Buying Real Estate with Bitcoin: Benefits & Risks
Did you know the first two items purchased with Bitcoin were pizzas? They were purchased for about 10,000 Bitcoin (roughly $40 U.S. dollars). Since then, the value of Bitcoin has skyrocketed and cryptocurrencies have become increasingly popular. Now, people are purchasing single family homes, investment properties, and commercial buildings with Bitcoin. When you think of purchasing a property, you probably picture U.S. dollars and mortgage lenders. However, neither U.S. dollars nor mortgage lenders are necessary to purchase a home anymore. Homes are now being purchased with cryptocurrencies-- one of the most popular being Bitcoin.
What is Bitcoin?
Bitcoin is a decentralized form of digital currency, as it is not backed by a central bank and has no government oversight. Bitcoin are created and held electronically in "wallets." They are produced by people and businesses, running computers all around the world, using software that solves mathematical problems.
What are the benefits of using Bitcoin to purchase real estate?
It is fast! Bitcoin transactions can go through in as quickly as 10 minutes, as there is not a central bank holding back funds. Additionally, the cryptocurrency blockchain can be tailored to add or eliminate third party approvals and ensure completion at a time or date, for only a portion of the time and expense required to conclude traditional asset transfers.
It is anonymous--sort of. Bitcoin wallets are not linked to any personally identifying information. They are simply a string of letters and numbers. However, it is important to note anonymity will be lost if your Bitcoin are converted to regular currency.
Reduced expenses. Bitcoin transactions require you to pay significantly less fees than banks.
Worldwide recognition. Bitcoin isn’t bound by the interest rates, exchange rates, or other inflationary charges of any nation or country.
Protection from identity theft. When you make purchases with a credit card, you give the merchant access to your full credit line. Credit cards operate on a “pull” basis, where the merchant initiates the payment and pulls the designated amount from your account. Conversely, cryptocurrency uses a “push” mechanism that allows the cryptocurrency holder to send exactly what he or she wants to the merchant or recipient with no further information.
Cannot be counterfeited. Bitcoin are digital and cannot be counterfeited or reversed.
What are the risks of using Bitcoin to purchase real estate?
There are few reputable escrow services. If the home seller requires you to place your Bitcoin in escrow, it's important to keep in mind there are few reputable Bitcoin escrow services. At the end of the day, you are still sending your Bitcoin to a stranger. If you or your crypto Realtor do not have a reputable escrow company to work with, you may consider doing away with the escrow company all together.
Bitcoin Transactions are not reversible. If you realize you sent Bitcoin to a fraudulent recipient, you are simply out of luck.
Fluctuating Exchange Rates. Rates are consistently going up and down. This can be a risk on the buyer's end of the deal.
