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Using Bitcoin for Real Estate

2021-01-21 · Your HonestDoor Team 4 min read



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Because we’re HonestDoor, a prop tech company, and not a fintech company, this blog is meant to introduce you to Bitcoin and its uses in real estate. As the world of cryptocurrency evolves, so, too may the world of real estate. We’re on top of the trends, and so this likely will not be our last post on using digital assets to buy real ones.

What is bitcoin?

Bitcoin is a cryptocurrency, which is a digital asset or currency that is secured by cryptography. For the purposes of this blog, cryptography makes bitcoin more secure, thus, making it nearly impossible to counterfeit or double-spend.

Why is bitcoin so volatile?

Bitcoin is incredibly volatile and is still going through a process of “price discovery”. In the last 48 hours, it has dropped 12% on concerns about double-spend (above) and speculation that Janet Yellen, Joe Biden’s nominee for Treasury Secretary, will make some attempts to regulate cryptocurrencies. Bitcoin was also designed to have a fixed quantity of 21 million, unlike normal currencies. If you recall Economics 101 (and have ever felt that urgency when buying something with only 1 or 2 items left), artificial scarcity can generate more demand.

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Titans like Warren Buffett and Charlie Munger hate Bitcoin, but others, like the Winklevoss twins, think it’s ramp up has only just begun and it could even reach $500,000.

How can bitcoin be used in real estate?

So, if the price of bitcoin is so volatile, even on a day-by-day basis, how can you use bitcoin to buy a property? With Paypal, Square and Visa all making it more possible to easily transfer funds and pay with bitcoin, it’s becoming more common to make a variety of purchases using cryptocurrencies.

First, you need to have a seller or a buyer with bitcoin.

Then, you need to have a seller and buyer willing to transact with it. More and more listings are asking for bitcoin as an alternative to traditional currencies but it is still a miniscule part of the market, so you might have a narrow pool of properties to choose from.

Lastly, you’ll need to find agents, such as lawyers and banks, that are willing to work with the bitcoin transaction. Given the lack of regulation around it now, it may be challenging to find people who are comfortable with accepting bitcoin.

So, how much is the property actually worth if it’s paid in bitcoin?

For now, properties bought and sold using bitcoin in Canada will still be valued in Canadian dollars (for tax purposes). So, if the value of bitcoin skyrockets (like it has in the last few months), then the buyer has overpaid for the property. However, when looking to re-sell that property, a new buyer is still going to look at the appraised value (not the new bitcoin one).

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Some other considerations

If you’re really thinking of buying with or selling for bitcoin, do your own homework! Consult with the professionals to clearly understand how these transactions can be processed.

Digital currencies can’t be held in trust accounts, which can make transactions inherently more risky. If there’s a deposit required, you’d have to work with a 3rd party to hold that deposit.

A major concern with cryptocurrency is that it can be used to money launder or protect ill-gotten gains. Turning those assets into real estate legitimizes them, which makes them more likely to fall under heightened scrutiny.

To conclude, it’s worth noting that most people would advise against anyone looking to buy real estate using bitcoin. Unless you have a stomach made of steel (to handle the volatility stress) or, you know, have bitcoin lying around and are willing to experiment with it, we recommend waiting to see how the world of cryptocurrency and real estate evolves.

That said, if you are one of those rare individuals who has bought or sold a house using bitcoin, PLEASE get in touch with us! We’ll dedicate an entire blog post just to you! Seriously. info@honestdoor.com

Yours truly,

HonestDoor

Your Real Estate Starting Point

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REALTOR®, REALTORS®, and the REALTOR® logo are certification marks that are owned by REALTOR® Canada Inc. and licensed exclusively to The Canadian Real Estate Association (CREA). These certification marks identify real estate professionals who are members of CREA and who must abide by CREA's By-Laws, Rules, and the REALTOR® Code. The MLS® trademark and the MLS® logo are owned by CREA and identify the quality of services provided by real estate professionals who are members of CREA.


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