Three major problems that affect the real estate industry are:
1. Siloed property and transaction data
2. High transaction costs
3. A lack of liquidity
As mentioned in our previous posts, companies that have targeted these problems have had - at best - marginal impacts. Rigid incentive structures of industry professionals have simply not allowed for any meaningful change.
The use of blockchains may finally be capable of breaking this trend.
The most interesting blockchain application in real estate I’ve seen so far is Rex, a company that is taking a bold, phased approach to changing how real estate is transacted by creating a secure data layer accessible to everyone (addressing problem #1) that minimizes transaction and listing costs (addressing problem #2) that can unlock liquidity for owners (addressing problem #3). Rex is in direct competition with the traditional MLS.
Siloed Property and Transaction Data
You can read Rex’s whitepaper here, but the short of it is that Rex is addressing the data silo problem by incentivizing users, including real estate professionals, to participate in the Rex network and share their listings for anyone to see. The more listings and data that is shared, the more users are compensated in REX tokens (more on this in later posts, but the whitepaper outlines the utility of these tokens in greater detail). This kills two birds with one stone: the data is freely available, and fees an agent who would typically pay to upload information to the MLS evaporate. Consumers (sellers and buyers) can access the Rex MLS without the need to subsidize a buyer’s agent fees to drive eyeballs to their properties.
Liquidity!
The most exciting element that Rex wants to introduce relates to “tokenized ownership” of real estate. The company is going to release longer-form details of how this will work, but at the most basic level, “tokenizing” ownership allows for the partial sale of real estate safely and efficiently, without a financial intermediary to centralize and complicate the transaction.
In the words of the company:
What if you could trade 1,000 tokens in the Chrysler building like you trade 1,000 shares of Apple?
The analogy is that you’d be able to buy a building’s tokens as you would a share of a company’s stock, which creates liquidity for a real estate asset’s owner just as buying shares does for a public company’s ownership. Replace “Chrysler Building” with “123 Main St.” and you have a model that can unlock liquidity with a completely technology-driven platform, and open up an asset class typically reserved for investors and institutions with significant capital. Looking further into the future, this could lead to an evolution of the traditional illiquid mortgage. No middlemen, no fees, and unlimited visibility. In a world where 83% of retirees see the majority of their net worth locked up in illiquid real estate investments, this could be a transformative feature.
Summary:
The ideas of freeing data and enabling partial sales of real estate are not new, but the elegance of a blockchain solution to achieve both certainly is. Rex outlines the risks of their project, which are significant, but this is an early sign that blockchain can – and will – drive efficiencies in real estate that many consider impossible.