Title Industry on a Blockchain
The real estate title industry as it exists today is an incredibly complex and wasteful system. Data is controlled by regional "plants", and the lack of even a traditional centralized reporting structure for titles and policies requires wasteful legal infrastructure when issues arise. I believe that the Title industry is a perfect candidate for Web3. What if there was a decentralized ledger for property ownership, programatic enforcement of policies, and tokens for data creation and validation?
The title software company Qualia has a great blog post about what title companies do. I won't retell the whole thing, but essentially they do three jobs:
- Ensure that the entity selling a property has the legal right to do so and issue an title insurance policy against any owners they may have missed
- Handle the exchange of money in a real estate transaction
- Organize all of the closing documents, i.e. paperwork to transfer the property to a new owner
Title companies purchase historical data about properties from title plants - companies that compile real estate records. They perform an essential service given the unstandardized nature of historical documents, but in a world where decentralized ledgers exist, they should not be necessary.
There are several companies attempting to apply Web3 to real estate, and title in particular (e.g. Propy). With such a vast, decentralized (but not in a good way) infrastructure, it's not going to be easy to get this very lucrative industry to participate in making real change.
What if we incentivized the title plants to put their data onto standardized blockchain ledgers? If contributing and validating property data is rewarded with tokens, and the same tokens must be redeemed in order to access property data, the plants have an immediate market to exchange their tokens for cash. The plants can democratize their data, but continue generating revenue by selling their tokens to title companies or other entities that need to access property data. Over time, the title companies will earn their own tokens by writing new real estate transaction data directly to the blockchain. When a plant’s initial payout is depleted, they can either leave the industry or pivot to earning tokens by validating new data.
Eventually, title insurance will be practically unnecessary because the historical record will be complete. Title companies can continue to exist for the other purposes they serve - notably the aspects that only humans can really do when it comes to helping someone make one of the largest purchases of their life.