Who would have thought that a decade after its inception, Bitcoin would be used to buy real estate? Our financial world has evolved and Bitcoin together with Blockchain is right at the forefront of that revolution. People have called it the fourth industrial revolution. The idea of buying real estate with cryptocurrency wouldn’t have been conceivable a few years ago.
I don’t know about you but I have memories of a time when money was sent through the post office as a parcel. I don’t need to tell you that at times that money would get stolen. Then came the smart money revolution when people could send and receive money through their mobile phones. And now with Cryptocurrency money does not even have a physical form, its operation is fully online. How times have changed.
Buying Real Estate with Cryptocurrency
For a few years, Cryptocurrency uses were limited to day trading until people realized that the coins held more potential. Soon the applications expanded further beyond trading to day-to-day activities. People started using Cryptocurrencies as payment in retail stores, to book flights and hotels, to pay school fees among many other things. Were it not for the extreme price volatility, you would probably be using Crypto to pay for your favorite cup of coffee.
Cryptocurrency and real estate are some of the most lucrative investment ventures. People have always thought of them as mutually exclusive; either you invest in Crypto or real estate. It is only recently that people have begun to merge these two ventures and the potential for tremendous success is mind-blowing.
Cryptocurrencies are still fairly new, very few sellers and companies are enthusiastic about them. Ensure that you carry out enough research beforehand to avoid disappointments. The very first bitcoin real estate transaction in the U.S. was for a home in Austin, Texas in 2017. The funds were converted from BTC to US dollars to complete the sale. This has continued to be the trend; sellers prefer that the buyer converts Crypto to fiat before conducting the trade.
When exchanging cryptocurrency for real estate, first both the buyer and seller need to be on board. If the transaction is peer-to-peer, that is there are no third parties involved then it is quite simple. The buyer will pay in Crypto and the seller will hand over the necessary documents. From there the buyer will contact the necessary authorities and make the necessary adjustments.
The case is slightly different when third parties such as escrow companies are involved. You will first need to ascertain that the company indeed deals with Cryptocurrencies. You will also need to find a title insurance company that accepts Cryptocurrency.
Bitcoin and Ethereum are the most common Cryptocurrencies used in purchasing real estate. However, depending upon your agreement with the involved parties you might use another coin.
Conducting a real estate purchase using Crypto
The most important thing when it comes to such a purchase is to ensure that the buyer and seller are on the same page. Once you have two agreeing parties, the process should run smoothly. Buying real estate with Cryptocurrency is very simple, once everything is signed the transaction is completed anywhere between 10 minutes to a day. Who needs a banking system if you can complete a real estate transaction in a day or less?
Only conduct business with people you trust. Crypto transactions are not reversible and therefore, if you want to reverse the transactions due to any litigation, then you need both parties to be compliant.
People need to explore the smart contract feature a bit more in real estate. I get the feeling that Ethereum and smart contracts can do wonders for the real estate industry.
Merits and Demerits of purchasing real estate with Crypto
One of the many things you must be aware of is the merits and demerits of buying real estate with Cryptocurrency. This will help greatly in deciding whether or not to purchase since you will weigh the risk involved and decide whether it is worth taking or not.
- Better store of value
Real estate is considered more secure than Cryptocurrency because its value is more stable. Cryptocurrencies are characterized by extreme price volatility; the price swings are sudden and extreme. Often the Crypto you bought will drop in value hence being worth less than you bought it. A few times it will increase in price and have more value than the buying price. Interestingly more people experience losses, it’s only a few smart investors that make a good profit.
As for real estate, the value tends to appreciate with time but rarely does it lose value. Though the growth is much slower than that of Cryptocurrencies, buying real estate allows you to trade a volatile asset for a secure one.
- Favorable offers
A seller that is willing to accept Cryptocurrency is also likely to offer an amazing discount. This is because they are probably Crypto investors and they understand the price volatility as well as the potentials of Crypto. If someone expects to get worthwhile returns from the crypto you are giving them, they are likely to give you a discount.
- Speeds up the purchase process
In the same way, paying in cash saves your time, paying in Crypto can also speed up the purchase process. Paying in crypto cuts out the typical hurdles of the mortgage process; also having the money ready makes your offer stronger.
- Prevents fraud
Most cryptocurrencies are built on Blockchain which helps prevent fraud through its private, fully certifiable digital identification. This offers current and reliable proof of funds. It also offers a digital ID that can be used for deed transfers, mortgage payments, escrow, or other financial scenarios.
- Greater transparency
Blockchain stores information securely and it is instantly verifiable. This eliminates dealings with banks and lawyers, saving money.
- Crypto price volatility
Cryptocurrency prices are extremely volatile; the value usually changes in a matter of seconds. Sometimes the difference between the highest and lowest price for the day goes up to $10; that’s crazy.
When you make an offer to buy real estate using crypto, the price will likely change within the course of the transactions. The seller might be afraid that they will not receive the value they had hoped for thus opting not to use Crypto.
Cryptocurrencies are still a fairly new concept and therefore most people are still unfamiliar with their operation. People are usually nervous to make money deals that they don’t fully understand. It is therefore difficult to find sellers, escrow, and insurance companies that are willing to accept crypto. The anonymity also puts some people off; some people prefer to receive money from an unknown origin.
- Difficulty in finding a seller
A seller is more likely to accept traditional currency over crypto because of familiarity and stability. Ensure that your seller is cryptocurrency-friendly in their listings.
It is possible to buy a house with Cryptocurrency, yet not all sellers will be onboard. The ones that will be on board are more likely to accept the well-known coins. Ensure that you have enough crypto to conduct a purchase and counter all the uncertainties involved.
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