United States: Proptech: Is It The Future Of Real Estate?

Last Updated: July 31 2019
Article by Tony Alfonso

Following the significant impact that new technologies are having on the financial sector (commonly referred to as fintech), the real estate industry has now become a focus of disruptive technologies which are claiming to change how real estate is purchased, developed and sold. Players in the real estate industry have become increasingly focused on the impact that proptech will have on real estate. However, in order to determine the potential impact of proptech, the industry first needs to have a clear understanding of exactly what proptech means. Although proptech is often defined as real property technology or technology that is focused on the real estate industry, the definition could be expanded to refer to innovative technologies, processes, standards and uses which are transforming the real estate industry. By taking advantage of proptech, companies can make more profit, while also having a positive impact on the community.

One of the main concerns that many companies have is whether proptech is simply the latest buzz word or whether proptech will have a lasting impact on the industry. Therefore, many companies have not been early adopters in incorporating proptech into their businesses. Given the potential reputational risk associated with using new technologies and its potential effect on legacy systems, one can understand why real estate companies are cautious about adopting proptech. Additionally, blockchain and other new technologies raise concerns about the potential legal consequences which may result from adopting software that may not be fully compliant with existing legal requirements.

Digitizing real estate assets: The impact of blockchain

Blockchain is one of the most talked-about proptech technologies that will impact the real estate industry. Blockchain is a distributed ledger or database which contains a record of information, and, in relation to real estate, works as follows: once a transaction occurs and the parties have satisfied all conditions for completion of the transaction, it is then verified by the network of computers or nodes on the blockchain. If a transaction is verified by the network, then a new block for the transaction is added to the blockchain and everyone on the blockchain can view the block containing specific information related to the transaction.

The blockchain verifies transactions using complex cryptographic technology. A common industry misunderstanding about blockchain is that it suffers the same negative perceptions as cryptocurrencies, like bitcoin. Blockchain is not the same as bitcoin: it is only the technology that makes bitcoin and other cryptocurrencies work. There are many different potential uses of blockchain technology in the real estate industry that go well beyond the creation of tokens and other cryptocurrencies.

An important use of blockchain is the digitization of real estate assets, which can occur in two important ways. First, using blockchain, real estate owners can create part-ownership interests in real estate assets through issuance of tokens, which can then be sold to third parties. The tokens simply refer to a digital representation of a typical share in a company which is recorded on the blockchain. Once the tokens are created, the owner of the real estate asset can raise capital through the sale of the tokens using blockchain. All of the information related to the sale and ownership of the tokens is digitally recorded on the blockchain and preserved so that it is fully transparent and available to third parties. Additionally, creation of secondary markets for the sale of the real estate tokens can provide liquidity for owners of the tokens to easily sell tokens for one project and purchase tokens in another real estate asset. The process of digitizing the real estate assets through the creation and sale of tokens will provide real estate owners and developers with access to new domestic and global markets that were previously unavailable due to the barriers inherent in the traditional process of raising capital.

The next critical step in digitizing real estate assets relates to the deed recording process. This has historically been subject to a significant amount of counterparty risk, which is lessened by the title insurance industry which creates insurance to trust and certainty in real estate transactions. However, by moving towards a digital recording process, blockchain can verify real estate transactions and maintain an immutable and transparent record of the transfer of real property. This information will be available to all third parties who have access to the blockchain. In order to change the process as little as possible, the deed that is digitally recorded on the blockchain can be prepared using the same form and can be physically recorded in the current local recording office just as it is now. Once the deed is recorded it can then be digitally uploaded onto the blockchain. A critical aspect of digitizing the recording process will be to create a consensus of what constitutes a valid conveyance. However, digitally recording the transaction on the blockchain can be an important way of reducing counterparty risk. Capital markets and lenders rely heavily on title insurance in underwriting traditional acquisition and construction loans as well as in securitizations of mortgaged backed loans. Although the title insurance requirements will not completely be replaced by blockchain, perfecting the transfer of title to real property digitally using blockchain can create additional trust in the validity of real estate transactions.

Proptech: Next steps

Although proptech is positioned to help the real estate industry decrease costs and increase efficiency, technology alone is not sufficient to bring significant changes. Traditional real estate industry players and other stakeholders will need to shape the future of the industry through the thoughtful integration of proptech. Although many claim that proptech will disrupt the industry, the reality is that the promise of proptech is more likely to serve as a tool to help industry players create the future of real estate.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions