The acolytes of blockchain technology preach of the many areas of our lives it will change. Aside, from Bitcoin, there’s blockchain for artwork, blockchain for music copyright, blockchain for friends to send hugs, and of course Blockchain Long Island Iced Tea.
At B&W, we are deeply interested in all that occurs on either side of a real estate transaction, how it activates all the professionals involved. Currently there is a lot of chatter about how Real Estate might be one of the most apt industries to adopt blockchain technology and crypto currencies. So, naturally, there are a number of startups looking to define what that means. One such entity is Propy, whose team is building a platform dedicated to simplifying the oft-arduous path to a real estate sale thereby, among other things, enabling international sales and unleashing liquidity.
Want some blockchain jargon? They wrote to me that "blockchain can act autonomously to execute sophisticated transactions" and is a "universal, distributed ledger that does not require trust in a single third party." But don't worry, we talked to a human about it.
Kate Fomina is a VP at Propy and still runs her own brokerage.
The next component is our transaction platform where you can literally buy a property online
Brick & Wonder (BW): Can you give us some background on your work
Kate Fomina (KF): I’m real estate broker and I've been in the business for about twelve years. I joined Propy a little over a year ago to help develop our transaction platform. Our main end goal is to sell real estate online, because currently you can buy anything online but real estate. Propy itself is not a broker; I have my own brokerage, and I’m their “in house broker” if you can call it that.
Propy has three components. First, it’s a listing platform. We have some integration with local MLS’s, and agents and sellers can list their properties free of charge. Unlike Zillow or Trulia, Propy covers the whole world. One of the benefits for realtors and sellers is that they get exposure to international buyers as well as crypto buyers, who are equivalent to cash buyers.
The next component is our transaction platform where you can literally buy a property online… You pay through the platform, sign all the documents on the platform electronically, and all of other parties, like escrow and title companies, upload their documents to the platform.
Lastly, the deed is recorded not only in the local clerk’s office, but we also record it on the Ethereum blockchain. This process makes the whole real estate transaction much faster, and much more secure because blockchain is basically invincible to hacking or information changes. The records stay on the distributed blockchain forever.
BW: Propy claims it is solving for the lack of liquidity in real estate; so we want to know how liquid can it really get, and what does a future transaction look like?
KF: We want to minimize all the expenses that you have to take on when buying or selling real estate. There are so many companies involved in a transaction -- agents,title companies, escrow, attorneys in most cases mortgage brokers -- and they are all using different software to process the deal. We want to unify all of that, to have one platform that is the same for each party and that is adaptive enough that you can process a transaction in California or in Spain or anywhere else. We had our first ever blockchain transaction in California back in late Spring and then we closed a deal in Spain, then the Ukraine, two deals in Arizona, and we’re now working in some in different states.
We're not trying to get rid of anyone like realtors or escrow officers
BW: Who are some of the intermediaries that you get rid of, and what are some of the expenses that you get rid of?
KF: We're not trying to get rid of anyone like realtors or escrow officers because we understand that they are still needed… we’re not “there” yet in the real estate industry. What we are doing is partnering up with them.
What we are trying to do is eliminate emails, printing, scanning, phone calls. Through our platform you don’t need to scan anything or print anything; everything is done electronically. We do data storage as well because the paperwork is secure on the platform in blockchain. Nobody has to use an external drive or keep stacks of paper!
BW: So It makes a close a very virtual process as opposed to a “people in a room” process.
KF: Absolutely, and with the new generation of buyers, millennials, or international buyers, it’s crucial. They don’t want to go anywhere - they want it signed now. They don’t like phone calls or emails. Everyone wants to buy online, in their own time whether it’s 12 in the morning or when they are at work. That’s our goal.
BW: In your white paper there is much mention of the current industries vulnerability to corruption that’s endemic to having so many players in a transaction. What kind?
KF: Wire fraud! Last year almost $1 Billion was lost to wire fraud in real estate transactions. For example, hackers will break into a realtor’s email and send a message to a buyer or seller and saying “here is the wire instruction.” This is a very big problem. Just yesterday realtors nationwide got an email from the Federal Real Estate Board talking about wire fraud how there are additional disclosures that we need to get the buyers and sellers to sign.
With Propy, this problem will not exist at all because all the information will be kept on blockchain and its immutable and stored throughout thousands of computers around the world.
That’s the first kind of corruption. Another is that in developing countries, for example, governments are taking land from owners because there are no records, or the records are lost. The government just says hey, this piece of land is ours. And that’s it - you can’t prove otherwise. Blockchain because it provides an easy way to prove that this piece of property belongs to a particular person.
BW: As for your listings, is the future plan to integrate all the information from all the MLS’s? In the States and other countries?
KF: We’re talking about that right now. There’s some serious costs involved. We’re trying to figure out if we need to focus on the whole United States now or maybe just the big cities that are attractive to international buyers. For now we do have some Bay Area, Silicon Valley, and LA based MLS’s integrated.
BW: Within the MLS regions there are small markets. Are the counties proprietary about their records?
KF: We are just a transaction platform and we comply with all the local laws and jurisdictions. The deed still has to be recorded in the county. So we cannot just eliminate that step and record it only on blockchain. We have talked to some county clerks from different states to explain how it’s much cheaper to store the data on blockchain rather than their own servers.
BW: Because you are so internationally focused, would your platform encourage more LLCs and faceless companies to buy property? Given that there’s general agita about anonymous ownership, how do you account for identity?
KF: We don’t discriminate! We’re open to all buyers whether its an LLC or a corporation. There is still a way for the identity to be visible and that’s why we are still incorporating escrow officers and title insurance.
BW: I assume you’re representing mostly sellers, and I’m curious about what kind of person lists with Propy?
KF: Our audience is so broad. We have mansions and castles in Italy, and we have new developments in the country of Georgia. We have pieces of land for $20,000 in Nigeria. We have beautiful mansions in Malibu and in the Bahamas. It’s all over the world, so we have completely different sellers.
BW: As an agent working with Propy, what is that relationship like and does it affect commissions?
KF: As I said, Propy is not a broker, Propy is just a provider of the transaction platform. We charge just 0.2% if the transaction is processes through the Propy platform. So you still get your standard commission. If they list on Propy and they find an international buyer there, that buyer most likely will not have their own agent so the listing agent could end up representing both sides.
We did a token sale in September of last year and raised over $15 million
BW: What are you efforts to onboard more agents?
KF: We just started running our “crypto certification program” where an agent can earn a number of “Pro tokens” by engaging with the website -- filling out their profile page or listing a property. They become a crypto certified agent if they complete their first crypto transaction on the platform.
It's still a conservative industry, but agents are getting more adventurous and not afraid of trying new technology. We are hosting seminars in the Bay Area and webinars online, and more and more agents are coming aboard and listing their properties.
We are also marketing all over the world, from social media to newsletters to Google Ads and we’re speaking and attending lots of real estate conferences globally.
BW: You raised a lot of capital with your recent "Pro token" sale. Tell me more about how tokens are used.
KF: We did the token sale in September of last year and we raised over $15 million! The deal is that we give Pro tokens for some of actions agents take on the website. And then agents can use Pro tokens to advertise their properties on Propy or on our dedicated Chinese listing site. Also in order to process the transaction or register deeds on Blockchain you can use your Pro tokens as well.
BW: Are they effectively a crypto currency like Bitcoin?
KF: Yes, they are exchangeable We have the Pro token on the exchanges.
BW: They were sold for $1 dollar apiece, but they could they end up being $10?
KF: Who knows! But right now that’s not our goal. Our goal is to build a transaction platform that allows transactions across all borders.
Katie Fomina is a VP at Propy and a Real Estate Broker in San Francisco.