You may have heard by now all the craze about cryptocurrency, and its popularity. With cryptocurrency, popularity comes a familiar currency type that has now become a method of payment: Bitcoin. If you’re not familiar with Bitcoin, it’s recommended to begin familiarizing yourself with it. It’s here to stay and continues making inroads in traditional payment methods. In fact, it has entered the real estate market. So that begs the question:
“Can I use Bitcoin to buy a home?”
The short answer, yes. Just a little over a year ago in Manhattan Beach, a homebuyer purchased a $3.225M home using approximately 3,300 bitcoins. A San Diego company is now dedicated to brokering sales of multi-million dollar homes using bitcoin. However, don’t worry just yet and rush to acquire bitcoins simply because it’s an accepted method of payment to purchase a home. It’s still in its embryonic state with real estate transactions. At this time it’s primarily being used in the luxury real estate market. The primary reason for its use in this type of market is due to its higher security than cash-based transactions. Plus, lower fees from the financial institutions who are shepherding the transaction. Of course, as history has shown us, the more comfortable consumers are using a particular method of payment, then the larger consumer base follows. Think of your Starbucks app😀. Of course, this doesn’t mean that purchasing a home using bitcoin for any home won’t be accepted. It all depends on both the buyer and seller accepting it as a form of payment, and if their financial institutions support it. If you find this method appealing and are prospective homebuyer and interested in using bitcoin, you may ask:
“How do you purchase a home with Bitcoin?”
When it applies to the real estate docs, all that remains the same. There are only two significant differences. One, is you have to confirm the other party accepts bitcoin. The 2nd is with the financial transaction itself. You can still use a traditional bank (must verify with your bank if they support bitcoin transactions) to execute the buy, but it’s recommended to use an investment bank. The reason for this is bitcoin, unlike cash, fluctuates daily in value. So when your sale is agreed upon and it’s time to purchase the home, the investment bank can lock in the contract based on the bitcoin value for that particular day. If the bitcoin value depreciates they can execute what is called a Futures Contract to ensure the required amount of bitcoins is accurate to meet the sale agreement.
“All this great, but is there a financial benefit to using Bitcoin?”
Short answer: No. At this current time, any use of bitcoin to purchase a home is a matter of personal preference. There isn’t any tax advantage. However, there is a catch for the seller. If the seller resells the bitcoin they acquired from the sale of their home, they may have to pay a capital gains tax on the bitcoin value. This could dent any profit earned from the sale. Of course, before you decide to use or accept bitcoin for your real estate transaction it is recommended you speak with an investment advisor first. We will be providing more information regarding bitcoin & real estate in the upcoming weeks. So stay in touch by following us on Facebook!
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