The real estate industry is ever-changing as new services and technologies emerge and influence the way we handle real estate transactions. Among these new technologies is cryptocurrency. While this digital asset has been used since 2009 as a form of payment, real estate cryptocurrency transactions have only recently been acknowledged. So, what does this mean for real estate professionals, buyers, and sellers? The future is here.
What is Cryptocurrency?
Cryptocurrency is a digital currency secured by cryptography (which is a method for securing communications and transactions) using a blockchain network—a decentralized network owned by the people who use it. These systems ensure that the asset is secure and practically impossible to counterfeit. Crypto is held in a digital wallet so while you will never physically hold it, you can earn, transfer, and spend it virtually. There are thousands of cryptocurrencies in existence with more in development at any given time, some of the most widely recognized names are Bitcoin, Ethereum, and Tether.
Real Estate Cryptocurrency in Action: Buying and Selling Homes
Bitcoin and other forms of cryptocurrency are making their way into property transactions around the world, so if you’re looking to purchase or sell using this digital asset, you are not alone. Buyers can purchase homes with crypto while sellers have the option to accept the digital payment directly, split the sale between crypto and U.S. Dollars or have the currency converted to U.S. Dollars. Purchasing and selling property with crypto has risen in popularity as more crypto investors look for ways to balance and preserve their gains through converting them into tangible real estate assets.
We were very excited to be the Closing agent on a Bitcoin Closing between Major Robertson, Buyer, and Luke Neubauer, Seller, and Ashley Brown, Agent with Homepage Realty. We enjoy working with forward-thinking real estate professionals as this new technology evolves.
Benefits of Using Crypto for Real Estate
Cryptocurrency is a secure method of payment for real estate transactions, it also offers the following benefits:
Crypto is a volatile asset which means that its market value shifts almost daily. By purchasing a home with cryptocurrency, you are converting a less stable asset into a more stable one. Real estate will appreciate and depreciate over time, but not as often as crypto.
Attract More Buyers
For sellers, offering crypto as an option for purchasing a home will attract and widen your potential buyer pool. Cryptocurrency also has the potential to appreciate whereas U.S. Dollars will depreciate as time goes on and inflation affects the value.
Quicker Fund Transfer
Closing will still take time, but like cash sales, a direct cryptocurrency sale from one party to another will cut out the hassle and paperwork associated with a traditional mortgage sale.
Since cryptocurrency is encrypted using a digital wallet, the buyer and seller will have greater privacy with their information.
Risks Associated with Real Estate Cryptocurrency Transactions
Since cryptocurrency is still new to the industry, there are some risks associated with using this method.
As previously mentioned, the market value of cryptocurrencies changes constantly. Having an asset that is continuously changing in value can be difficult to determine how much to offer for a property.
Capital Gains Taxes
Cryptocurrency is recognized by the IRS as a type of property that may be subject to capital gains taxes.
The IRS has Frequently Asked Questions on Virtual Currency Transactions Available on their website. We also recommend that you speak with a tax professional if you have any questions regarding your tax liability.
Close with Crypto at Millennial Title
Real estate cryptocurrency is showing great promise in the industry with the potential to make transactions more efficient, secure, and transparent with the introduction of smart contracts. Millennial Title is a proud partner of Encrypted Estates and is excited to offer cryptocurrency closings throughout the United States. Our team has the knowledge and expertise to navigate the complexities of these transactions so that your closing is stress-free. For more information on using cryptocurrency for your next property transaction, contact us today!