Skip to content Skip to sidebar Skip to footer

Bitcoin is Gaining Acceptance in the Real Estate Market

It’s all over the news. You can’t watch a financial show without seeing the logo. You can’t read a trade magazine without seeing new information about the skyrocketing value.

It’s Bitcoin, and it’s the current buzz in the financial sector.

This “cryptocurrency” is powering transactions from coffee shops to clothing stores. As the digital currency gains acceptance, it seems to be slowly moving from small transactions, like a cup of coffee, to larger purchases, like fine jewelry. It’s now moved up the ladder to automotive purchases…you can probably guess what’s next: real estate.

In fact, cryptocurrencies (yes, plural; Bitcoin is not the only digital currency, just the craze right now) have already been used to purchase a home.

But will it become a common practice in real estate? Will we see Bitcoin or another form of digital currency used in a large portion of the real estate market from New York to Kansas to California?

Maybe.

For now, however, all we can do is learn as much as possible about cryptocurrency and try to understand the Bitcoin buzz and it’s potential impact on the real estate market.

Is Bitcoin Coming to Your Next Real Estate Transactions?

What is Bitcoin?

It seems that even the financial gurus don’t fully understand what cryptocurrency really is. Even the people who are sitting on hundreds of thousands of dollars in digital currency can’t adequately and fully explain the digital currency. But we’ll do our best to explain it in an relatable fashion.

Bitcoin is a digital currency that has no corresponding physical property like a coin or bill. Instead of silver or paper, they are blocks of data held in super-secure digital platforms that are treated like money, in that they are used as a currency in trading. Instead of physically exchanging a dollar bill, (or digitally exchanging a dollar bill, in the case of debit and credit cards) the users digitally exchange a Bitcoin, allowing the Bitcoin system to verify the sales transaction.

Using the “peer-to-peer” system, Bitcoin has become a new way to purchase items, assuming, of course, that the buyer and seller both use the currency.

First Real-Estate Bitcoin Transaction Has Already Happened

In the real estate market, we’ve all been waiting for the time when Bitcoin or another cryptocurrency is used to purchase a property. It seemed it would take a while; after all, real estate is generally the most expensive purchase a person will make.

But it appears that it’s already happened.

According to multiple reports, including CNBC and Futurism, Bitcoin is already a part of the real estate market. In September 2017 transaction, which is reported to be the first real estate transaction to use the digital currency, a Texas home was purchased with all digital currency. The realtor said they were surprised by the ease and simplicity of the deal; they assumed it would be difficult to convert the large amount of digital currency (the exact total was not disclosed) into U.S. dollars, but it actually happened in minutes.

In this case, the real estate transaction was done in Bitcoin, and then the real estate agency immediately transferred the money into U.S. dollars, much the same as you might convert euros into Japanese yen, yen into dollars, or dollars into Russian rubles.

Unstable Prices Make Real Estate Transactions Difficult

The issue with Bitcoin, across all sales and industries, is the fluctuating and unstable prices. Although the value of a Bitcoin has skyrocketed over the past year, the changing prices and potential for a rapid downward slide (which could happen as fast as the rise) make people hesitant to accept Bitcoin for real estate, which can make up hundred of thousands or millions of dollars.

Bitcoin is already being used in some markets. Time will tell whether it is commonly used to fund single-family homes or new developments.

Say you decide to sell your $1-million-home and accept Bitcoin for payment. At the time of the transaction, the Bitcoin you hold is worth $1 million, but the price fluctuates daily. Depending on the situation, in one month or even a week the currency you received could be worth $1.25 million…or $.75 million. (It goes the other way too. As the buyer, will you loose out on a huge future gain by trading your Bitcoin for real estate?)

If prices go down after you sold a cup of coffee for Bitcoin, you might be out a few cents. In a day, it could total a few dollars or a few hundred, depending on how much you sold. However, if prices slide in a single day right after you sold the property, you could potentially loose tens of thousands. The low number of high-price transactions in real estate, as opposed to high number of low-price coffee sales, makes the real estate market a little more hesitant to adopt the technology.

To be fair, the value of Bitcoin has gone up and up and up, but the rapid rise makes weary holders uneasy. Better, in some people’s minds, to take real dollars or exchange the Bitcoin immediately, rather than take the chance of a sharp decline.

However, some realtors are accepting and holding Bitcoin, using it to fund purchases both large and small. Instead of converting it into dollars, they hold it, and seem perfectly happy to do so.

Complexity in Real Estate Also Slows Bitcoin Adoption

The other issue is the sheer complexity of the real estate market. With taxes, closing fees, zoning laws, mortgages, capital gains, estates, and many other factors in real estate, adding the complexity of Bitcoin, and applying it to all these variable, can make a complex industry into a confounding mess.

Simply put, selling a home is not the same as selling a cup of coffee, a necklace, or a pair of jeans. It’s even more complicate than selling cars, so there are still a lot of issues that need to be settled before cryptocurrency becomes commonplace in real estate.

Will it Be Bitcoin, or another Cryptocurrency?

It’s important to understand that Bitcoin is not the only cryptocurrency on the market, just like the U.S. dollar is not the only currency in the world. While it is certainly getting the most attention from the media because of the soaring value, there are other digital currencies that may be used for real estate transactions.

“Brickcoin,” for example, is a popular currency that leverages U.S. real estate that could become popular in the future. It’s being marketed as a highly-regulated and stable currency that would remain a liquid asset. Other digital currencies include Litecoin, Ether, and Ripple. Bitcoin is certainly at the top, but whether it remains there is still uncertain.

Get Reliable Advice to Navigate the Changing Real Estate Market

The real estate market is always changing, but one thing will remain the same: the value of reliable, informed advice.

Contact San Diego Purchase Loans to learn more about mortgages and home purchases.

Subscribe to Newsletter

Subscribe to our Newsletter for new blog
posts, tips & photos.