DENVER – As Bitcoin and other digital currencies have entered the mainstream in the past few years, more people are starting to use their virtual money to buy real-world products, including real estate.
Because digital currencies – called cryptocurrencies – are still a relatively novel concept to those outside the technology sector, they’re more common in expensive coastal markets like Los Angeles and Miami that see a lot of investment from international buyers, according to Wendy Forsythe, the chief operating officer of real estate brokerage firm HomeSmart.
Forsythe said her company has been monitoring the cryptocurrency trend closely but so far, they’ve only seen a handful of Bitcoin transactions.
“It’s not even a piece of the market at this point,” Forsythe said, since there so few people with enough cryptocurrency to buy a home, but HomeSmart is making sure its agents have the resources and information they need to help not just their clients but also lenders and other people involved in real estate sales.
“It’s really been a learning experience for every party that touches a real estate transaction,” Forsythe said, because of all the uncertainty surrounding the relatively new currencies. “How do I know they really have the money? How do I know what this Bitcoin is worth?”
Cryptocurrencies can be extremely volatile; Bitcoin, which is far and away the most popular, can see value fluctuations of several hundred dollars in a single day. At the time of writing on Tuesday afternoon, 1 Bitcoin was valued at about $7,600.
Given a median home price in metro Denver of $420,000, one would need a little more than 55 Bitcoins in order to buy the typical home today.
Forsythe said home sales using cryptocurrency typically go two ways: The buyer and seller can either exchange the currency directly between them or convert the currency into cash and move forward with the transaction that way. How the sale progresses will depend on what the buyer, seller, agents and others are comfortable with.
What to know as a seller
For sellers, having someone come in with an offer using Bitcoin or another cryptocurrency might raise a lot of questions; Forsythe said sellers will need to ask for some additional information or documents before moving forward.
First things first: Get some kind of written proof that the buyer has the amount of currency they say they do, and that it’s enough to cover the sale.
“Think of it very much like having a pre-qualification letter from a bank,” Forsythe said.
It can also be helpful to look at how long the buyer has owned the currency and whether they’ve made any past purchases. Providing proof of a big purchase in the past, like a car, could help assure the seller that the buyer has done this before and knows what they’re doing.
It’s also important to find a title and escrow company that are comfortable working with a cryptocurrency sale.
“A lot of title companies are just not interested,” Forsythe said.
What to know as a buyer
Buyers looking to use cryptocurrency should be prepared to provide the information mentioned above so that they can show they’re prepared and have done their homework.
“Have everything in place to provide a level of comfort to the seller” and others, Forsythe said.
It’s also helpful to find an agent who has some experience or knowledge about using cryptocurrencies. While those agents may be few and far between at the moment, even a little bit of knowledge of how cryptocurrency works can go a long way.
“That will make all the difference in the ability for the transaction to go through smoothly,” Forsythe said.
In the end, ensuring a successful sale with cryptocurrency is much like any other real estate transaction: Be prepared, do your homework and make sure you have the right professionals on your side.