Blockchain Can Drive Savings In A Fractional Real Estate Market
Buying a home is usually a happy occasion, yet first-time home buyers are often shocked at the cost of home ownership. The blockchain can reduce at least two of sources of these costs: lack of transparency and integration.
The blockchain can incentivize a pricing and services structure where home buyers can take back some of the money that is slipping away to inefficiency. As buyers benefit from cost savings, vendors will have access to a marketplace that has stickier and more active users, and they’ll see more transactions. All of this behavior can be incentivized with a strategic marketplace structure and token.
First off, marketing and commercial margins in real-estate marketplaces are not transparent and remain high–between 6-12% for new builds. In theory, digital platforms should have chipped away at the cost of marketing a new development, but that has not happened.
The missing link is transparency and consumer access. If real-estate developers could offer the margin back to consumers, it would be a substantial chunk of money each homebuyer could reclaim on the process. A platform that enables vendors (developers) to tell prospective buyers what the commercial margin is and offer it back to those consumers can make the purchase easier for the buyer.
This margin return – really a cashback swap – is one element of these new marketplaces, but there needs to be another layer to continue to incentivize the right behavior. There needs to be horizontal integration of services and a positive feedback loop – both achievable through a simple profit-sharing element of tokens.
To accomplish the cash-back transaction, consumers would trade in a platform-specific token 1:1 for the cashback margin. The tokens that are traded in are then shared universally with every market participant. Whenever a buyer redeems cash, all users gain some fraction of the tokens swapped in.
This token-for-cash exchange has a ripple effect and drives the next steps in the process – horizontal usability and integration. Compared to other industries, real estate is poorly horizontally integrated. The vendor who sells the property is unlikely to offer associated services like renovation or maintenance.
Other verticals, like telecom are horizontally integrated. The same company that sells equipment might also offer engineering and design services, installation and implementation, maintenance, and more. When a value-added reseller (VAR) offers all of these other services, they can bring margins lower for the end customer because they are guaranteed a wider range of revenue.
Home buyers need to prepare for all sorts of spending in addition to simple closing on a property, and this might include maintenance, renovations, new goods for the home, etc. These services are also available on the platform, and the same deal – a transparent commercial margin that can be redeemed by a buyer with a swap for tokens – exists for these services as well.
The net effect is one great positive loop. Users accumulate tokens and can redeem them to reduce their costs on any product or service. In essence, the more types of services there are (greater horizontal integration) and the more transparent the services are (greater margin visibility) the more users have the opportunity to save.
Such a marketplace expands not just because it can, but because the incentives align for users to want greater access to more goods and services. For young home buyers saddled with unexpected costs, the loop becomes a way to unlock more savings.
With this built-in positive feedback loop, vendors will easily see the benefit of forgoing some commercial margin. They’ll have access to customers who are more eager to buy and who are better equipped to do so because they are passively accruing tokens to save. The platform brings the horizontal integration of another industry’s VAR to any user, enabling them to benefit from lower margins and greater service variety. When buyers’ and sellers’ incentives finally align, the outcome is a better marketplace for all.
Real estate is a simple place to start because the industry is so poised for disruption, but there are other industries that could use this type of platform. Traditional online marketplaces offer no distinction from the old ways – they are just digital places to exchange goods and services. This new system incentivizes transparency and horizontal integration, two attributes proven to provide better prices to consumers.
To facilitate future growth, the platform can leverage blockchain-based governance best principles to determine which verticals to disrupt next. It won’t be long before any industry suffering from a lack of margin transparency or horizontal integration will be ushering in a new type of marketplace to solve its dilemma.
