The idea of houses on a blockchain are pretty much a pipe dream. But there are a lot of systems in traditional house buying that could be made easier with crypto-like ideas. Saying “real estate should be on-chain” should be read as asking for more NFT-like features in how real estate is transacted.
- as a cash bidder you need to provide proof of funds to the estate agent, which might just be a screenshot of your entire bank account balance. privacy with a zk-proof could be used in theory here to hide your balance while still giving the agent confidence you can meet the bid
- blind bidding process is usually opaque and broken, subject to discrimination and some winks and handshakes behind closed doors between friendly parties. a blockchain would give transparency and treat transactions equally regardless of race, sexuality, and friend or family ties.
- settlement times are extremely long in the order of months, not seconds. this is sometimes just because some party including the agents are on holidays, or slow to respond to emails, or forget to sign some paper, or whatever.
- escrow and exchange of funds in some cases could in theory happen with smart contracts where both parties sign a message to perform the exchange, which would reduce the significant commissions and fees.
- the process feels archaic compared to buying most other types of property.
> as a cash bidder you need to provide proof of funds to the estate agent,
Here, you don't provide them to the seller, you provide them to the solicitor acting on your behalf. Even if we removed that person from the chain, they are required to perform KYC on these transactions, so for regulatory reasons I still need to provide proof of those funds.
> blind bidding process is usually opaque and broken,
As much as I hate this, that's a (design) feature not a bug. Blind bidding doesn't exist in a vacuum, a seller is perfectly able to accept a bid from a party. Blind bidding is what a seller would use in a competitive market to extract the highest possible bid. If they wanted to accept a lower bid they could, by e.g. accepting their favourite bid at the second highest offered price.
> settlement times are extremely long in the order of months, not seconds.
This isn't because of transactions though, this is because mortgages take _weeks_ to come through, solicitors and agents take time to communicate/juggle multiple accounts/offers, and frankly they're still working with paper documents and off of the "who shouts the loudest gets service" system.
> - escrow and exchange of funds in some cases could in theory happen with smart contracts where both parties sign a message to perform the exchange,
The problem with using trustless currency for physical goods is that you need to trust the other party. If they just walk away without providing the keys or clearing the house out, it doesn't matter what it says digitally, you have a problem.
> which would reduce the significant commissions and fees.
On my past property purchase, I paid ~6% of the value in a transaction tax to the government, and ~£1000 in other "legal" fees. Meanwhile the actual transfer of funds cost me £0, (thanks faster payments - free almost immediate transactions up to £250k), and if I was a cash buyer, a bank transfer would have cost me £35. The fees are negligible even today.
I've been banging this drum for years now, the problems you're outlining are not technical, they're policy and regulatory. You can solve all of the above problems with regulation, like we've done in the UK. That said:
> - the process feels archaic compared to buying most other types of property.
Couldn't agree more. It feels like being dragged back to the stone age.
Yes these are mostly policy and regulatory hurdles but there are also some technical solutions that could be applied here.. The fact that a screenshot of a bank website or PDF passes as proof of funds for a 6 or 7 figure cash bid is laughable.. the idea that a concluded auction won’t fully settle for days, weeks or months is wild after being accustomed to bidding and auctions based on smart contracts. if a listing agent accepted USDC and a zk-proof as a proof of funds for the bid, the actual transfer into a solicitor’s holding account could be settled in minutes and with zero privacy invasion.
This is all purely hypothetical, and not likely to work across the board.. but it does present some areas that cryptographic tech could improve upon our traditional financial system
There's nothing about blind bidding that is solved by crypto in any shape or form. Moving to a blockchain approach for bids doesn't guarantee that you have opened bids, you can still allow people outside of the ecosystem to bid externally.
> The fact that a screenshot of a bank website or PDF passes as proof of funds for a 6 or 7 figure cash bid is laughable
Not really - a screenshot or pdf passes if the person you provide the proof to is happy with it. If you try and prove your funds with a screenshot from <local credit union in the phillipines> for a UK property transaction, they're going to ask you for more details, and they're going to ask you where the money comes from.
> if a listing agent accepted USDC and a zk-proof as a proof of funds for the bid, the actual transfer into a solicitor’s holding account could be settled in minutes and with zero privacy invasion.
For transactions under 250k faster payments guarantees transactions in under 2 hours, and anecdotally when sending my deposit for my last purchase, it was confirmed in about 15 minutes. For transactions over 250k, SWIFT transfers take a couple of days _because of regulation_, not because of technical problems. They're subject to AML checks.
> This is all purely hypothetical, and not likely to work across the board.. but it does present some areas that cryptographic tech could improve upon our traditional financial system
It's pie in the sky thinking, frankly, and doesn't even pass the sniff test. I completely disagree that it improves upon our financial system. The delays in these processes today are around AML/KYC checks, surveys, ownership dispute checks, etc. If you remove the legislation around AML/KYC checks, and streamline the surveys/ownership verification process, you could turn the entire process into 30 minutes for transactions under 250k, and some number between 30 minutes and 1-5 days for larger transactions.
Meanwhile, if you keep the regulations, don't fix the manual part of fetching deeds from the previous owner manually verifying them against a local land registry, and move the entire thing to the blockchain, I would bet you'd save a couple of days off a multi-month process, _and_ you still need to trust that your solicitor has correctly verified ownership, sourced your funds, etc.
The policy that's needed to change here has _nothing_ to do with trustless systems, because fundamentally the system you're interacting works on trust. Me telling HSBC to wire £250,000 to my solicitor for a property purchase doesn't actually send them £250,000, it just marks it to be cleared at a later point, but from HSBC's perspective the transaction has mostly happened at that point, and if the receiving bank is Lloyds, they're more than happy to trust that HSBC is good for the £250,000.
If all parties agree that the smart contract is what settles the auction, then yes it could be superior in some ways, and inferior in others. Bids would be transparently recorded for all parties to see, perhaps held in escrow or using zk-proof to accept each bid, and accounts could be shielded to provide privacy. Accepting a new bid outside of this smart contract auction or after this auction settles would be a violation of the agreement. It also means the auction can be performed through an automated system, without a listing agent facilitating it via emails and phone calls, which is significant as that same agent stands to benefit if all parties bid higher than they really need to.
> For transactions under 250k faster payments guarantees transactions in under 2 hours, and anecdotally when sending my deposit for my last purchase, it was confirmed in about 15 minutes. For transactions over 250k, SWIFT transfers take a couple of days _because of regulation_, not because of technical problems. They're subject to AML checks.
Not all buyers have this smooth of an experience. I'm not disagreeing with you, the UK has good banking infrastructure and if every country in the world could send value through Faster Payments to every other country in the entire world, there would probably be less need for crypto. It is a pretty good model for how financial systems can be improved to facilitate most average use cases.
We are approaching this from different points of view and with different shared experiences around how smoothly our first-world home purchases and bidding processes have been, and that's OK. The fact that you think a PDF or screenshot of a website frontend is "acceptable" proof of 6- or 7-figure cash bid is probably enough of an indicator that we should just agree to disagree and move on with our day.
You know you can buy a house without a single realtor involved yeah?
Have a trusted third party transfer it back to you? Or give up your house to the hacker?
Or time delayed exchanges for important things like your house NFT.
> (i.e. the market value of the house + some percentage).
Where does the market value come from? "Market value" for properties varies wildly, and the number a property does not necessarily track to a fair market value - I might be willing to accept 10% under market value to someone who is a cash buyer because I need a quick sale, or I might be in a ripping hot property market where properties are selling for 20+% over their market valuations
> time delayed exchanges
That's all well and good if everyone involved is digitally contactable for the entire duration of the process, but if I'm ill for a period of time, or otherwise vulnerable, it doesn't matter whether the delay is 2 days or 2 months. The advantage the current system has is that there is inherently a central organisation that says "yes you own this" and they handle disputes. If you have an actual problem of suspected fraud (say your car catches fire with all of your ID in it), you can go to a government office, sign some legal documents, and get new ID and continue. Similarly, if someone impersonates you there are legal protections that can and are enforced.
Not with blockchains we don't. They're also doomed to fail, and not working. A system where your money loses 25% of its value in a day its completely unusable for a mortgage. Saying "I'm sure the problem will be solved" doesn't mean anything, you could say the same thing about a credit system.
Now who owns the house? Do we have to let it decay forever?
This doesn't even make sense. 'Realtors" is plural, and there are many, which is incompatible with monopolies. Realtors have a monopoly on their trade only because anyone competing with them becomes a realtor, by definition.
It's like complaining about the airlines' monopoly in air passenger transport.
https://en.wiktionary.org/wiki/realtor
https://en.wikipedia.org/wiki/National_Association_of_Realto...
Buying houses are expensive because:
- Realtors are a state-sanctioned monopoly for real estate transactions and suck up a % of the costs. They also provide the necessary service of aggregating information about the market and negotiating on your behalf - Due diligence on the state of the property. This means inspecting that there’s no mold growing everywhere, checking that proper maintenance has been carried out, etc - Property law developed over literal centuries to provide the legal framework that we have now, if you damage something as you move out I can sue you to recover costs involved, we have statements about property state before closing, if the building doesn’t meet code we negotiate about who pays the costs - Property registries matter because legally speaking that’s a part of how you prove ownership. The county knows who to send the tax bill, if you default creditors can impose a lien, these are legal technologies that developed over time
This is why you can’t just pledge your house as collateral and borrow against it in a HELOC like you can borrow against your stock portfolio. The bank needs to verify that nobody else has a claim on your property and that the property actually exists and is worth as much as you say it is.
A house NFT has none of the legal protections of a SPA and all of the risks. If it’s not up to code you’re fucked, if the county has a tax lien there’s nothing you can do, etc. Us engineers like to think that everything is an engineering problem, and that’s often true, but law seldom works that way.