There’s a trend happening in real estate and agents aren’t sure what to think about it: More and more buyers want to pay for their next home using cryptocurrency. There’s no doubt that agents have mixed opinions about what this means for the future of real estate. While cryptocurrency has some benefits for buyers and sellers, real estate agents are talking about how cryptocurrency might change real estate transactions and the entire home buying process.
How does cryptocurrency apply to real estate and why does it matter?
While cryptocurrency isn’t new, its application to real estate is a relatively new trend. To start with the basics, cryptocurrency is a digital currency that is virtual and tradable as a digital asset. Bitcoin, which launched in 2008, was the first cryptocurrency and is still one of the best-known along with others like Ethereum. Each currency has a blockchain that records transactions made by that currency as a public record — that means that anyone can look up this data. However, cryptocurrency is not the same as cash or USD, which in the cryptocurrency world is called fiat.
Buyers who want to purchase a property using cryptocurrency, can transfer the cryptocurrency to a seller, or convert it to fiat first. Transferring cryptocurrency can be instantaneous while converting it to fiat could take a few days. Because of the increased demand for cryptocurrency transactions in real estate, real estate agents’ tips to clients include getting familiar with Fintech platforms that are designed to make these types of transactions easier. For example, BlockFi, gives sellers a platform to secure crypto-currency-backed home loans and BitPay will convert cryptocurrency to fiat currency.
Realtors are seeing that for buyers, cashing out crypto-currency may make it easier, as this type of transaction is similar to a cash sale, which is nothing new, especially for investors who purchase homes as a business transaction, instead of as a home to live in.
Can sellers and buyers benefit from the cryptocurrency trend?
Cryptocurrency gives buyers another option when it comes to purchasing a home, and that is one of the major benefits of adding this type of financing to the world of real estate. Because cryptocurrency is an asset in its own right, it also has investment implications for sellers.
Because cryptocurrency has the possibility for rapid appreciation, sellers could see that the asset is worth more in the end than they would if accepting dollars in a traditional real estate transaction. However, sellers should also keep in mind that this type of transaction can be risky, because cryptocurrency is a volatile asset, which means it can also go down in value. Real estate agents and lawyers advise buyers and sellers that even if cryptocurrency is how the seller will be compensated, a contract is a must, with the fiat (USD) price for the property included. Consulting with a professional who is familiar with these transactions can ensure the best outcome for everyone involved.
Buyers will also need to keep in mind that if they want to use cryptocurrency, not all sellers will be willing to engage in this type of transaction, which means there could be a smaller pool of homes to choose from, and for this reason, real estate agents might discourage this type of transaction for people seeking to buy a single-family home in a competitive market, for example. Another benefit to buyers using cryptocurrency is that similar to cash real estate sales, closing costs associated with real estate transactions could be eliminated, saving them money in the end. It’s even possible that some sellers might offer discounts for cryptocurrency offers.
Markets that are likely to be the most affected by cryptocurrency
With many similarities to cash real estate transactions, real estate agents are seeing an increase in the demand for real estate purchases using cryptocurrency, especially in the luxury real estate market, and for investors buying homes as part of a business. The most likely buyers to use cryptocurrency are investors, and others who are not necessarily purchasing a single-family home to live in. One of the advantages of cryptocurrency is that transactions can be completed faster than a real estate transaction with a mortgage-backed loan. For example, if a buyer is using cryptocurrency to pay for a home by making a direct transfer to the seller, that transaction could happen in minutes, even if the buyer and seller are in different cities, states, or even, countries.
Does the rise of cryptocurrency mean the end of in-person open houses and showings?
While some critics are questioning if cryptocurrency could drastically change the real estate market, where buyers and sellers are less reliant on real estate agents, technology can never replace human interactions and the support that real estate experts can provide. Whether you are a buyer or seller if you think you might want to involve your cryptocurrency investments, talk to your realtor early on to see how you might want to change your strategy to make this real estate trend work for you.