Before not long ago, the real estate industry had nothing to do with blockchain or cryptocurrency. Now, both are viewed as a significant leg up for the market. Distributed ledger technology offers greater transparency, expedites contract processes, and brings the traditional Multiple Listing Service (MLS) database to a whole new level.
Despite the obvious value, cryptocurrency in real estate is still in its infancy. Together, let’s take a look at what the current situation is, how the industry may benefit, and what challenges still need to be addressed.
How Does It Work?
The first recorded real estate transaction was a single-family home in Austin, Texas. The purchase took place back in 2017, initiated by Kuper Sotheby (international realty) and processed by a Bitcoin payment service provider.
Kuper Sotheby’s Sheryl Lowe, the buyer’s agent, was fully satisfied with how everything took place. In a press release, she noted that in all her 33 years of real estate experience, she hadn’t had such a smooth transaction. “In a matter of 10 minutes, the Bitcoin was changed to U.S. dollars, and the deal was done.”
Since Bitcoin transactions don’t need to be processed and verified by the bank, there was no need to wait several business days. However, the seller and the buyer had to accept the risk of Bitcoin’s fluctuating value. The final amount in dollars essentially depended on network congestion at the time.
Property sale in BTC isn’t much different from any other sale. It still requires both parties to sign a contract, the only thing that is different is the mode of payment. Kuper Sotheby also said that anyone entering a Bitcoin sale needs to have complete trust in the other party because these transactions are irreversible.
So far, you can’t take out a mortgage on a house with crypto. Some people envision having open-sourced mortgage contracts built on Ethereum rather than traditional contracts. Since smart contracts are self-executing, there will be no need for extra parties.
Advantages of Buying a House With Crypto
Here are the perks of buying a home with Bitcoin or another cryptocurrency.
Tamper-Proof, Transparent Acquirement
Anything recorded on the blockchain is immutable, tamper-proof, and democratic. If there is a block indicating that the property purchase took place, this fact cannot be denied or changed. Anti-corruption and anti-fraud campaigners are championing the blockchain for this exact reason.
Besides, all transactions can be transparently viewed by either having a personal node or using blockchain explorers.
Increased Purchase Speed
In the best-case scenario, a cryptocurrency purchase might be processed in under an hour. Even the leading banks can’t compete with this level of efficiency.
Buying houses with crypto is like buying with cash. Of course, you need to have enough cryptocurrency to purchase the home upfront.
Many sellers will be willing to give discounts because they expect the cryptocurrency value to rise over time. Otherwise, who would accept crypto if they weren’t confident in its future price direction? Ask around and see what sellers accept a slightly lower price for the house in exchange for a promising cryptocurrency.
Disadvantages of Buying a House With Crypto
Let’s not forget about the downsides, which are as important as the benefits.
Volatile Nature of Crypto
A lot can change during the timeline of the purchase of a home. If you agree on an X amount of cryptocurrency, by the time your negotiations come to an end, the exchange rate might be drastically different. A profitable transaction can quickly become disastrous.
Unfamiliarity With Digital Currency
Despite numerous news articles, guides, and tutorials, many people still don’t know their way around cryptocurrency. A crypto deal may be too complex and unfamiliar to a regular person – this applies not only to buyers but to realtors and sellers as well.
Finding a Seller
The Bitcoin-friendly market sector is very small. So, finding sellers who accept digital currency on traditional home listing sites will take some time and effort. You might be lucky to find a website with a cryptocurrency filter, although it’s not a widespread feature on major sites – proper online research will help!
Summary for Cryptocurrency and Real Estate
Conversations about cryptocurrency applications have been hot. Even though it’s highly unpredictable and volatile, many people still believe it’s the future. Digital currencies are already finding their way into the real estate industry, offering new opportunities for promoters, investors, individual buyers, sellers, and renters.
Still, anyone considering a crypto purchase should be careful and consider the risks. And when it’s something as substantial as a home, counter all the uncertainties involved.