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CEO’s Message: Understanding the Role of Ultimate Trust in the Blockchain Era

Jim Harrison: MLSListings Inc CEO and President

Jim Harrison
President and CEO, MLSListings

One of the things I most like about both my position as CEO and the entire MLSListings experience is the opportunities it presents for continuous learning. A central theme in my personal life is the belief in most pursuits one is what knows. An equally important part of my professional philosophy is that a critical MLS function is to gather and share knowledge and information about emerging real estate issues that our participants and subscribers may not have the time and energy to study but which will definitely need to be incorporated into their businesses and careers.

A premier venue for fulfilling these aspirations is the annual meeting of the National Association of REALTORS®. If one filters out the political crises manufactured each year to give the event a feeling of intrigue and ignores the sense of urgency that fills the halls as dozens of attendees rush off to their respective “committee” meetings there are, in the remaining caverns and crevasses of the event, some truly fascinating discussions, and brilliant folks dealing with some really important matters. It is this last category of events and opportunities that represent the “mother lode” of the NAR annual meeting.

During the most recent of these meetings, in Chicago, I discovered a significant level of discourse occurring around the subject of purpose and potential of blockchain networks. By no means were these discussions everyone’s cup of tea. However, I am confident that the matters being discussed by these groups have far-reaching and compelling potentials for all real estate industry thought leaders and decision makers. Rather than undertaking an explanation relative to the specifics of blockchain theory, I recommend reading the Blockchain for Dummies eBook provided by IBM.

I think a more productive use of our time would be to examine the transactional problems and shortfalls that many experts suggest that the blockchain process can address.

Most blockchain experts agree that one of the most powerful and negative forces impacting the real estate market today is the vulnerability and lack of trust being experienced by the consumer. The risks are everywhere. They dominate how the transaction is executed and how the consumer is treated.

It is not that these same risks haven’t been present for many years, the fact is that they have. The issue is that, while the contemporary consumer has become sophisticated enough to know that that these risks are present, there has not been a corresponding improvement in their ability to mitigate them.

By way of example, a number of the leading iBuying entities are demanding that if any of a property’s depreciating mechanical elements (appliances, heating, air conditioning, etc.) are over a certain age the seller must pay for their replacement. Institutional buyers are setting the terms of the risk they are willing to accept. Can consumers be far behind?

Why isn’t this same informational accommodation being demanded by all buyers? The answer is that the institutional buyers have access to information regarding the “useful life” of the appliance whereas other buyers don’t. Most buyers go into the transaction with a compelling informational deficiency that wildly expands their risk exposure.

One of the benefits of blockchain networks is that they can offer a source of totally dependable (trustworthy) information across the entire range of the real estate transaction. This dependability provides a level of transparency that contributes to trust and, ultimately to the transaction being accountable. These are the attributes that today’s consumer is seeking and this is what blockchain may be able to provide.

Another way to consider the potential impact of blockchain theory is to conduct a comprehensive risk analysis of any residential transaction. As part of this exercise consider all the ways that risk mitigation figures into the real estate transaction. Matters regarding title and encroachments or limitations of title. Matter surrounding the current mortgage process. Limitations regarding the past, current and future condition and use of the property.

The current real estate transaction process assumes that one or more of the parties or third parties connected with the transaction is going to be mistaken, lying, or cheating. Efforts to mitigate this risk through the efforts of such intermediaries as lawyers, title companies, escrow officers, inspectors, credit agencies, and lenders have greatly increased both the costs and negative pressures on the transaction and its parties. The question moving forward is whether or not the positive effect of this process is greater than their negative impact.

Blockchain networks may also have the potential of improving the quality of the MLS experience for participants. Imagine all of the MLS-related information that could be made available. Tour information, showings, lock box information, web access, observations, price changes, offers, withdrawn offers, etc.

It seems clear that blockchain networks and related technologies will offer significant solutions to the real estate industry challenges set forth above. I am advised that over the next few months, NAR will be presenting and promoting a number of very innovative blockchain-related proposals.

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