In a recent Propmodo Daily briefing on antitrust regulation in real estate, I mentioned the example of Standard Oil’s experience with trust-busting. It makes for a perfect example: the dissolution of an industry giant into numerous smaller businesses. But that narrative is only half of the story. After Standard broke up into its constituent firms, those firms went through a century of their own individual rises and falls before eventually becoming or being absorbed by Chevron, ExxonMobil, BP, and Marathon. It just made sense: between the macro factors affecting O&G and the nature of economies of scale, it was bound to happen.
Real estate has seen a similar saga of consolidation, with many of the big brokers facing it even today. But the story of consolidation in real estate goes well beyond the scope of companies merging or acquiring one another. There is also a very legitimate argument that the way real estate business is done today is too fragmented for the good of the transaction and the participants.
Consider a simple apartment sale. An owner looking to move his or her property has to communicate and coordinate with a sales broker, who has to rally their own team before marketing the property out to a buyer or buyer’s agent. Once the three or four parties have all come to an agreement in terms of deal terms and price, even more participants enter the equation: the title and escrow tea, along with an array of inspectors, contractors, managers, and appraisers.
Handing off the deal’s fate from party to party is an invitation for delays, and as one of the best brokers I know says, “time kills deals.” But the opportunities to streamline the transaction are relatively few and far between. You can try to cut out the brokers, itself a risky and challenging proposition. You can work with a brokerage that takes advantage of tech where they can to increase process efficiency. Or you can try dual repping the transaction, which can save time but is far from always an option.
Another angle of approach is to avoid disrupting the buyer and seller themselves and instead focus on making the individual steps of the transaction more efficient; a consolidation of effort. Allowing information to be shared and documents signed on a single platform, with a built in payment functionality, has the potential to speed up the transaction process in a way that owners, buyers, and brokers alike can all agree with.
Until recently, the idea of seriously impacting the title and escrow process has seemed far-fetched based on security and fraud concerns. But the development of blockchain tech has opened new futures for the state of the industry. And while the idea of a completely blockchain-enabled real estate industry is still firmly in the future, the impacts of the technology are already being felt.
“County recorders have already started to recognize the benefits of using blockchain and some of them already implement it today,” said Natalia Karayaneva, CEO of real estate closing platform Propy. “For example, a Vermont county adopted blockchain for title recording back in 2018. Many more counties are following suit. We are in talks with quite a few counties now and we will be releasing official news about it in the next couple of months.”
In oil companies and real estate deals, time kills. While the full rollout of blockchain-enabled closing platforms is still on the horizon, it has certainly already begun. For brokers, it’s an opportunity to set themselves apart with the utilization of a fast-growing technology. For owners and buyers, it’s a chance to jump on what will almost certainly be the norm in the future, and realize time and cost savings today. For title and escrow professionals, it might be something more concerning.