For Part I of this series, please click here.
Chasing down documents, recovering escrow funds, and worrying about fraud are examples of things in the real estate world that create stress. Wouldn’t it be nice to know that your contract will be executed and carried out accurately and without fail? That it will occur almost automatically and with fewer 3rd-party hands touching it along the way? Your work life might be simplified in that case, freeing you up for other matters. Really, the process of transferring ownership of property in Pennsylvania can be complex and time-consuming. It typically involves intermediaries which can add significant costs to the transaction. Perhaps blockchain technology can simplify our lives and reduce transactional costs in the real estate context and elsewhere.
One of the key benefits of blockchain technology for property transactions is the ability to create smart contracts. Smart contracts are self-executing contracts with the terms of the agreement directly written into code. Once the conditions of the contract are met, the contract automatically executes. A simple, mechanized form of a smart contract that we’ve all used is a vending machine. I insert $1.25 (or $0.25 when I was a kid), hit A3, and automatically receive my Snickers. In the context of property sales, smart contracts can be used to automate the transfer of ownership of property once certain conditions are met, such as the transfer of funds. This can help to reduce the risk of fraud and errors in the transfer of ownership.
In addition, blockchain technology can be used to record deeds and other documents. By recording deeds on a blockchain, the transfer of ownership can be made more transparent, efficient, and secure because intermediaries and human error are removed from the process. Relatedly, another benefit of blockchain technology is the ability to verify property titles quickly and accurately. Property titles stored on a blockchain are tamper-proof and easily accessible for review. The automation that comes with smart contracts on the blockchain also could eliminate delays in the recording process and make it easier to search for recorded documents. There no longer would be a need to manually track a ledger and compare one book and page reference to the next.
By using blockchain technology to simplify the sale of property, we can reduce the costs and time associated with property transactions, making it easier for people to buy and sell property. It can simplify our lives and reduce costs. And still, blockchain technology can do more – and we will discuss how it can benefit the development process in our next post.
Until then, if you have any questions about this post or any other land use questions, please contact one of the members of the McNees Wallace and Nurick Land Use Group for assistance.