In 1991 Dr. Daniel Kenigsberg became the owner of a nearly half-acre parcel of land in Fairfield, Connecticut.
Dr. Kenigsberg eventually moved to Long Island but he kept the property in Connecticut for sentimental reasons.
You see, this plot of land was right next to his childhood home that his father purchased back in 1953.
It was his dream to pass this property onto the next generation of his family.
So it came as a shock to Kenigsberg when a friend called to tell him that someone was building a house on his land.
On a visit to Fairfield, Kenigsberg went to the property and confirmed that there indeed was a 4,000-square-foot house that was being built on it by 51 Sky Top Partners, a property developer.
When Kenigsberg went looking, he found Fairfield County property records that showed the property was sold to 51 Sky Top Partners for $350,000 in October of 2022.
Except he never sold the land.
When he sued 51 Sky Top Partners to void the sale and remove any structures on the land, it turned out 51 Sky Top Partners were victims in this too.
Someone had impersonated Kenigsberg and through carelessness at several stages, the property was allowed to be listed, marketed and sold without anyone ever catching on.
Kenigsberg said: “I’m angry that so many people were so negligent that this could have happened.”
Kenigsberg’s reaction is very understandable.
Real estate transactions are some of the most cumbersome and red-tape filled ordeals.
And yet, not only did something like this happen, it went unnoticed.
So how could this have been prevented?
The world of crypto could have the answer.
A System Built on Flawed Records
Kenigsberg’s situation is an extreme case where both the buyer and the seller were unaware of the truth about the property.
But what is far more common is people buying a house only to find out days, months or years, after the sale that there are liens on the property.
How is this possible?
Part of a real-estate transaction is a title search, where a title company can look up who owns the property and if there are any claims or liens on the property.
It’s estimated that around 25% of real estate transactions encounter some form of title defect.
Most of this is dealt with before a purchase goes through, but it’s not foolproof.
In fact, missing things in the title search is so common that a whole title insurance industry exists.
In 2023 alone, the title insurance industry in the U.S. paid out $638 million in claims — up from $596 million in 2022.
The Antiquated Infrastructure Behind Real Estate Deals
The core problem? Title searches rely on outdated record-keeping systems.
There’s no unified national record keeping system in the U.S. Instead, these systems exist at the township, county or municipal level.
There are over 3,000 municipal level systems in the U.S. today, and although they follow some common-sense conventions and norms, there is no standardization across these systems.
So, if there are claims or disputes over a property, there is no set way to register or record that on these systems.
It’s up to those with the claim to follow the municipality-specific procedures, and up to the record keepers to accurately input the information into the system.
Any hiccups in this process could result in these claims being absent in a title search in the future.
How Blockchain Can Change the Game
But what if there was an immutable ledger that could record the original existence of a property and then provide a verification system by which only legitimate claims and liens on the property could be recorded?
Well, that system already exists and it’s a blockchain network which can be customized to accept certain kinds of proof and validation before information is added to that blockchain.
And it is the latest innovation in real-estate tech.
Imagine owning a non-fungible token (NFT) that represents ownership of a property.
Multiple parties could be given permission to add information to this NFT without owning it.
This information could include verified pictures of the house, home price history, renovation details, liens, property tax information and much more.
Essentially, this NFT could include everything that you could find out about this property on Zillow and through a title search.
Think of this like paying with a $100 bill at certain establishments. The person accepting your bill draws a line on it with a special marker and the bill itself acts as the proof that its real.
Similarly, the existence of the NFT and the information contained within it is proof that its real.
And it’s there are participants on that blockchain network who in a way keep marking it with a special marker constantly.
This is how real-estate can be tokenized and traded on a blockchain.
You, the owner of the NFT have to sell it or transfer ownership — it can’t be done without your knowledge.
There is no scenario in which you end up in the same unfortunate predicament as Dr. Kenigsberg.
Even if someone impersonated you, and even if there is gross negligence at every stage, the impersonator cannot sell the NFT that is not in their possession.
And the buyer can examine the NFT themselves and contact the owner shown on the NFT to verify the authenticity of the sale.
The Future of Tokenized Real Estate
This type of tokenization is part of a growing trend in tokenizing real-world-assets.
According to Statista Research, real estate is expected to become the largest type of tokenized asset in 2030, making up nearly one-third of the nearly $11 trillion overall market.
And this is an extremely conservative forecast that assumes that less than one percent of real-world-assets will be tokenized by 2030.
Crypto projects have started to emerge around this trend and it is expected to take off in the coming years.
The shift to blockchain could finally bring transparency and security to real estate transactions.
As the world moves forward, embracing this technology might be the key to avoiding the headaches of outdated systems — and securing what’s rightfully yours.
Until next time,
Ian King
Editor, Strategic Fortunes