After a very enthusiastic tip from a good friend a few years ago, I casually purchased some Bitcoin on the Coinbase exchange. At the time the cost to invest was approximately $600 for one Bitcoin. If you’ve been watching headlines at all it’s hard to miss the fact that although it fluctuates wildly, the value of Bitcoin has increased dramatically.
It seems that lately everyone is talking about Bitcoin, trying to figure out if it’s ‘real’ or a scam of some kind, and whether or not they should be buying cryptocurrency themselves. I’m not going to evangelize BTC, or even try to explain what it is or how it works – there are some very good resources online for information. What I do want to illustrate is that these new types of currency are poised to become a part of our everyday lives. Today, Bitcoin can be used to purchase just about anything, from a house to a cup of coffee at Starbucks – you can even spend your Bitcoin at online retail giants like Amazon and Overstock. Granted, buying a coffee is a lot less complicated than buying real estate, but both are happening and with more and more frequency.
Purchasing Real Estate with Bitcoin
As recently as the tail end of 2017 and as close to home as Tukwila, Washington a twenty-something aerospace engineer purchased a 3-bedroom house priced at $415,000 using Bitcoin Cash (BCH), an offshoot of Bitcoin. Generally, when a purchase is made with cryptocurrency (for a cup of coffee, for example) the buyer simply sends the seller the agreed-upon amount of currency directly. The seller has a ‘receiving address’ or digital wallet – expressed as a scannable QR code or a string of letters and numbers unique to their account – and the buyer sends funds to the seller from their own digital wallet using this information. In the case of the Tukwila purchase, it wasn’t as simple as a transfer of the BTC from the buyer to the seller because the buyer had acquired traditional financing on the home purchase and U.S. cash was required by the lender. The buyer’s BCH was used as an ‘asset’ to secure his loan – and then it was converted to/sold for ‘fiat’ (regular money) in order to make the actual purchase in the traditional way.
Back in 2014 a property was purchased for Bitcoin in Lake Tahoe – the price was 1.6 million dollars or 2.739 coins (based on the value of BTC at the time the purchase was made.)
There are numerous cases though where sellers put their properties on the market seeking Bitcoin specifically, and only, as payment. In these situations, buyers paid for the real estate outright with Bitcoin. In Miami, in December 2017, a 2-bedroom, 950-square-foot condominium for about 60 BTC. Or, a little farther from home, a developer is accepting Bitcoin for purchases on a project in Dubai consisting of two residential towers and a shopping mall.
In all of these cases, once the seller receives an offer he wants to accept, the transaction is, in essence, an all-cash purchase. As long as a lawyer isn’t needed it’s not necessarily any more complicated to complete a real estate transaction using BTC than it is to buy that cup of coffee – the buyer and seller simply have to agree that cryptocurrency is being exchanged and seal the deal. Although this doesn’t necessarily preclude the need for utilizing (and paying) real estate agents, inspectors, and any other specialists involved in the transaction. who may or may not accept Bitcoin in exchange for their services.
Lenders are getting in on the action as well, with players like Unchained Capital coming onto the scene. Unchained is relatively new lender offering loans backed by a buyer’s cryptocurrency assets. According to an article in Barron’s, Unchained allows buyers who own cryptocurrency to borrow up to $1 million with interest rates between 10% and 14%. The length of the loans ranges from three months to three years, rarely longer, with the principal due at the end.
Bitcoin Technology in the Real Estate Market
As the real estate market catches up to this new technology everyone from lenders, mortgage brokers, and real estate agents are taking note. One agent, in particular, has notably brokered four homes with Bitcoin. When asked what she sees as the biggest hurdle the real estate industry faces in terms of moving forward with cryptocurrency purchases, Piper Moretti states, “Bridging the gap between new technology and the “old school” way of doing business. Real estate is very slow to adopt new ways of thinking and implementing technology.” She goes on to clarify that the ‘technology’ she’s referring to is the tech backbone of BTC, called the Blockchain which she believes will, “…revolutionize all aspects of how deals get done.”
If you currently own Bitcoin and would like to learn how your cryptocurrency assets could impact your home loan or purchase, feel free to give me a call or shoot me an email to discuss.