In the digital age, almost anything can be done online. Communication, entertainment, shopping, banking – and now you can even buy houses. Real estate listings have been online for some time now, but until recently, no one had purchased a property with cryptocurrency.
The concept of buying and selling homes via blockchain makes many people nervous. Cryptocurrencies fluctuate all the time, so what if a buyer has the money one day, strikes a deal, but loses it all the next? On the other hand, many potential homeowners find the prospect appealing: blockchain is an immutable ledger, so all transaction histories are verifiable, both parties can hold one another accountable, and it removes the need for intermediaries. If buyers have the money, though, and want to take advantage of blockchain’s transparency, why not go for it?
First challenge – Converting cryptocurrency into cash
The first-ever bitcoin real estate transaction happened in Austin, Texas, but the seller did not receive bitcoin as payment. The agent who oversaw the sale, Sheryl Lowe, has since worked with the buyer three more times. Lowe says:
“[her] contracts specify the price of the home in a dollar amount, and her buyers liquidate their cryptocurrency before entering into a deal. This guarantees the seller will receive the US currency detailed in the contract, no matter how Bitcoin’s value may change. If the seller wants that wealth in bitcoins, they must convert the money back into the digital currency following the sale.”
Converting bitcoin into fiat money is a strategic way of circumnavigating the currency’s volatility. Even if the value drops, its previous equivalent in US dollars is still legitimate. Most transactors feel comfortable with Coinify or BitPay (the latter was used for the first exchange) when they exchange bitcoin for cash. BitPay is similar to PayPal: if parties agree to trade bitcoin for a property, the seller issues an invoice. The buyer then completes the exchange within the next 15 minutes, allowing BitPay to work with a stable conversion rate.
Business Insider provides a few examples of what Bitcoin users are buying. Many listings are on the expensive side, and Sheryl Lowe notes that millennials who made quick fortunes from Bitcoin’s rise are targeting high-end properties. The Wall Street Journal mentions that in 2014, a 14-acre property in Lake Tahoe sold for $1.6 million, which was then 2,739 bitcoins.
Paying directly with bitcoin
If someone wants to buy or sell a house with cryptocurrency, both parties need to consent to it. A crypto transaction cannot work if only one side has a digital wallet. The first true bitcoin-to-bitcoin real estate transaction was for a two-bedroom condo that sold for 17.741 Bitcoin last December—which was then equal to $275,000.
Bitcoin consultant Jake Bryan says:
“The pros of buying real estate with bitcoin is that once everything is signed, the transaction completion time takes 10 minutes to a day depending on network congestion. Think about that for a second—no need for a banking system. You can pay for the house, the realtor, and anyone else at the same time.”
However, sales like this are rare. There are tax implications buyers and sellers need to consider because the US government regards cryptocurrencies as assets rather than treating them like foreign currencies. Crypto transactions are also irreversible, so parties need to be comfortable with final sales.
Going through Deedcoin
Traditional real estate methods are tedious, overlong, and rife with fraud. Agent commission rates are somewhat predatory: according to a company by the name of Deedcoin, “Six percent of your house does not belong to you, but rather to your future real estate agent. US property owners hold $15 trillion in private property and stand to lose $900 billion to future commissions.” Deedcoin plans to address this issue with blockchain technology, returning “up to $750 billion to homeowners by tokenizing real estate commission and connecting customers and agents directly.”
Deedcoin replaces the way people find real estate agents. The platform hosts agents in over 130 cities across all 50 states that work for a one percent commission instead of six. Deedcoin tokens—the company’s unique cryptocurrency instead of Bitcoin—are worth 0.1 percent of commission fees. This system enables buyers to convert commissions into closing cost rebates, which can save them up to two percent of a property’s price (meaning only 20 Deedcoin are necessary to get a maximum rebate on the average home sale).
Buying and selling homes with cryptocurrency is currently uncommon, but the potential to streamline the process is both convenient and necessary. As blockchain technology moves its way into the mainstream, people can expect to see it handle more real estate transactions.