Will Bitcoins Disrupt the Real Estate Industry?
Bitcoins, a digital currency, seem to be the number one topic of conversation today. No matter where you turn Bitcoins has taken center stage. And, now it appears that this cryptocurrency has come to the real estate market. With the volatile nature of the Bitcoin, one has to ask, “Is this a good thing?” Can we say that Bitcoin is going to be a lasting disrupter of real estate transactions?
High-end Real Estate appears to be a Natural Fit for Bitcoin
In late 2015, Stephen Burke and Carol Cassis, two leading real estate agents in Miami found themselves facing the prospect of their first Bitcoin transaction. The agents were frequently called upon to find buyers for Miami’s rich and famous. They were working with buyers searching for luxury properties when they received an inquiry they had never heard before. The buyers wanted to use Bitcoin to close the deal. They needed a seller who was willing to accept a transaction based on this cryptocurrency. In the end, the buyers had to convert their Bitcoins to cash and proceed in the usual way. But, the idea stuck in the heads of Burke and Cassis. At the time, Bitcoin had not jumped through the roof and it was still very much a novice in the financial market. However, the seeds of Bitcoin’s future were already beginning to sprout.
It took a couple of years of analysis and planning before the first Bitcoin real estate transaction would take place. During the interim, Burke and Cassis tracked Bitcoin’s rise in valuation. They pursued the legal ramifications of using a cryptocurrency for real estate transactions. Finally, in 2017, they facilitated the sale of a luxury property of one of their clients who was a Bitcoin collector. It closed for 455 Bitcoin, or $6 million. The buyer used Bitcoins, which were paid in installments.
What Happens to Your Real Estate Investment when Bitcoin Tanks?
It was an exciting milestone, but not without skeptics and doubt over a lasting future. The first question is: considering the volatility of Bitcoin, what happens to the value of real estate purchased with Bitcoin when the price drops? Does the value of the property also fall? We can see in the news that the value of Bitcoin can drop dramatically in a single day. Therefore, potentially a transaction of a $6 million property at the time of signing the contract could drop to $3 million before the end of the day. And what about the buyer? At the time of signing, he has Bitcoin valued at the sale price and by the next day, he might not have enough money to pay for the property.
Gaining Momentum in spite of the Risks
Conducting real estate transactions with Bitcoin is definitely risky and still very much in its infancy. Nevertheless, the concept is gaining ground. More than 3,000 people attended the Bitcoin real estate conference last year sponsored by the Blockchain Real Estate Association. For foreign real estate investors, Bitcoin seems to be one of the best ways to get around barriers related to currency controls. And, as Burke and Cassis note, Bitcoin is very popular with the younger generation, meaning that it could definitely be more than a passing fad.
