain will shorten the length of time to close a deal. Take away the need for an attorney add a title in escrow and the process will get shorter
RippleNet and XRP are taking over finance. Only a matter of time before they handle real estate transactions as well. Imagine transferring real estate ownership in four seconds or less.
Maybe I’m a “fossil” being in the business for over 27 years but a real estate transaction requires more than just a touch of the button of a computer keyboard or text messaging…PERIOD. If our services are cheapened then we are as well.
What’s the hurry? In residential real estate this is the largest, most significant purchase in a person’s life. 30-45 days does not seem unreasonable to give time for due diligence, negotiation and not paying for appraisals until there is a meeting of minds. Most first time buyers need to give notice to their landlords and often a speedy close puts more burden on them.
I’m all for technology making things easier but time is our friend when making critical decisions, getting bids for repairs, or additional inspections if needed. This is not a trip to the grocery store, it’s a very personal and complex transaction that takes on the personalities of the parties involved. Streaming is not always our friend , as with desktop underwriting. We are not all square pegs and square holes.
If a transaction was just between a buyer and their agent, and a seller and their agent, then efficiencies can be increased. But here in the OC, our transactions typically require a pest inspector, a home inspector, an appraiser and most importantly a lender. We have no control over these providers schedules and work load, especially the lender. And each of these activities potentially triggers a host of issues that need discussion, negotiation, and resolution – before the transaction can move forward. Additionally, buyers and sellers need time to get their affairs together, in order to plan and execute a move.
Your comment that it currently takes “Months” to close doesn’t apply in our area. Residential real estate purchases and sales take only a few days from start to finish if it is cash. The few days has to do with getting Title Company to issue title insurance to ensure a clear title.
Using a Lender can extend that time to 3-weeks. Our lenders can actually process a loan in less than 2 weeks. It is the appraisal process and the 3-DAY CD clause that slows it down. Getting the appraisal completed can take a week or more. Even with an appraisal, most lenders process the loans in 3-weeks or less. However, the Seller and/or Buyer may not want to close that quickly. Most want 30-45 days in which to close. So, I don’t really see the benefit for Residential Real Estate Sales.
I agree with the comments made by Richard. I also have been in the business over 40 years. I have embraced change in the industry since the 70’s and I had computers on the desks in my office in the early 80’s. What the proponents of the Block Chain technology are describing, in my opinion, is a world were the processes of closing the deal after the contract is signed takes hours. All the insurance and mortgage process etc is accelerated using block chain tech. Getting the buyer or the seller through the emotional/ Human part of the deal is still the purview of the broker. Technology even AI can’t do it.