> Can Technology Really Add Value To Real Estate Transactions?

Resource Center

The latest real estate crowdfunding news and resources

Can Technology Really Add Value To Real Estate Transactions?

Catching Up Quickly

Technology does not always advance evenly. The real estate industry has seen developments in internet marketing, the use of drone photography, and the use of predictive analytics. These have changed the industry in many ways. However, many facets of this important sector of the economy still have room for improvement. Here are four areas that are likely to get a remodeling job compliments of new technology. 

Title

Title insurance is a requirement of most real estate closings for a very good reason. Every buyer wants to be certain that they have a clear and valid title to the property they are buying. Title insurance provides that certainty. It insures against errors in the recording of a title that can cause financial harm to the new owner.

Blockchain technology can provide the same assurance at a very low cost. Records entered on a blockchain cannot be altered or lost. Recording real estate titles on blockchain will give the new owner the absolute assurance that there are no errors. This will also eliminate the need for and expense of title searches.

Keep in mind that this is far more than simply digitizing ownership records. Blockchain is a new way of storing information, and any new approach has to have a way to transition from the old way of doing things.  Moving title information onto a new platform from a legacy filing system may require a separate and creative technological solution.

Heating, Ventilation and Air Conditioning

Every business looks for “low-hanging fruit”.  This is the easy-to-implement solution that pays big dividends in terms of cost savings or other efficiency.  Heating, ventilation and air conditioning (HVAC) is the low-hanging fruit of building maintenance. Spending on this one item accounts for almost a third  of all maintenance expenses, and over twice the next largest line item for commercial real estate. In addition, HVAC has the largest carbon footprint of any operating system in a building.

The opportunity exists because most HVAC work is still done by hand.  Personal inspections and personal opinions serve as the primary sources of information. Comparative analytics are all but absent from the management and maintenance of HVAC systems.  Not all situations are properly identified, resulting in costly emergency repairs.

Rravti, a technology start up firm, is working to change this. They have created a data management system that evaluates energy use and the effectiveness of HVAC systems. Identifying efficiencies and employing predictive analytics which has resulted in savings for both property managers and owners who use their proprietary models.

Hard Money Lenders

Real estate financing is moving forward more quickly than other areas, but still has some way to go before it can be considered up-to-date. The problem is that the traditional source of real estate financing, banks, are ill-equipped to deal with the demands of the modern fix-and-flip real estate investor or even a homeowner who needs a quick answer to close a quick sale.

This bottleneck started to open with the JOBS Act which became law in 2012. This allowed crowdfunding and opened new avenues for real estate investors to secure funding. Hard money lenders (HML) entered the financing space with an innovative blend of financial underwriting, interest rates and risk sharing. Real estate investors now have access to capital in a new and more efficient manner.

This improvement is spreading to the residential sector. Retail banks still play a significant role in the home mortgage sector, but online companies like Quicken Loans are using technology to disrupt the business.  As more financial data becomes readily available through automated requests, Artificial Intelligence (AI) will conduct more financial underwriting without direct human involvement, speeding up the process and reducing costs.

Learn How To Find the Right Lender For Your Real Estate Loans

Contracting

Real estate closings also represent a real opportunity for cost savings, but have an even greater hurdle to overcome than real estate records.  The simple fact is that there is a compelling economic reason to gather representatives of the buyer and the seller in one place at one time.  That reason is the need to get everything done correctly.

Smart contracts on blockchain have the capability to do this same thing at a much lower cost.  These self-executing computer programs can transfer value and record information, which is the basic operation of a real estate closing.  However, it will probably be necessary to record real estate titles on the blockchain in order to reap these benefits.

Share this post:

Share on facebook
Share on twitter
Share on linkedin