The news last week that cyber outlaws are sneaking into agent email accounts and duping homebuyers into wiring money to illicit bank accounts screams out for industry action to verify the parties in a home transaction. Suddenly, it is evident that the industry is not keeping up with cyber thugs and must move quickly to create a safe digital real estate system.
- Blockchain authenticates participants, verifying everyone's identity -- buyer, renter, seller and the property.
- One app is using blockchain to help smooth the subleasing process when rental tenants must move on, verifying the property, new and old tenants.
- Blockchain can make the industry safer for agents by verifying and qualifying buyers before they meet with an agent, and it can also protect consumers from fraud.
The news last week that cyber outlaws are sneaking into agent email accounts and duping homebuyers into wiring money to illicit bank accounts screams out for industry action to verify the parties in a home transaction.
Suddenly, it is evident that the industry is not keeping up with cyber thugs and must move quickly to create a safe digital real estate system. Secure transactions are way behind agent and consumer adoption of Internet tools and platforms.
Trade group and regulatory warnings about scams are not enough.
The industry still relies on antiquated systems for authenticating buyers, sellers and property, and on insecure modes of communication like the phone, fax, paper and email. This arcane process creates a dream come true for criminal hackers.
This problem can be solved with a nifty software solution called blockchain, which connects an array of databases that authenticate participants, verifying everyone’s identity — buyer, renter, seller and the property.
Another benefit is a smoother transaction that is completely transparent.
How it’s working in one real estate niche
Here is an example of how it is working in one real estate niche — subleasing an apartment or breaking a lease with a landlord, who struggle to police a common occurrence that they often pretend is not happening.
Authentication is a central part of attacking the problem.
The app Flip hosts a marketplace where renters can buy and sell rental leases. When renters sell leases on Flip, their identify and qualification details are pre-verified by the app.
Flip requires renters to provide answers to a series of questions along with proof of employment, income, savings, references and a credit report. Bingo: Identity verification.
Then, they are thrown into blockchain — multiple-data-point authentication, creating a system of trust between existing tenant, new renter and the landlord.
Renters whose identity is stored on the blockchain can then peruse leases posted for sale by people seeking to move, who are also authenticated, as well as the property — so the renters know it is not a scam listing.
Leaseholders who connect with renters through the platform can forward a renter’s “package,” which is generated by Flip and verified on the blockchain, to their landlord or property manager for review.
Founded by Susannah Vila (remodeling TV icon Bob Vila’s daughter), Flip takes a backseat in the transaction after that.
The landlord or property manager can reject a lease transfer proposed by a tenant using Flip. But if they choose to go along with a transfer, they can reassign the existing lease to the new renter or have the new renter sign an entirely new lease.
Safety, verifiable parties and property authentication. Light shines on an underground part of the rental business.
Leads and prospects in blockchain — imagine
Imagine if real estate leads were in blockchain, weeding out predators who attack agents. Imagine if prospects were in a blockchain system, instantly screened for financial wherewithal — saving agents countless hours of working with unqualified buyers.
Once a blockchain system is up and running, more and more databases can be added — like sexual offenders, for example — and smart contracts can be included, which further protect the parties. Finally, blockchain enables secure and closed messaging platforms where only authenticated parties can participate.
Then lenders — like landlords — can adopt the system, which automatically triggers financial transactions, which would prevent wiring instruction fraud like that.
The National Association of Realtors should consider throwing some of its financial might toward blockchain innovation and its political muscle behind working with the CFPB to ease the path for lender adoption and database sharing. NAR might fund a pilot program.
Blockchain is our best strategy for wiping out real estate fraud — and for making the work of agents safer.