Individual real estate transactions can generate up to 30 or more individual fees, which can add up to thousands of dollars in fees and expenses. While these fees are shared by the buyer and seller, they still decrease the overall value of the property to both parties. This is part of what causes real estate to appreciate over time and why you get the most value from a property the longer you hold it.
If you buy a property for $500,000 that generates $5,000 in closing costs and then sell it the next year for the same price, you can actually lose up to $10,000 because you will have to pay a portion of the closing costs as both the buyer and seller. If you buy the property for $500,000, hold it for 10 years and sell it for $550,000, you are still only making a small profit thanks to closing costs on both end of the transaction.
Blockchain technology is poised to change all of this. The reason closing costs are so high is because of the sheer number of parties involved, each of whom charge an individual fee. Blockchain technology, on the other hand, involves thousands of parties for a flat fee. So, for instance, let’s say there are 10 parties involved in a closing that all charge a $100 fee. That’s $1,000 in fees right there. Now say instead, that you paid a $100 fee for thousands of parties to witness the transaction and also arbitrate any disputes. The reason they can charge less is because those same 1,000 people are witnessing and arbitrating thousands of transactions all at the same time.
Not only will blockchain minimize the costs of real estate transactions, but it will also significantly decrease the time they take. The more parties you have involved in administering a contract, the longer it takes because each individual party has to have time to do their part. In some cases, one party can’t do their job until someone else has done theirs. At the moment, from the time an offer is accepted to closing can be as little as 30 days, but can often take as long as 6 month or more. With blockchain technology, the time may not be far off when it is jut as easy to buy and sell a home as rent an apartment.