I previously wrote about the history and development of the best-known cryptocurrency, bitcoin (BTC). Bitcoin can make many transactions easier, and yes, you can buy real estate with bitcoin. In the United States, the Internal Revenue Service has classified bitcoin as a form of real property. So, in an unusual way, real estate bitcoin transactions reflect a separate layer of capital investment for tax purposes, in addition to the real, physical properties that are being bought and sold.
What is necessary to buy real estate with bitcoin?
All that is required to use bitcoin to buy real estate is an agreement between buyer and seller to use bitcoin for the transaction. In addition, both buyer and seller should have bitcoin accounts and be familiar with how the cryptocurrency and transactions work.
You should be aware that once completed, bitcoin transactions are not reversible. This is why buyers and sellers should not only be familiar with one another, but have a mutual level of trust. Traditional escrow companies are often not familiar with cryptocurrency transactions, and they may not have the capacity to handle a BTC or other cryptocurrency escrow. BTC and other cryptocurrency escrow services are emerging, and some may be available that specialize in bitcoin real estate transactions.
Agreed-upon prices in real estate bitcoin transactions
The very first bitcoin real estate transaction in the U.S. was for a home in Austin, Texas, in 2017. However, fiat currency was involved, because the home’s seller wanted the buyer to convert BTC to U.S. dollars to complete the sale.
Another well-known BTC home listing was a Green Bay “Packer House,” attached to the parking lot at famed Lambeau Field in Green Bay, Wisconsin. Although a modest ranch-style home, the property was listed by its owner, former Facebook executive Chris Murphy. Murphy listed the home for sale in late 2017 for the equivalent of $1 million in bitcoin. The “Packer House” was never sold for bitcoin, and it’s currently valued between its tax assessment of approximately $250,000 USD and Murphy’s asking price.
Because BTC’s value in fiat currency fluctuates, real estate transactions in BTC rely upon mutual agreements between buyer and seller on fiat currency sales prices. For example, if a property is listed for $5 million USD, and the price is agreed upon by buyer and seller, then the BTC completion of the sale will be executed at the close of escrow using the value of BTC at the exact time escrow closes.
Real estate bitcoin advantages
A number of people with significant bitcoin holdings have been looking at buying real estate with their BTC to diversify their portfolio. Properly handled, BTC transactions can be executed much more quickly than property purchases done through traditional fiat currency methods.
Also, there is no need for many of the additional fees or intermediaries that can be involved in fiat currency real estate deals, so BTC transactions can be much more streamlined. BTC can accommodate purchases of properties of any price, including $5 million, $10 million or more. As long as due diligence is performed, there is no reason that bitcoin payment cannot offer a smooth, rapid and less cumbersome way to purchase a vineyard or estate in Wine Country. You simply need your BTC account and keys, and of course, the seller must also have the same requirements. Some sellers may wish to have BTC converted to fiat currency to complete the transaction, but in either case, you may still have a smoother transaction with fewer added fees using BTC.
Blockchain and BTC
If you are considering buying a home, vineyard or winery in Napa Valley with bitcoin, you will be among the earlier adopters of the cryptocurrency for real estate transactions. However, some cryptocurrency and blockchain enthusiasts have introduced bitcoin and blockchain into winery operations. You may choose to continue to use cryptocurrency and blockchain accounting for your vineyard or winery operations. Tyler Scheid, of Scheid Family Wines in Monterey County, a large-scale, publically-traded wine business, has developed blockchain accounting for all segments of the winery’s supply chain. Using the keys to the blockchain, people who have a reason to access the business’s blockchain can verify every segment of the supply chain, from vines to bottles to retail stores and end customers. Scheid is an expert in using blockchain data to manage the business and gain insights from it.
One of the beauties of blockchain is that it can be completely transparent in providing the necessary information and verification to those who require it. Blockchain keys need not be offered to members of the general public.
Changing the transaction
One aspect of BTC, the blockchain accounting that supports it and cryptocurrencies in general, is that transactions, once completed, cannot be reversed. If there should be a need to alter or change the transaction, a new transaction must be executed and a new entry into the blockchain ledger made.
Although it is not bitcoin, but an alternative cryptocurrency, some people are interested in Ethereum, a type of cryptocurrency that is built upon more flexible underlying programming than bitcoin, which includes the capacity for smart contracts. These smart contracts are written in a specific programming language and are read and executed by “Ethereum virtual machines.” You can use a translation mechanism to read the contracts in comprehensible human language. In brief, the “smart contract” adds to the security and confidence of a verifiable transaction in this type of cryptocurrency.
Entering the mainstream
As I noted in the earlier article about bitcoin, some of the slow adoption of this form of currency in real estate transactions is undoubtedly due to the feeling on the part of some that bitcoin or other cryptocurrencies are associated with money laundering. This may have been the case years ago, but now cryptocurrencies are entering the mainstream in financial portfolios and financial planning, and they offer the ability to buy real estate with bitcoin as well as other cryptocurrencies.