Assembling the world's real estate data, on-chain
Blockchain technology presents an immense opportunity to solve some of the most significant problems facing real estate at large. BHR will be the Web3 standard for the future of home ownership, allowing the real estate industry to modernize collaboratively, while empowering consumers to own the data behind their most significant asset.
Real estate is the largest asset class in the world, yet the industry is perpetually reticent to adopt new technologies and modernize. This is a resultant effect of numerous factors - real estate data is controlled by fragmented and competitive organizations that are not incentivized to share with one another, oftentimes acting as costly gatekeepers preventing public information from being easily available. This is true across real estate brokerages, mortgage lenders and brokers, Multiple Listing Services (MLS) providers, real estate technology companies, and more. Consumers are left in the dark and maintain very little control over the facts and history around their own most significant asset, because the aforementioned organizations are protectionist and generally disinterested in facilitating a better consumer experience.
Additionally, whenever a home is sold, typically the minimum requisite amount of property information is transferred from seller to buyer. This puts a tremendous onus on the buyer to uncover the history of the home, ranging from ownership records, to inspections and maintenance, to appliances, improvements, and more.
This, combined with the protectionist nature of the industry results in massive inefficiencies and recurrent expenses as it pertains to borrowing, marketing, selling, and ownership of homes.
We propose that a collaborative Web3 standard is necessary to collectively advance and modernize the real estate industry. This document will address why BHR is the optimal solution to the aforementioned problems.
BHR allows all owners of homes (“Homeowners”) to claim a unique, verified non-fungible token (NFT) attached to their physical real estate. This NFT provides the Homeowner with privacy-controlled access to a permanent, transferrable, historical record of their home.
The surrounding ecosystem will be powered by a highly-motivating incentive structure for all firms, organizations, individuals, and municipalities (“Integrators”) to build services/offerings utilizing the framework, while simultaneously contributing various forms of rich data to the network.
Home records will mature and grow organically as integrations are deployed, empowering Homeowners to make more informed decisions regarding their most significant asset throughout the purchase, ownership, and sale lifecycle. As the network of data grows, so do the opportunities for new Integrators to build novel integrations, creating a powerful flywheel effect for adoption and growth.
This presents a tremendous opportunity for innovation across the real estate industry. A sampling of what could be built includes instantaneous borrowing and refinancing, seamless transfer of home ownership, the elimination of costly repetitive tasks like title checks and appraisals, and software built to save industry professionals time and money. The possibilities are truly endless.
- BHR: The name for the entire ecosystem powering the future of Web3 real estate.
- Homeowner: A verified owner of a physical property, to which is attached a BHR NFT.
- Originator: The Homeowner or Integrator that originally added a piece of data to the network. When a home is sold, the new owner becomes the Originator (for both privacy controls and Rewards) of data added to that home’s record by any earlier owners.
- Integrator: A firm, organization, individual, or municipality who builds an integration utilizing BHR. Integrators may contribute data to the network or consume data that has been added by others when optionally made available by its Originator. All Data defaults to private unless explicitly shared.
- Native Transaction: A transaction that occurs directly within BHR.
- External Transaction: A transaction that occurs outside of the native BHR platform, such as within an integration.
- Data: Any piece of information added to the BHR network. This could be photos, images, documents, reports, text, figures, files, etc. All data is fully privacy-controlled by its Originator.
Since the creation of the first blockchain, real estate has been one of the most often discussed use cases for disruption by the technology. We are now at a unique point in time where the adoption of the technologies that underlie BHR is sufficient to meaningfully help the industry modernize.
Numerous blockchain real estate initiatives have been attempted (some of which remain active), although to date few have gained traction in actually modernizing the industry. These have included, but are not limited to:
- Fractionalizing properties to sell portions to investors.
- Circumventing the network of Multiple Listing Service (MLS) providers in the United States.
- Selling an NFT to kick off the transfer of an LLC that owns a property as a means for circumventing traditional deed transfer.
- Digital real estate/metaverse. While not typically attached to real-world properties, there are a number of “metaverse” real estate projects where investors can purchase digital properties as NFT’s.
- Decentralized autonomous organizations (DAO’s) that sell a token to represent ownership or governance. Examples include purchasing actual real estate (land, vacation properties, buildings, or even a golf course), aggregating data, and more.
- A cryptocurrency that claims to be backed by United States home loans.
The industry is yet to significantly adopt any of the above initiatives. However, the large number of attempts has substantially grown the recognition for the opportunity to make change in the industry using blockchain. In addition, the recent explosion in popularity of non-fungible tokens (NFT’s) for art, music, access to experiences or groups, unlockable digital content, and more has thrust this aspect of the technology into the mainstream. The combination of general blockchain technology adoption and NFT popularity has created an incredible opportunity for BHR to act as the standard as we move forward modernizing real estate together.
A key component of BHR is its support for third-party integrations to build an entire ecosystem. An Integrator is any firm, organization, individual, or municipality building an integration on top of BHR.
Integrations achieve several purposes. First, they allow firms, organizations, individuals, and municipalities to create new and interesting services and technology to establish a relationship with Homeowners. Second, integrations add data to the network that (privacy control-dependent) can be consumed for a fee by other interested Integrators. Lastly, Homeowners will, without additional effort on their part, continuously learn more about their home and its surroundings as Integrators add novel data to home records.
The below list is by no means comprehensive, but is meant to be a sampling of some of what is possible in the BHR ecosystem. As BHR continues to be adopted and developed, the possibilities for integrations are endless.
The average home purchase takes 40+ days. The limiting factor is virtually always the loan commitment time frame. The primary reason for that duration is that lenders need to collect immense amounts of data on the home being purchased, and on the purchaser. An Integrator could build a way for lenders to instantly access all of the relevant home information required to issue a loan. Additionally, they could build a module for privacy controlled personally-identifiable information such as income, credit, tax history, etc. If a lender were able to access everything they needed with an instantaneous integration, regulations notwithstanding, this would allow for an effective one-click process for purchases, refinances, and home equity lines of credit (HELOC’s). With the same information, they could also build an auto-refinancing mortgage that automatically adjusts as rates drop below an initial value.
Real estate title is one of the most obvious use cases for blockchain technology due to its reliance on incomplete, distributed, and often archaic (paper, microfiche, etc) storage methods. BHR could allow existing title companies to build within the collaborative ecosystem to adapt and modernize.
In states where a real estate attorney is required, they perform a title check when a home buyer is purchasing a home. An Integrator could also build a way for real estate attorneys to access all historical records of a home, compressing the required effort for an incremental title check, saving time and money.
Alternatively, an Integrator could aggregate title information and store it within property records, disrupting the existent concentrated nature of the title industry.
Here, as is the case with many integration examples, there is both the opportunity for incumbent players to innovate and modernize, as well as the potential for new initiatives to disrupt the status quo.
A number of companies are pursuing innovative approaches to ownership of real estate. Many are attempting to sell portions of a property, generally termed as “fractionalized ownership” using blockchain to demarcate who owns which portion. Rather than build the blockchain infrastructure to support this from scratch, an Integrator could simply modify a BHR property’s ownership, which is held as a ledger of owners, whether it is a single name, or even an array of wallet addresses. This will dramatically accelerate the pace at which fractionalized ownership can occur by removing technical barriers and standardizing the process.
An MLS could build an integration for agents to list homes for sale to provide home listing data to the BHR ecosystem. This would give MLS’s additional means to monetize their current data streams while offering their members more efficient means to market properties.
Alternatively, an Integrator could incentivize real estate agents to input data directly into BHR, potentially circumventing the existing network of MLS’s.
An Integrator could build a standard interface for appraisers to input and normalize appraisal data and store it in a home’s record. Traditionally, appraisals are ordered by lenders. With this integration, a lender could access historical appraisals and view incremental updates from additional Data within a home’s record, saving time and money by eliminating the need for additional full appraisals.
Alternatively, an Integrator may build a fully-automated appraisal model when all of the data needed to provide an accurate appraisal exists as part of a BHR home record.
An Integrator could build a standard interface for home inspectors to input and normalize inspection reports and store them in a home’s record. Traditionally, inspection reports are ordered by home buyers or sellers. This integration could allow home sellers to make recent inspection reports and upgrades available to prospective buyers, eliminating the need for new inspections, saving time, money, and allowing buyers to waive inspection contingencies.
A radon mitigation company could build an integration using aggregated inspection data, to suggest radon system needs to Homeowners. A Homeowner would now see rich data showing that 90% of homes in their zip code required radon mitigation systems, and infer that they need to add one to their home. They would now connect with the Integrator to install the system for them.
BHR will allow for more efficient and accurate underwriting of homeowner’s insurance. Rather than laboriously collecting requisite property information and documentation, an insurer could build an integration to instantly access information such as home condition, maintenance, inspection reports, valuation data, property features, safety information, etc.
Similar to home insurance, a home warranty company could build an integration to more accurately underwrite their warranty policies when they can access inspection reports, appliance data, maintenance history, etc.
Alternatively, an Integrator may build a competitive bidding platform for home warranty companies where they all have access but can now provide competing quotes for policies with access to the available information.
Most lenders require cryptocurrency holdings to be liquidated into USD at minimum 60 days prior to the close of a home when being used as part or all of a downpayment. For lenders who are willing to recognize cryptocurrency holdings as acceptable assets for a downpayment or purchase, a cryptocurrency exchange could build an integration to facilitate streamlined loans using cryptocurrency.
An Integrator could build a lead-generation tool for real estate agents. Real estate agents provide invaluable local knowledge to consumers (ex. Neighborhood info, schools, points of interest, etc). An example integration could allow agents/brokerages to contribute local information to property records and support consumer ratings of those inputs. If a Homeowner sees that there are 20 pieces of highly-rated information from a real estate agent about their neighborhood, they may be more likely to reach out to them to utilize their services when selling their home.
Additionally, each BHR Homeowner is a potential home selling lead for real estate brokerages and could be distributed via a referral network built into BHR
Utility providers could share data to show Homeowners what services are available in their area, or what their customers are currently using.
A Homeowner could see that they currently have 250mbps internet from Provider A. Provider B could decide to build an integration which displayed an alternative offering to Provider A for faster and cheaper internet, motivating them to switch to Provider B.
An energy company could provide their customers with real-time energy usage as a means to shift their behavior, getting them to charge their electric car overnight or decrease usage overall to achieve climate goals.
Firms that buy large volumes of homes require immense amounts of data to accurately price their offers. These firms could build an integration to access aggregate and individual information to make their offers more precise, or could purchase that data directly from Homeowners and other Integrators.
Municipalities could adopt BHR as a mechanism to record official deed transfer. Thereby facilitating instantaneous home sales via sales of the attached NFT. Broad adoption is not necessary - a single municipality of any size could benefit by adopting this. Municipalities could also more efficiently assess property values for tax purposes through permissioned access to homeowner information.
A solar installer could build an integration to add their sun model into home records in order to show Homeowners their potential for rooftop solar power. This, combined with real-time energy usage provided by the Homeowner’s energy company would allow them to offer discounts on right-sized installs when they already have the requisite information to quote the system.
One of the largest problems with real estate transactions is lack of transparency and information asymmetry. This creates the need for offers to purchase typically being contingent on various inspections, appraisal, etc. BHR presents the opportunity for a seller to make public any information about their home before accepting offers, thereby encouraging potential purchasers to eliminate contingencies, making sales more economically efficient, easier, and faster. By providing transparent information and eliminating potential concerns, home sellers utilizing BHR could receive more offers to purchase at higher prices.
Below is a non-exhaustive list of some of the documents a Homeowner might store with their NFT home record:
- Appliance history
- Maintenance history
- Photo history
- Environmental history (impact/risk)
- Utility information/providers
- Ownership history/past residents
- Ownership history of their BHR NFT
- MLS history
Home data will continue to evolve over time with additional insights provided by the Homeowner as well as Integrators adding data to BHR.
If you have questions, ideas, feedback, or are interested in getting involved with BHR, DM us @BHR_fyi or contact us at [email protected]