Contents

Contents ............................................................................................ ii
Introduction ....................................................................................... 1
About Me ........................................................................................... 3
What is a Blockchain and how does it work? .................................... 5
How users make currency transactions: Public & Private Keys ......... 8
How a transaction is recorded to the Blockchain............................ 10
What are Smart contracts? .............................................................. 12
Advantages of Blockchain and Smart contracts .............................. 14
Smart Contracts for Real Estate ....................................................... 16
Digital Trust & Digitization ............................................................... 18
Real Estate Industry Advantages ..................................................... 19
Cutting out the Middlemen (Disintermediation) ............................ 20
Real Estate Issues: Blockchain to the Rescue! ................................. 22
Innovation in Real Estate Leasing .................................................... 27
Foreseeable Challenges ................................................................... 29
Real Estate Revolution ..................................................................... 30

Source : https://www.investinBlockchain.com/what-is-Blockchain-technology/
https://www2.deloitte.com/insights/us/en/industry/financial-services/evolution-of-Blockchain-
github-platform.html
https://www2.deloitte.com/us/en/pages/financial-services/articles/Blockchain-in-commercial-real-
estate.html
https://www.sior.com/docs/default-source/Thought-leadership/Blockchain-and-commercial-real-
estate-real-final_.pdf?sfvrsn=5cbceba8_0
https://www.sior.com/docs/default-source/Thought-leadership/Blockchain-and-commercial-real-
estate-real-final_.pdf?sfvrsn=5cbceba8_0

ii
 Introduction

M ost readers of this eBook will have some awareness of

cryptocurrencies. 2017 and 2018 saw Bitcoin, the most
widely-adopted cryptocurrency to date, regularly featured in headline
news as its valuation soared and plummeted. Despite the speculation
bubble created by investors trying to get rich fast, real-world
adoption of Bitcoin and other cryptocurrencies never faltered, and
has steadily expanded as businesses, consumers and investors find
new uses for digital currencies.

My primary focus in this eBook is the technology that undergirds all

digital currencies called Blockchain. Blockchain is what makes
digital currencies possible, but its use is not limited to
cryptocurrencies. Blockchain can be used, for example, to monitor
the supply chain of a business, with complete inventory control and
time stamping at every stop along the route, allowing businesses to
identify and improve inefficiencies. Insurance companies are
exploring ways to use Blockchain to increase data transparency,
ensure payment of valid claims and prevent duplicate transactions.
Blockchain could conceivably be used to create a secure digital
voting system because it is fully transparent for both regulators and
voters, and because it is tamper-proof, meaning that once a vote is
counted by the system, that record cannot be changed.

The possible applications for Blockchain are endless and have only
begun to be explored. Almost any industry having transactions that
require verification, confidentiality and speed can improve
operational efficiencies with discrete implementations of Blockchain

1
technology. This eBook will introduce the reader to ways Blockchain
technology can be used in the real estate industry.

2
 About Me

M y name is Amir Yazdani, and I

am a real estate professional
and investor in Dallas, Texas. Over the
past ten years, I have bought and sold
millions in residential and commercial
real estate. In addition to real estate, I
am an IT professional who is familiar
with Blockchain – my company is
already exploring uses for Blockchain
technology in real estate in Dallas,
Texas.
Remotely, Closing a deal in
New York on a development
property!

Going over some of the blueprints of

my favorite development projects!

3
“The Penthouse” Condo Developments

4
 What is a Blockchain
and how does it work?

B lockchain technology is evolving quickly because there is

collaboration and focus by many different people and
industries. For the layperson, there can be a steep learning curve if
they are not familiar with technological concepts and terms. I will
attempt to distill the basics of Blockchain technology in the
following pages.
5
A Blockchain is part of the underlying code that makes digital
currencies possible. At its core, a Blockchain is simply a digital
ledger that keeps track of basic information such as a sender, a
recipient, a timestamp, and whatever digital asset is being
transferred. Each record in the Blockchain is called a block, and that
block’s unique ID is linked to the previous block in the ledger by a
cryptographic hash.

Blockchains are considered to be secure and the data immutable

because of the way they are designed. A Blockchain calculates
unique hashes for each record in the Blockchain based off of the
previous block in the chain, which means that no record in the ledger
can be altered without forcing the Blockchain to re-calculate the hash
of every subsequent record and block in the chain. Bitcoin, for
instance, uses an intentionally long and complex method of
calculating hashes so that supercomputers cannot simply alter a
record and all subsequent records simultaneously. This creates a
condition in which new records can be added to the Blockchain
whenever a transaction is authorized, but it is very difficult to alter
old records in the Blockchain. The amount of computing power
required to alter an older record is increasingly prohibitive as more
records are added to the stack.

Technically, it would still be possible to alter the record in a

Blockchain with enough raw computing power if it weren’t for the
second design feature. Blockchains are designed to be decentralized,
meaning there is a mirror copy of the entire Blockchain stored on
every node in the network. An altered record on one node would be
at odds with every copy of that record on other nodes. An
unauthorized alteration of a record on a node would not reach

6
consensus with the network and would simply be discarded by the
Blockchain.

Without wading deeper into the complexities of block mining, proof-

of-work and Merkle trees, that’s the quick version of how a
Blockchain keeps all of the data written to it intact and tamper-proof.
The design elements of Blockchain are what allow all digital
currencies to work; without those elements, cryptocurrencies could
be subject to hacking, errors and alteration and would never have
approached the wide adoption that they have today.

7
 How users make currency transactions:
Public & Private Keys

A person who wishes to buy or sell using a digital currency first

purchases digital coins. Those coins are kept in a wallet, which
is a bit of software that also stores a Private Key and a Public Key.
These keys together are called a Key Pair and make up a user’s
digital signature. The Public Key is how you appear to others – your
public identity, which represents your digital wallet address (unlike a
street address, a wallet address appears to be simply a randomized
sequence of numbers and letters). It is completely anonymous and
conceals the real identity of the user. The Private Key is used to

8
digitally sign and authorize cryptocurrency transactions like
transfers, withdrawals, etc. A private key is kept confidential at all
times for use only by the owner of the wallet, whereas the Public Key
is publicly shared with others as a digital mailing address, the same
way you might request your grandmother to send a birthday card to
your home address, or direct a client to send a PayPal payment to
your email address.

One way to think about digital currency transactions is like a postal

box: just as everyone has access to a postal box (i.e. the Public Key),
only the mailman has the key to open the postal box and retrieve the
mail for delivery (or in this case, only the Private Key holder can
retrieve a payment made to the wallet address).

9
 How a transaction
is recorded to the Blockchain

“signed”
I n a Blockchain, every transaction is by the
authorizing/initiating person, using both their Public and Private
Keys, and contains the Public Key of the recipient. (Every
transaction of Bitcoin, for example, must be authorized by the
original owner). Along with the timestamp and a unique ID number,
this information is added to the Blockchain ledger. The authorized
transaction is then broadcast to other network members (nodes) that
then acknowledge that the transaction has occurred and add the
transaction to their ledgers.

Every transaction is recorded to the public ledger and contains the

following:
10
 1. transfer details (such as the amount of digital currency
transferred, the public addresses of both parties and the
date of the transfer)

2. a timestamp, and

3. a unique ID, or hash

Once authorized, the record of the transaction is public, permanent

and cannot be altered or changed. The distributed network verifies
and updates all copies of the Blockchain to indicate that the
transaction completed, and the Blockchain files it away by recording
new transactions to the stack

11
 What are Smart contracts?

ow that we’ve covered the basics of Blockchain and the way

N digital transactions take place, let’s take a look at Smart
contracts, which are another innovation that Blockchain have made
possible and which will be tremendously advantageous in the real
estate industry.

Smart contracts are digital contracts, usually for the exchange of

something of value (property or currency, in this case), the terms of
which are executed electronically without the need of human
intervention. In regards to real estate, these can be used for a single
purchase or transaction, such as a real estate purchase, or for multiple
obligations like monthly rental payments.

(Technically speaking, a smart contract is a relatively simple

computer program that executes when the conditions for a
transaction are met. It is an IF-THEN protocol: if the specific
conditions for a sale are met, then produce a sale or rental contract.
Another way to describe a Smart Contract is simply: A set of specific
directions for how, when and under what circumstances to release
money from a wallet, and then execute automatically when all
conditions are met.)

If a prospective buyer or renter were to make a down payment or

deposit and enter some personal data, a Smart contract could
automatically produce a personalized rental agreement or lease
instantly. The contract would be finalized when the other party uses
his or her digital signature to authorize the transaction, or when a

12
“trigger” occurs – a specific date and time, or a verification of
possession, for example.

Next, we will look at some of the ways that these tools will improve
the real estate industry.

13
 Advantages of Blockchain
and Smart contracts

B ased on my experience with these transactions, I believe this

new technology will save time and headaches because the
contracts will execute automatically. Earnest money, for example,
and option checks are an area of real estate transactions that currently
cause a lot of delays and overhead in the real estate market. The
current process in some states requires both parties to sign in order to
release the earnest money from the escrow company. This involves
many people and wasted time all around.

On the other hand, if we were to take advantage of Smart contract

transactions, if the obligations for a contract are not met, the party
that breached the contract will automatically have the money sent to
the other party, all without human intervention. In the future there
will be no need for the escrow company at all, much less a release of
signatures, because the contract will execute on its own according the
conditions. Below is a summary of the major advantages of this
technology:

1. It is incredibly difficult to alter logged data within a

Blockchain, making it very secure

2. Transaction costs are reduced because it cuts out the

middleman (in the above example, the middleman would be
the escrow company)

3. Transactions are processed much faster because the

Blockchain is in operation 24 hours a day, 7 days a week,
14
 unlike typical banks and financial institutions (from above
example, the parties to the transaction do not have to waste
time traveling, signing documents, and waiting for the bank
to process the transaction)

4. User/Developers control the networks, not some mega-

corporation

5. Decentralization is a corruption-prevention feature of

Blockchain Technology. It prevents censorship, tampering,
and corruption because copies of the ledger are stored in
many different locations, therefore:

a. In order to destroy it, you would have to track down every

single copy

b. These multiple copies will disagree with an untrustworthy

transaction and won’t update the ledger

15
 Smart Contracts for Real Estate

I am very excited by the potential of Blockchain Technology for

real estate. By enabling Smart Contracts, this technology will have
the ability to enhance real estate transactions in multiple ways:

1. Enhanced transparency

2. Automated payments

3. Near-real-time reconciliation

4. Efficient management of cash flows

5. Easier processes in property management

16
 6. Simplify title records and checks

7. Digital and detailed identity records for properties

8. Beneficial Blockchain characteristics:

a. Distributed and tamper-proof

b. Encrypted data

c. Difficult to commit fraud related to real property

d. Reduces title fraud risks and overall transaction timestamp

Speaking from experience, the process of purchasing real estate can

be very frustrating. I recently purchased a property where there were
so many changes and agreements that I was required to sign
amendment after amendment to make sure the deal would close.
Smart Contracts will eliminate this headache.

This system is a protection for both sides of a transaction. Last year,

my friend tried to rent a place in Italy for his vacation. Unfortunately,
he lost his deposit because the website he was using to reserve the
place was a fraud. With the use of Smart Contracts using Blockchain
Technology, the identities of each side are verified, there are
conditions in the contract that must be met before money will be
transferred, and so this kind of fraud will be prevented. In this
example, the deposit does not get transferred to the owner until the
person physically arrives to the destination. The residential and short-
term rental sectors are markets that will benefit significantly.

17
 Digital Trust & Digitization

D ata breaches (cybercriminals hacking into large corporations

and stealing consumer data) are becoming more common and
impacting more people. In this environment, Digital Trust (the
measure of confidence in an organization to protect private data)
becomes a valuable commodity and builds customer loyalty.
Blockchain technology can be a tool that companies can use to
secure client information.

18
 Real Estate Industry Advantages

’ve already touched on a few benefits to real estate industry

I transactions above. Here is a summary of those and a few more
benefits of Blockchain Technology to Leasing, Purchase and Sales
transactions:

1. Verified and accurate databases that contain detailed property

information compiled from multiple sources.

2. All individuals involved in real estate transactions and

management (owners, tenants, lenders, investors, etc.) can
access and modify the databases.

3. Increases transparency, reduces risk, eases the due diligence

and verification of data processes.

4. Cuts out, or reduces the need for middlemen and intermediaries

like title companies because of the increased security,
transparency, and confirmation of information.

5. Smart Contracts that involve conditional clauses or

dependencies, like loan approvals, are easily executed (read
more on Smart Contracts below).

6. Title and deed transfers can be executed through Blockchain

ledgers.

19
 Cutting out the Middlemen
(Disintermediation)

B anks have been the primary brokers in financial transactions

and money liquidity for hundreds of years. Government central
banks have evolved as an essential component to ensure payment
settlement finality and bank liquidity in this imperfect system.
Cryptocurrencies evolved into a new currency option that cuts out the
middlemen (including banks) and interchange fees.

Blockchain contains a complete log of all transactions and contains a

non-reputable data store that is immutable, distributed and time-
stamped. It is a perfect electronic ledger for nearly every industry,
and removes the need and expense of implementing infrastructure for
billing, payments and contracts.

With real estate, this can have considerable impact to verifying clear
title, and ensuring that the title stays clear of tampering going
forward. With the use of Distributed Ledger Technology (DLT –
another name for Blockchain) the tracing of title will be automated,
and any changes to a title will be immediately notified to the rightful
owner.

Real estate fraud is rampant. Houses are being sold by third parties
without the knowledge of the real owners; strangers are staking
claims on properties they have no right to; fraudulent landlords are
collecting deposits and rent for properties they don’t own.
Blockchain Technology will solve many of these problems.

20
Second homes, vacation homes and investment properties are also
major targets for title fraud because people don’t pay as much
attention to the details of notices from lesser-used properties such as
property tax bills, foreclosure notices, past-due notices. People are
more likely to notice you didn’t get a property tax bill on their
primary home than they are a second property in Miami.

Elderly homeowners are often targeted for title fraud because they
have a lot of equity in their homes; they aren't able to identify newer
types of scams as quickly or easily as younger folks; and they often
make poor visual witnesses. Even when a perpetrator is apprehended,
it can take two years to prosecute and the elderly victim might not be
alive in that time. Scammers calculate these risks before picking their
targets.

That being said, with the use of Blockchain Technology, the buyer
will be able to buy a house directly from the owner, knowing the
exact status of the title at the time of the purchase. As I alluded to
above, title fraud is currently a big issue, and I believe Blockchain
Technology will help by saving the owner and the buyer significant
purchase costs throughout the transaction, but in this example they
will not need to pay for title searches or title insurance. This will
likely mean that the role of title companies will change and evolve
significantly in the future.

21
 Real Estate Issues:
Blockchain to the Rescue!

I have discussed the advantages of this technology, but what real

life issues in the real estate industry can Blockchain Technology
solve? There are many! My personal experiences have led me to
believe that real estate financing will see a lot of changes. Whenever
I face the dilemma of having more deals in the works than I have
access to capital (and therefore I cannot close on deals) I think about
all of the ways my experience could be improved and streamlined
with tools like Smart contracts. With the use of Initial Coin Offerings
(ICOs – essentially a fund-raising tool) investors, developers, and
builders will be able to raise money for their own projects and
completely by pass the banks. ICOs create a sovereign community
where they can actually help develop their own neighborhoods by
funding real estate deals. Even more interesting is that the interest
rate can be set at whatever is appropriate, completely independent of
the Federal Reserve rates. Here are some other problems this new
technology may solve:

1. Property Searches become Efficient and Reliable

Currently Environment: real estate transactions rely on the data

contained in MLS (Multiple Listing Services) which:

a. Generally have high subscription costs and are not available

to the general public

b. The data can be inaccurate, dated, or incomplete

22
 c. Lacks standardization or common processes

d. Inefficient search capabilities and fragmented data

Blockchain Advantages:

a. Better control of data, better accessibility, and increased

trust in accuracy of data

b. Title clarity

c. Clear property details – location, address, rental comps,

ownership and tenant history and details, etc.

d. Cost and time-to-market efficiencies

e. Historical data is recorded and changes/update are visible

2. Increased accuracy and efficiency in the due diligence Process

Current environment: Relies on physical documents and

antiquated manual processes:

a. For proof of identity, due diligence and financial

requirements

b. Which have limited flexibility and usually cannot be

customized

c. Which increase chances of errors and loss of information

d. Which require multiple third-party service providers that

often require duplication of documents or information, and
increases costs and time-to-market

23
 Blockchain Advantages: General overall reduction of
inefficiencies and inaccuracies.

a. Consolidation of information (property and tenant profiles,

financial and legal statuses, etc.) into a digital identifier

b. Pre-transaction activities and due diligence are expedited

c. Increased accuracy and streamlined processes that are

partially or fully automated

d. Ease of data validation by the different participants ensures

accuracy

e. Secure online property records

3. Reduce complexity of tracking cash flow in property

management.

Current environment: Generally requires tracking of multiple

payment transactions such as lease payments, maintenance and
repairs, etc. which can be expensive and time consuming.

Blockchain Advantages: Better Cash Flow management

efficiencies and transparencies through Smart Contracts (read
more about Smart Contracts below).

4. Smarter decision-making

Current environment: Makes decision-making difficult due to

fragmented and duplicated information, and does not provide a
real-time view of information.

24
 Blockchain Advantages: Provides a shared, open database in a
near-real-time environment. With correct information more
readily available, pre-purchase analysis becomes much simpler
and more accurate.

5. Reduce costs of property title management

Current environment: Paper-based transactions have multiple

disadvantages:

a. Paper-based transactions are cumbersome and often create

authenticity, accuracy, and defect concerns with mortgage,
lien, and title documents.

b. Drives additional fees and extends time-to-purchase in

order to correct these errors.

1. Title insurance adds to property purchase costs.

2. Multiple players in the transaction are often duplicating

searches.

Blockchain Advantages:

a. Simplification of title recording and checks.

b. Fraud reduction through its encrypted and tamper-proof

nature.

c. Reduced overall transaction time.

d. Tamper-proof once it is recorded.

25
6. Payment and Financing Efficiencies

Current environment: Slow, expensive, and involves many

entities and stacks of documentation, especially in cross-border
transactions.

a. Time-to-close on a typical commercial mortgage is 3

months.

b. Increased risk to mortgage lender because standardization is

lacking.

c. Foreign exchange fees increase costs and time in cross-

border transactions.

Blockchain Advantages:

a. Reduces inefficiencies and increases transparency through

digital identities and Smart Contracts.

b. Simplifies and speeds up loan application and financing

process.

c. Provides traceable, accurate, and complete audit trails of the

transactions and property information to all parties.

d. In cross-border transactions the verification and settlement

process is significantly improved, risks reduced, and time-
to-market shortened through information sharing on a
common network that contains all information about the
transaction, property, and parties involved.

26
 Innovation in Real Estate Leasing

B lockchain Technology has the potential to significantly

improve all aspects of real estate leasing. As in the real
example I gave of my friend’s fiasco in Italy, there are real trust and
verification issues because of rampant fraud in this industry. Here are
some potential benefits to leasing transactions:

1. Blockchain-enabled MLS searches are more transparent and

efficient.

2. Property visits and inspections can be setup through

Blockchain.

3. Negotiation of the deal and signing the letter of intent can be

executed and tracked through Blockchain.

4. Digital identities allow fast and accurate verification and

background checks.

5. Terms of Agreement between both parties are easily

prepared, shared, and verified through Blockchain.

6. Smart Contracts are used for the Leasing Agreement/Tenancy

Contract (see more in next section below).

7. All current and future financial transactions (aka lease

payments) are recorded and initiated automatically.

8. Data is available immediately for real-time analysis.

9. Real Estate Agents, Flipping Houses, and Blockchain

27
All of the benefits of Blockchain and Smart Contracts discussed
above are also beneficial to both individual real estate agents and to
investors who are interested in flipping properties rather than buying-
and-holding: reduced paperwork, faster transactions, fraud
prevention, and title surety.

For professional real estate agents, these benefits can free up time to
focus more on education, advertising, generating leads, and therefore
increase potential earnings. Just being versed and practiced in the
technology in itself can generate a new customer base that is savvy in
the benefits of this cutting edge innovation.

For investors who are flipping houses, sales transactions execute

much faster and the fraud prevention features significantly reduce the
risk of these fast-paced transfers. The faster the sale executes, the
sooner capital is freed up for additional investments. The faster you
turn your capital, the more money you make. The ICO feature can
also make more capital available for investments, again increasing
the profit potential. Another e-book is coming on how to flip houses
using Blockchain, please stay informed.

28
 Foreseeable Challenges

A lthough the future of Blockchain use in real estate is

promising, some challenges may present themselves for early
adopters.

1. It is difficult to determine when the best time will be to enter

the digital/Blockchain movement because it is still a new and
rapidly developing technology and unknown problems may
be encountered.

2. There is not yet regulatory or compliance frameworks to help

govern data privacy and transparency, which can make
buyers and sellers wary of engaging with these tools.

3. More companies need to implement infrastructure and

controls for Blockchain in order to increase the opportunities
for companies to engage in digital commerce.

29
 Real Estate Revolution

T o sum up what I have discussed in this eBook, Blockchain

technology is already making visible inroads into the real estate
industry. Mortgage and wire fraud are major concerns that secure
Blockchain networks can help eliminate. These issues create huge
levels of distrust between potential transaction partners, driving the
need for verification and re-verification by third parties. This causes
excessive transaction times, fees, coordination issues and more. What

30
are current activities in Blockchain tech that are helping to address
these problems? Here are a few of the ways that Blockchain tech is
already revolutionizing the world today:

1. SMARTRealty is a Seattle-based startup company that is

working to provide customizable real estate contracts that will
automatically execute when all conditions are met.

2. Zap is a Blockchain platform in New York that is currently

being used to automate the management of commission
payments, which can be complicated and time-consuming.

3. The first ever end-to-end property sale in California using

Blockchain Technology was completed on a system called
Propy. Their goal is to facilitate cross-border and global real
estate sales.

4. The Swedish Mapping Authority is set to become the first

government to use Blockchain technology for conducting
property sales. They have partnered with telecommunication
firm Telia, consulting firm Kairos Future and tech company
ChromaWay to develop an initial platform.

5. The nation of Estonia has created a platform called X-Road that

will allow the nation’s e-service databases to link up and
operate succinctly. The X-Road is a Blockchain that holds data
that relates to taxes, voting records, medical records, residency
information and digital identities.

6. My own company, SARO, is on the leading edge of Blockchain

tech and Smart contract use for innovation in the real estate

31
 industry in Dallas, Texas. Here are some of the ways our
company has already put this technology to use:

a. SARO executed the first ever 1031 exchange in real estate,

in which we sold land and picked up a mixed-use site.
(1031 exchange allows the reinvestment of sales proceeds
into a new property, and to defer all capital gains taxes).

b. SARO is the first company to put permits and plans on

Blockchain.

c. SARO is the first company to develop four condo units that

will have all of the most important documents pertaining to
the development on Blockchain. The goal is to be as
transparent as possible to potential buyers and make the
buying process as easy as possible, as well.

d. SARO is in the process of putting titles on Blockchain in

order to notify the homeowners of any changes that could
potentially take place to the title (fraud prevention).

In conclusion, real estate is one of the industries in which Blockchain

technology can address many problems and bottlenecks, including
increasing security for buyers and sellers, cutting costs and delays,
and streamline processes dramatically. Those of us who are aware of
the potential, including myself and my company, are starting to lay
the foundation for processes that could enhance and ease the
verification and transfer of real property in the near future.

32