Smart contracts in real estate: Automating and simplifying property deals

Buying a house can be exciting. It often represents a step towards attaining your dream property or relocating to pursue a new passion or career opportunity.

However, it’s also considered one of life’s most stressful events. It’s a long and difficult process with a ton of complex paperwork and mounting fees.

So you might be relieved to know that those days might soon be over thanks to one quickly developing technology: smart contracts. By streamlining traditional home buying with automated property deals, smart contracts in real estate are set to transform the industry.

Many people worry that digital property contracts might be too complicated or unsafe. But smart contracts are actually much simpler and more secure than current methods.

To give you total confidence in this new real estate technology, let’s take a look at how smart contracts in real estate automate and simplify property deals.

What are smart contracts?

Smart contracts are digital contracts that automate predefined actions once certain conditions are met. They govern interactions and transactions between buyers and sellers using rules and conditions written in code.

These contracts work using blockchain technology, which is a system for the transfer of assets that’s almost impossible to change once created. This protects digital property contracts against fraud and cyber threats.

If you’re not familiar with blockchain, you might be sceptical. But this technology is already used for medical records, identity management, food traceability and even voting. So chances are you’re already using it all the time, even if you don’t realise it.

By leveraging distributed ledger technology, smart contracts in real estate ensure transparency, security and immutability in digital property transactions.

Understanding smart contracts in UK real estate

Buying a house in the UK usually takes around 18 weeks, though it can take much longer.

Finding a property you like and having an offer accepted is tough enough. But after that, you still need to arrange a residential mortgage, complete dozens of detailed forms, negotiate completion dates and more.

And throughout the process, you deal with lawyers, notaries, brokers, bankers and many other intermediaries. This creates many bureaucratic delays and leads to high transaction costs.

But with automated property deals using smart contracts, these long and difficult steps can be handled quickly and securely online. That means no communicating with overworked intermediaries and no waiting for physical paperwork to be carried through the post.

Smart contracts in real estate double as both real estate technology and as property finance technology. So you can enjoy shorter, simpler transactions with lower fees from start to finish.

The mechanics of smart contracts in property transactions

Smart contracts function using 5 key steps:

• Deployment: Digital property contracts are written in code and deployed on a secure blockchain network. They exist here as self-contained programs.
• Execution: They wait for predefined conditions (sometimes called triggers or inputs) to be met. These could be specific dates, events or the completion of certain criteria.
• Verification: Once the conditions are met, the contract is triggered and executed. This usually involves the transfer of assets such as property deeds and the updating of ledger entries to confirm new ownership.
• Validation: The transfer of assets is validated and recorded by the network of nodes that make up the blockchain. This ensures execution of the contract is transparent, secure and abiding.
• Completion: Finally, the results of the smart contract are recorded on the blockchain. This creates a tamperproof record of the transaction that all participants can access.

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In terms of real estate, this means all the steps that make up traditional buying and selling will instead be conducted online.

When you complete a certain step (such as submitting proof of identity and funds), it can be reviewed and validated instantly. That means the next step can begin with no delays. And once the transaction is complete, new ownership is recorded digitally in a way that can’t be wrongfully altered or misused.

Benefits of smart contracts in real estate

Boosts efficiency

Smart contracts automate property transfers, payments, compliance checks and other aspects of buying and selling property. It reduces the need for intermediaries, meaning the transaction can be completed more quickly and with fewer costs. Tasks that used to take weeks can instead be done in minutes.

Ensures transparency

If the buyer and seller possess different information at any point in the property transaction, it can lead to arguments and distrust. But smart contracts offer a decentralised, tamperproof ledger of all transactions that both parties can access with ease. This ensures they always have access to the same information and can work together to finalise the contract quickly.

Improves security

Since real estate transactions involve large amounts of money and sensitive information, they’re a major target for fraud and cybercrime. But the immutable nature of blockchain technology makes it virtually impossible for unauthorised parties to access or tamper with digital property contracts. So all parties can have total confidence in the security of the property transaction at all times.

Lowers costs

Administrative expenses and legal fees make up a significant part of real estate costs. Since smart contracts eliminate the need for many intermediates, they also make the transaction much cheaper. With the money you save, you can invest in a slightly larger property or have cash spare to decorate how you want.

Speeds things up

Negotiations, paperwork and administrative delays take up a huge amount of time in traditional real estate transactions. But smart contracts allow many steps to be completed instantly. Without the need for manual intervention, automated property deals expedite the transaction immensely.

Ensure smooth and simple property transactions with Ramsay & White

Smart contracts in real estate are set to streamline a notoriously complex process, saving you a ton of time and money.

But while this real estate and property finance technology is set to transform the industry, it hasn’t yet become mainstream. So as it stands, the best way to enjoy a quicker, easier and less stressful property transaction is with the help of experienced and well-connected real estate experts.

At Ramsay & White, we help people buy and sell property throughout Cardiff, Aberdare, Merthyr Tydfil and other South Wales locations. Our award-winning team offers deep insight into the property market, helping you get the best price on a fantastic property and complete in the shortest possible time. We even offer mortgage brokerage services and post-completion support, so you can enjoy a seamless experience from start to finish.

Explore our comprehensive real estate services today to find out how we can help you achieve your property goals.