Cryptocurrency, especially Bitcoin, is starting to influence all sorts of things, including the real estate market. There have been many cases of homes being put on the market recently with a Bitcoin price tag. Many in the industry say there must be something to this; many real estate agents report several advantages to putting a ‘Bitcoin accepted’ sign on the home. Of course, the real estate market and property transfers are the sort of market that could easily be taken over in a Bitcoin rush. But is it worth it to sell a house for Bitcoin today?
One thing that is obvious is those who put their homes for sale in Bitcoin is that there is a lot of press coverage. There was a $20 million mansion in the UK that went for sale this year that was priced in Bitcoin. According to the realtor who listed the property, there were 15 viewings of the home with most of the prospective buyers under 30 and coming from Asia.
It makes sense that many of the potential buyers are young, as most people who invest in Bitcoin are from their early 30s and younger. Also, most of the early adopters of Bitcoin when it was worth only a few dollars were young and tech savvy. When some of these young people bought Bitcoin, the cryptocurrency was only worth enough to buy a pizza. Now one Bitcoin is worth $12,000 as of March 2018.
Other Effects of Cryptocurrency on the Real Estate Market
Experts think that we are at the beginning of a shift in residential real estate as more people want to do property transactions with Bitcoin and similar. These types of transactions can be done faster, cheaper and more efficiently, the argument goes.
Traditional real estate is very much based on paper and involves many third parties. But blockchain allows people to quickly transfer funds and title to property in a more peer to peer way. The savings on real estate transactions with cryptocurrency comes from not just cutting out third parties; they each need to be paid and can slow the process. It also makes it cheaper because transaction fees are often reduced to the 1% needed for a Bitcoin transfer.
Peer to peer transactions online are seen as more compelling where international sales are frequent. They are instant transactions and take away any need for currency conversions. There are no more transfers between foreign banks which can take weeks or months. Some people like the idea of pricing a house in Bitcoin can be advantageous because there is not as much red tape as buying a house with dollars or a standard currency. While some inside the real estate industry are excited about the possibility of cryptocurrencies making it easier to buy and sell real estate, many say we are not there yet.
Some experts in the real estate field think that the Bitcoin craze particularly in real estate could be a gimmick. Some real estate experts think that people who buy properties as investments usually want to do so for a low risk return on investment. But this is not the buyer profile of many Bitcoin investors. They say that Bitcoin as an exchange medium in real estate is not sustainable for the long term. Real estate developers usually raise capital from pension funds and private equity. When a fund invests in real estate, they are usually looking for a return of 8% or 10%. But because Bitcoin is very volatile and will always be higher risk for doing transactions.
Today, many Bitcoin transactions for real estate only involve a single party who wants to use it, but the other wants to do the sale or purchase in a more traditional way. There are ways to make these transactions happen though – services such as BitPay convert Bitcoin to cash.
An agent at Keller Williams recently used BitPay to help a client buy a $3.2 million property with Bitcoin this year. The seller agreed to open a BitPay account and then send the buyer an invoice for the purchase price. The buyer sent the funds and they were converted back to dollars, and the 1% fee was paid. In that case, it was essentially an all cash deal. But it was not as easy as an all cash deal; it required a 30-day escrow and it took all of that time to figure out how to get the deal done.
The same realtor did other transactions with Bitcoin and all of them had title transfer on paper with some degree of headache for turning Bitcoin into cash to get the deal closed. But many believe that these transactions will get smoother as Bitcoin gains acceptance.