The escrow process has over the years seen some change from regular bank checks to the use of cryptocurrency. If you don’t know what escrow is, it is a form of mediation between a buyer and seller, where a third party holds onto the buyer’s funds (or documents) until all negotiations are finalized before handing them over to the seller. In the real estate world, the third party is responsible for the distribution of funds to the seller and other bodies and seeing to it that all the buyer’s and overall proper sales conditions are met. Typically, these funds are in a physical form but since the introduction of cryptocurrency, this has since changed. For those who are unsure about what cryptocurrency is, think “digital money”. So how does this “digital money” change the escrow process?
EFFICIENCY AND TRANSACTION SPEED
During the escrow process, third parties are added who can, instead of speeding the process along, slow it down. These third parties include lawyers, bankers, and brokerages, and mismanagement of paperwork or mistakes can severely slow down transaction speeds. Smart contracts ensure that contracts are final and sales conditions are enforced at all times. So, there will be less paperwork, of course, fewer meetings and definitely less signature signing
Because many third parties are removed, costs are significantly reduced. One of these costs is to the escrow companies who charge anywhere between 1 and 5 percent of the property value for their services. Another is the amount of taxes the buyer has to pay for loans and to the IRS.
One function of the escrow process is to reduce fraud. Escrows make a number of verifications which greatly eliminates the chances of either party falling victim to real estate fraud. Though useful, escrow is not 100% foolproof and many fraudulent transactions slip through the process every year. Usually, documents are forged, as are notary stamps and grant deeds. Use of smart contracts and digital ownership certificates completely eliminate the risk of fraud as these unique certificates are almost impossible to replicate and as a result cannot be sold or advertised except for by the property owners themselves.
These are only three ways in which cryptocurrency is changing escrow as the technology is still new, and, when regulated it may further impact the escrow process. But there’s one thing that is certain, it will alter the real estate industry.