Digital Journal: What is the current state of the real estate market?
Jeff Berman: I’d like to reframe the question as “what is the current state of the real estate market vis a vis technology”? The real estate industry has historically been slow to adapt and adopt new technologies but there has been a dynamic shift in the way the real estate community looks and views real estate technology.
It was only a few years ago that landlords, developers, brokers – many of the key stakeholders in the space – didn’t embrace the notion that tech could be deployed in their businesses to positive affect. Whether they were of the “if ain’t broke, why fix it” mindset or simply weren’t aware of the tools coming to market, tech was not seen as a priority. But in the past few years the industry woke up and we’re starting to see stakeholders from across the sector embrace cretech in a vigorous manner. “Tech” (as a generalization/catch all) is no longer a “nice to have” but rapidly becoming a “need to have”.
DJ: How has this market been disrupted by digital technology?
Berman: I’ll give a practical, real world example. Most real estate transactions – especially those where a lender is involved – require an appraisal. The traditional way of procuring and performing an appraisal is decidedly analog. An appraiser visits the subject property, takes photographs, scribbles some notes and researches comps with the typical output being a long report with a valuation justification. And it’s been done this way for decades. Two entrepreneurs who were working at one of NYC’s most successful appraisal firms thought to themselves “there must be a better way to do this.”
They created Bowery Valuations – the world’s first technology enabled appraisal firm. Bowery created a mobile-first natural language appraisal platform that allows an appraiser to do their work in a third of the time while also creating a previously unavailable comp dataset. Camber Creek led their seed round and since then Bowery has continued to gain traction and market share. Bowery’s platform is just one example of how the real estate market is being disrupted by digital technology, and we are seeing similarly exciting technological transformations across all areas of real estate.
DJ: How important is blockchain set to be for businesses?
Berman: I’m glad you couched the question as “how important is it set to be.” There’s a lot of hype around Blockchain at the moment spurred on in large measure by crypto currencies. But at its core, blockchain is simply a publicly available digital ledger which contains transactional records in chronological order. In the near term I see blockchain potentially being utilized for smart contracts, payments and supply chain management to great effect. In the long term, we’ll see…because while blockchain could very well become the transformative element for a wide range of businesses, I would caution patience before jumping on the bandwagon.
We at Camber Creek are actively looking at a number of opportunities in the space and are regularly engaging with real estate owners and operators in our network to track the viability of various blockchain solutions.
DJ: How can blockchain affect real estate?
Berman: Blockchain protocol can be utilized by the real estate industry in a number of ways – smart contracts enabled by blockchain could allow a real estate transaction to be closed without gratuitous intermediation by title companies or attorneys. Facilitating payments and transactions is another exciting opportunity. That said, real estate stakeholders have traditionally relied on the opacity of the market to create alpha.
The idea of the universal ledger – enabled by Blockchain – has the potential to cause a seismic shift on the culture of the real estate industry by creating unfettered access to all sorts of information.
DJ: What are the current weaknesses with the real estate market that blockchain can address?
Berman: There are a number of applications where Blockchain could strengthen areas of the CRE market that are weak. Negligence and fraud come to mind – specifically with regard to land records/title and mortgages. These issues are more acute in some developing countries where real estate fraud is more commonplace, and we could see blockchain having a near-term positive impact in those environments.
Human error could become a thing of the past and blockchain’s public ledger would make fraud difficult given that anyone could check to see who the owner of record of a property actually is. Smart contracts can also address a number of weak points in the transaction process from rules/logic based ‘preset’ standards for execution to eliminating the need for third parties to be involved at all. And that could help speed the process of transactions saving time and money.
DJ: Are tokens needed for this?
Berman: A token is essentially a unit of value – the “proof” of ownership of something on the blockchain – like property or a piece of information. A good real world example is when Cook County (in Illinois) ran a blockchain experiment in 2016 where they issued a digital token as well as a paper deed to property owners.
The idea was that the token transfer was proof of a change in ownership and that ultimately, tokens could become the standard which would then form the underpinning of a national register of properties where the ownership history of a given property could be proven out by the token’s past transactions. So are tokens useful? Yes. Needed? Maybe not. There is at least one platform – IBM Fabric – that doesn’t utilize a token based system.
DJ: What are the advantages for businesses and consumers from this?
Berman: We’ve already discussed transparency and security. Another advantage is liquidity. Think about how stocks used to be traded before electronic trading platforms became ubiquitous. You would call a broker who would call a market maker who would call the trading floor where the stock would be traded.
Now you can buy stock on your mobile device. Blockchain potentially affords the real estate industry with a level of liquidity that may make it possible to trade in and out of tiny slivers of specific properties in a way that’s impossible today.
DJ: Are any other types of digital technology set to disrupt real estate?
Berman: Absolutely. The real estate industry is a veritable whitespace for technological disruption. The realization that the traditional way of doing business is antiquated is helping foster the development of everything from IoT products for buildings (like Latch) to applications that open previously closed markets (like TaskEasy) to platforms for managing information around commercial and residential properties (like VTS and Nestio, respectively). The opportunity set is virtually limitless and we at Camber Creek are excited for the future.