Imagine yourself as a first-time homebuyer. You’re about to write the biggest check of your life for the down payment, not to mention taking on a monster loan. You have no idea who you can trust—from agent to lawyer to inspector—or what the process should be. And the list of—let’s face it—crappy experiences on the road to homeownership goes on. Must this meaningful life event be riddled with stress and anxiety from the get-go? It doesn’t have to be.
Insert block chains: a relatively new and promising technology that could transform the way we digitally exchange value, similarly to how Internet protocols, like TCP/IP, transformed the way we exchanged information. For example, to transfer ownership of a home today, there are countless checks of authenticity and intermediaries involved to insure the transfer is legitimate. By using a distributed database (a.k.a. “a block chain,” the same technology behind Bitcoin) to prove authenticity, we could legitimately transfer ownership immediately without the need of a middleman. In fact, when we think about block-chain technology and the industries it could disrupt, real estate tops the list. While Trulia, Redfin, Angie’s List and others have brought some transparency to the opaque world of home buying and home ownership, most of our experiences in this industry are fraught with incomplete, inaccurate, and asymmetric information.
Let’s play out one fundamental difference between today’s environment and a future with block chains: Houses in the future could not only have physical addresses but also digital ones. Why? Because we live in a connected world of smart things, and it’s inevitable that houses will collect and store a tremendous amount of information about themselves and their relationships. For example, imagine the house being able to answer:
•Who is my owner?
•Who are my inhabitants?
•Who are my caretakers (eg. housecleaner, landscaper, plumber) and what is their reputation with me?
•When was my HVAC system last serviced? When is the next service?
•How much electricity am I using? What’s my billing history? Am I late?
•Am I currently owner-occupied, rented, for sale, or vacant?
With this fundamental shift in mind, let’s see how it might feel to buy and own a house with a digital address on the block chain.
1. Searching for your perfect home.
It’s Sunday afternoon, and you’re at your fifth open house of the day. Turns out that the house is amazing! It’s exactly what you want and the location is dead centered in your search area. Before you get too excited, you dig in to learn more.
Today, the sources for this information are disparate and incomplete, so you’d have to make lots of assumptions. But with block chains, houses could have their own digital identities, so could can easily look up their complete history including the chain of ownership, laundry list of repairs, and projected costs associated with owning and running the home.
2. Making the offer to purchase.
Satisfied that there are no skeletons in the closets and the finances are within your reach, you and your partner decide to go ahead and submit an offer to buy the house. You’ve been pre-approved for a loan based on your reputational credit score, which instead of using centralized credit bureaus, uses your block chain–based identity and proven financial history to instantly demonstrate your financial health. Time to put the wheels in motion.
The offer experience is entirely digital in contrast to today’s experience of endless paper documents and signatures. As part of your offer, you’ve included conditional payments to avoid the awkwardness and hassle of negotiation based on inspection results. For example, you will pay for half of any repairs needed to bring the HVAC or plumbing systems into good working order; the other half will be due from the seller.
3. Getting an inspection and moving through the timeline.
Great news: your offer has been accepted! Now the experience begins to unfold. The buying timeline is your guide for what’s next.
In addition to pulling in data from your offer, your timeline aggregates a list of the most common events that occur in your neighborhood between offers and closings, and knowing what to expect helps alleviate anxiety, especially if you’re a first-time homebuyer.
4. Making cosmetic improvements and moving in.
The rest of the process is fairly painless, and just six weeks later you’re the proud owner of your first home. But before you settle in, you want to update a few things that might make a bit of a mess. You hire an electrician to install recessed lighting in the living room and kitchen. The electrician has done two prior jobs on the house and about 25 in the immediate area—he’s built a great reputation.
Because the house is always collecting funds for known bills, it still has $2,700 paid by the previous owner that is now available to you. Since the down payment cleaned out your cash reserves for the moment, you’ll use some of these funds to pay the electrician.
5. Becoming part of your neighborhood.
Now that you’re settled in, you start participating in your new neighborhood. Just as houses are part of a physical community, their block chain–based digital identity is part of a community as well—one that can much more effectively coordinate and operate as an aligned group.
Turns out there’s a property on the main street nearby that’s just been vacated, and there are three different proposals for how it could be used. The landlord pushes the proposals out to the neighborhood network to gather feedback and get assessed.
6. Working together with your community.
Over time, houses can work together for better community outcomes. It turns out that there hasn’t been much rain in your area over the past year, and there’s a severe drought. The local government wants to avoid imposing water bans. Instead, they decide to structure smart incentives for each zip code in the town. They offer to rebate 10 percent of the total neighborhood water bill next quarter if total water use can be cut by at least 25 percent.
Because each house knows its water use relative to others, they can collectively optimize to get to an overall 25 percent reduction. A home that uses water for low priority needs like watering the lawn could receive a large part of the incentive for reducing their use significantly. In contrast, a home that uses very little can still benefit from a small part of the incentive without reducing their use by much at all. No one house can reach the incentive target alone, so they’re better off banding together and optimizing as a community.
As a designer who has recently bought a home, I’d love to see this future begin to unfold. Block chains could create fundamental changes that would transform everyday real estate transactions. My colleagues and I have written about five opportunity areas where block chains could create better experiences for people, ranging from peer-to-peer exchange to shared ownership. For home-buying, I’m particularly excited about these three:
Peer-to-Peer Exchanges: In the real estate industry, we’re equally excited about new forms of exchange between people as exchange between non-human actors—homes themselves. When we give homes identity and agency, we empower them to act on behalf of themselves, their owners, and the neighborhood, making new forms of value exchange possible.
Trust + Authenticity: This is a big deal in this industry. The home buying experience is riddled with moments when you have to decide whether you trust a person or a bit of information, and it can be impossible to discern fact from fiction. By leveraging the immutable, public nature of block chains, we could reduce the need for blind trust and introduce facts that aren’t readily available today.
Shared Ownership + Coordination: What if neighborhoods could become more neighborly? By coordinating resources, service providers, and information, homes could better cooperate and, in effect, help their owners avoid the awkward conflicts that can arise between people when agreements are difficult to negotiate and monitor.
For a life event and transaction that’s so emotionally and financially charged, the current experience feels worse than antiquated; it’s borderline unacceptable. With block chains, the possibilities to make these experiences better seem unbounded—and we’ve only scratched the surface.
What else stands out to you? What other pain points in the current home-buying process could block chains help eliminate? Let us know! email@example.com or @ideofutures
Visuals by Kim Miller (annotated screens) and Nick Dupey (header).