Can You Buy a House With Bitcoin? Here’s What You Need to Know
It seems like bitcoin has been in the news more and more recently—you’ve likely heard of it, and you may know people who have invested in it, but what is bitcoin, and does it have a use in real estate? Bitcoin is a cryptocurrency; it does away with central banks and uses advanced encryption to secure and regulate funds. There are no third parties involved, meaning that buyers and sellers can make a transaction directly.
But, the real question is—can you buy a house with bitcoin? Yes!
Related: Beginners House Buying Checklist
Before we get into what you need to buy real estate with bitcoin, it’s important to have at least some understanding of how bitcoin transactions work. Bitcoin is an internet-based cryptocurrency with a decentralized payment system. Every user gets their own anonymous address, and every transaction with bitcoin is fully traceable.
The blockchain technology that it uses is basically a database that co-exists across various locations and gets shared by the community. There’s a significant advantage to these types of systems: there’s not a single center point of failure that is vulnerable to attack.
The only hard requirement to buy real estate with bitcoin is to have an agreement between the buyer and seller to use the cryptocurrency for the transaction. Both parties need to have a bitcoin account, and they should be familiar with how the cryptocurrency and its transactions work.
There’s one important factor both parties need to be aware of: you cannot reverse a bitcoin transaction. Because of this, the buyer and seller should have some level of familiarity with each other and mutual trust.
Conventional escrow companies don’t usually have the means to deal with cryptocurrency transactions, but cryptocurrency escrow services are beginning to emerge.
The value of bitcoin relative to the U.S. dollar constantly fluctuates, so buying a house with bitcoin is a bit different than with traditional currencies. Typically, the buyer and seller agree on a price in U.S. dollars, and the bitcoin transaction is executed at the escrow closing using the bitcoin value at that time.
The first bitcoin real estate deal completed in the U.S. happened in Austin, Texas, in 2017. Though the buyer used bitcoin, the funds were converted into U.S. dollars at closing.
Another famous listing was the Green Bay “Packer House,” which was listed for $1 million in bitcoin. It never sold for bitcoin and is now valued between $250,000 and the original asking price.
Many people with significant bitcoin holdings look to purchase real estate as a way to diversify their portfolio. When properly handled, bitcoin transactions can be completed much more quickly than traditional sales.
Another perk? No intermediaries or traditional banking fees. As long as both parties perform their due diligence, bitcoin payments can offer fast and smooth real estate transactions.
Related: Benefits of Buying a Home
The biggest risk of using bitcoin to buy a home is its price volatility. If you sold a home for $500,000 worth of bitcoin when prices were high and held onto it, you could lose value quickly. Since cryptocurrencies are not regulated, there’s no way to predict future value with certainty.
Despite this, many sellers and real estate agencies have started accepting bitcoin for property purchases and deposits.
To buy a home with bitcoin, both the buyer and seller must agree to use it for the transaction. Once the deal is finalized, the seller can either keep the bitcoin or use an exchange to convert it to U.S. dollars.
In many places, taxes are the same whether the transaction uses cash or bitcoin. There are no extra charges for using bitcoin, but price swings make it risky for sellers.
Still, for those who understand cryptocurrency, buying real estate with bitcoin could be a glimpse of the future.
Looking to secure a mortgage loan for your dream home? Get in touch with Mares Mortgage—we’re here to help!
Related: What to Ask a Mortgage Lender
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