The team at startup Prime-Ex Perpetual thinks the blockchain can change the way we buy and sell real estate.
They think their blockchain platform and smart contracts can change how property is developed, financed, and sold. To get an idea how this might work we recently interviewed Prime-Ex Co-Founder and mortgage industry veteran John Gilbert.
In a short conversation Gilbert outlined some of Prime-Ex’s goals and explained the potential of its technology.
The Prime-Ex Business Model
What is Prime-Ex’s business model and how is it different from today’s real estate process?
"First, Prime Ex Perpetual manages the real estate process from beginning to end; from selecting land, buying it, constructing property, providing better buyer financing arrangements and delivering a more positive borrowing experience to the residential buyer, thus minimizing such deficiencies as cumbersome collection costs, and drawn out legal disputes."
What are the specific benefits of this business model?
"It eliminates the need for middlemen or intermediaries, makes the process more transparent and makes it irreversible."
Can you give us some examples of that?
"It increases transparency because the peer-to-peer (P2P) distributed network records a public history of transactions. The blockchain is distributed and highly available; it also retains a secure source of proof that the transaction occurred.
It eliminates middlemen because two parties transact directly with each other, without the need of the third parties.
It’s irreversible because the blockchain contains a verifiable record of every transaction, which eliminates the risk of fraud and manipulation."
Why is this new business model for real estate needed?
"Times have changed. The traditional real-estate model is based on a person with one job who bought one house in his life, and paid for it with a basic 30-year mortgage.
Today’s real estate buyer is more mobile. He or she will probably work at several jobs and own several different homes in his or her life. People are also moving all over the world and more likely to be self-employed.
Self-employed people are also proving to be more mobile as more and more of their work focus migrates from the limitations of their physical locations to the limitless reaches of the global internet economy.
People are also more likely to take control of their finances. Take retirees, they have shown willingness to be more mobile, looking for opportunities that minimize hazards to their nest eggs and give them the ability to explore new retirement destinations. We want to create a platform catering to those people. Our hope is to make it easy for a person to buy a home anywhere in the world using the blockchain."
What’s wrong with the Traditional Real Estate Process?
What is so wrong with the traditional real estate process that you need this model?
"A better question is what is not wrong with it. The traditional real estate business model dictates multiple parties; each working for his or her own interest, at the expense of the homebuyer."
Can you give us some examples of that?
"You bet, take property selection for land developers involved in developing residential real estate lots for example. Today it transacts solely on the basis of buying the land cheap, developing the land, and selling it double to triple the price to the homebuilder. Once sold, the land owner is out of the game with no incentive to provide a good product for the end buyer."
What else is wrong?
"Home builders will cut corners to cut costs with the goal to achieve ever-higher profit margins and do nothing to guarantee their work. Home buyers in Panama will be lucky to find a two-year warranty in a new house. Generally, once the house is sold, the home builder is out."
Who else is to blame?
"Banks because they provide the financing to the land owner, home builder, and eventually the home buyer. Having the property as collateral at any point in time; the bank achieves a zero-risk investment at the expense of its client, often generating three different profit cycles from the same piece of land."
How Prime-Ex is Different
How is Prime-Ex’s blockchain based P2P platform supposed to be different from that?
"It provides a cohesive real-estate process from beginning to end. The customer is dealing with one process for land selection, construction, financing, and maintenance. This makes everybody in the process responsible for their actions."
How does Prime-Ex make participants in the home buying process more responsive to customers?
"Prime-Ex has incentivized its client with the carrot of a guaranteed buyback so long as they have performed as scheduled."
Prime-Ex's Revolutionary Loan
How is Prime-Ex’s Financing Model different from the traditional process?
"It puts more responsibility on lenders by switching financing terms to a system that replaces income verification for proven reserves and plans the exit strategy up front as part of the agreement.
Instead of an implied threat of lawsuits and foreclosure to demand that they perform, Prime-Ex gives them every reason to perform with a guaranteed buyback program and maximum loss exposure. Prime-Ex effectively cuts out the risk that time holds over the borrower’s head. Instead of submitting our client to the stick of a prepayment penalty and performance failure; Prime-Ex has incentivized its client with the carrot of a guaranteed buyback so long as they have performed as scheduled."
What differences will the home buyer see?
"This allows Prime-Ex Perpetual to offer a Revolutionary Loan. The traditional model implies late charges, default interest, prepayment penalties, negative credit scores, and foreclosure. Whereas Prime-Ex Model offers the potential of a revolutionary loan to homebuyers, and its distinct features are:
- No credit scores.
- Asset verification rather than income verification.
- A 30-year no-nonsense fixed rate mortgage payment.
- A guaranteed buy-back program at two thirds of the original price.
- A 25% down payment.
- No age restrictions."
How Prime-Ex Plans to Leverage the Blockchain
How will Prime-Ex be able to achieve all that?
"By leveraging Blockchain technology through our PEX-Token. Crowdsourcing via the PEX-Token will enable Prime-Ex to achieve its business objectives. In return, Prime-Ex will return real estate profits to the token holder, via annual dividend distributions.
We will also want to incentivize buyers to pay mortgages using PEX Tokens by means of mortgage rate discount, effectively creating demand for PEX on a monthly basis. Taking PEX Tokens should make it easier to collect mortgage payments and limit the risk of foreclosure."
What else can blockchain do for homebuyers?
"Cut costs by maximizing efficiency in document retentions, verifications, authorizations, and performance history creating a seamless, more transparent environment for all within the Prime-Ex Perpetual real estate ecosystem."
Prime-Ex's Customer Base
Who is the customer base for Prime-Ex?
"Everybody that wants to buy a home. We eventually hope that all homebuyers will use a process like this."
Where do you plan to test the process?
"The Prime-Ex Perpetual 125-home proof-of-concept will occur in the cool highlands and the warm beaches of the Republic of Panama, the top expat destination for home ownership and a place where financing homes used to be challenging for expats. Once the concept has been proven, Prime-Ex Perpetual will expand into other international locations."
Why are you marketing to expatriates?
"Expats cannot easily get financing abroad, even though they are members of an elite group with high discretionary income."
What Can PEX Tokens Do for You?
You are currently holding an initial cryptocurrency offering or ICO of PEX-Tokens, how will holders of that Token benefit from your plans?
"We plan to distribute 80% of our profits to the PEX-Token holders."
What does your business model do for PEX-Token holders?
"The Prime-Ex business model is also set up to encourage organic PEX demand by providing favorable borrower financing terms to those who make their mortgage payments in PEX-Tokens, rather than with money via a mortgage rate discount.
How can people invest in the PEX-Tokens or find more about them?