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Blockchain Could Speed Homebuying—Once the Hurdles Are Cleared

Anyone who’s ever bought or sold a home knows how expensive and drawn out that can be. Now an Ohio county wants to cut the time to transfer a title to hours or even seconds using blockchain. The technology could reduce closing costs that run thousands of dollars.

Franklin County, the 33rd largest county in the nation, plans to move all of its 438,000 parcels onto a digital ledger in the next two to three years, Auditor Clarence Mingo said in a phone interview. Sellers, real-estate agents, title companies, lenders and government will use the technology, down to be virtually tamper proof, to complete sales faster and cut down on fraud.

Many governments in the U.S. and around the world -- including Bermuda, Ukraine, Dubai and India -- are exploring or already placing property deeds on blockchain, an effort that could reshape how sales are processed in the global real-estate market, which is expected to reach $4.26 trillion by 2025. The change will require altering existing laws and may force blockchain startups to foot the bill for the development of new government registries.

Eventually a young couple buying their first home could complete a deal in seconds, by tapping a mobile app. Lenders, agents, insurers and other parties to real-estate transactions would all be on blockchain to facilitate a deal.

“Transaction costs could come down from thousands of dollars per sale to a modest service fee,” Mike Graglia and Christopher Mellon, property rights analysts at the New America think tank in Washington, said in a recent report.

Migrating Deeds

As deeds migrate onto blockchain, title companies and others involved in real-estate transactions could see their roles shrink. Costly functions like escrow could become automated with so-called smart contracts -- bits of software that live on blockchain. The need to reconcile different real-estate documents should go away, because blockchain keeps a secure, unchangeable record that should reduce discrepancies.

“Title and escrow companies would have meaningful risk from technology developing in this direction, as the need for their services is diminished if not eliminated,” Gil Luria, director of research at D.A. Davidson & Co., said in an email.

Many in the title industry expect this changeover to be slow and don’t sound worried. For a sale to close, title companies have to access not only deeds, but other databases that can keep a sale from going through. Those include records of divorces, child support, outstanding utility bills and property taxes, said Marc Shaw, president of title agent World Wide Land Transfer Inc. Getting all of those databases on blockchain could take 15 to 20 years, he said.

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