Cryptocurrency or “crypto” is a type of decentralized, online payment system that operates using a blockchain. It has exploded in popularity during the past few years. As the use of crypto becomes more acceptable, it begs a few questions. For example, could you use it to buy something like a house?
The answer is yes, but both the buyer and seller will have to be on board. You’ll also need to find title insurance and escrow companies that are okay with handling transactions of cryptocurrency rather than “real world” money.
Let’s take a look at why you might want to buy a house with crypto and what might make doing so difficult.
The Pros Of Buying A Home With Crypto
Here are some of the benefits and perks of buying a home with Bitcoin or another cryptocurrency.
Acquirement of a More Secure Asset
The value of crypto is volatile, meaning it can change frequently. This means the Bitcoin you bought might drop in value until it’s worth less than what you paid for it, or it could go the other way, and become more valuable. Just like assets traded on the stock market, the value of cryptocurrency experiences daily fluctuations.
When you buy a house with crypto, you trade a volatile asset for a much more secure one. Real estate value tends to appreciate with time, which means it grows in value much slower than something like crypto. It’s also less likely that it will lose value, which could potentially happen with crypto any day of the week.
Potential Discount
If you find a seller that’s on board with a crypto offer, they may offer you a discount. Sellers interested in obtaining bitcoin or another virtual currency are likely crypto investors as well that expect the value of your offer to rise over time. If they’re confident they can continue to profit from the crypto you’ve offered them, they might accept a slightly lower price for the house.
Increased Purchase Speed
Similar to buying a house with cash, paying with crypto can speed up the purchase process by cutting out the typical hurdles of the mortgage process. If you’re coming to the table with enough cryptocurrency to purchase the home upfront like with cash, it can make your offer stronger.
The Cons Of Buying A Home With Crypto
Here are a few of the downsides that come along with attempting to buy a home with cryptocurrency.
Volatile Nature of Crypto
As mentioned earlier, all cryptocurrency is volatile. Since its value can change by the day, your offer will also experience fluctuations in value during the timeline of the purchase. The uncertainty that they may not receive the value they’d hoped for may dissuade sellers from accepting crypto as payment.
Some sellers may not want to deal with uncertainties at all. Real estate usually appreciates in value, meaning it’s likely that sellers will be able to sell their home for more than they bought it for. If they accept an offer of Bitcoin or another cryptocurrency, the odds of that profit staying profitable are not 100%.
Unfamiliarity with Digital Currency
Cryptocurrency is a little over a decade old, but it has only recently become more visible in the public eye. Many people are still unfamiliar with digital currency and may be nervous to make a deal involving a currency they don’t fully understand.
Finding A Seller
It can be difficult to find a seller – not to mention insurance and escrow companies – that will accept digital currencies. Some sellers will include that they are cryptocurrency friendly in their listings, but otherwise, you have to ask. Some home listing sites have filters you can use that allow you to see only home sales accepting cryptocurrency, but this is not a widespread feature on many sites yet.
Anonymity
People may also be unwilling to partake in a crypto real estate sale because of digital currency’s inherent anonymity. While all cryptocurrency transactions are recorded in blockchains, they’re only tied to numerical ID’s – not names.
It can be difficult for sellers and other parties involved in the sale of a house to trace the origin of the money that’s being offered when there isn’t a traditional paper trail. People may be hesitant to accept money with an unknown and not easily proven origin.
The Bottom Line
It is quite possible to buy a home with your cryptocurrency. It is a less volatile asset to hold and can speed up a real estate transaction. However, as crypto is still considered a risk or an unknown by much of the real estate industry, finding a seller or insurance company willing to deal directly in them is rare.
The good news is that many sellers, insurance companies, and other parties are willing to work with cryptocurrency offers if you ‘cash them out’ first. While an offer of 20 Bitcoins for a house might make a seller nervous, its worth once sold and converted to cash ($468,000 at the time this article was written) may seem much more enticing.
For more information and resources on how to manage your money and finances, visit the Rocket HQ Financial Learning Center at rockethq.com/learn.
This article was written by Rocket Mortgage.