Introducing Cryptocurrency to L.A. Real Estate
A San Diego company brokering the sale of two multimillion-dollar homes recently announced that it would accept Bitcoin as payment, in addition to cash.
Bitcoin Has Entered the Housing Market
It’s no secret that Bitcoin and other cryptocurrencies have gained immense popularity over the past year and businesses are taking note. Bitcoin, a peer-to-peer exchange system that essentially eliminates the need for banks, has seen a huge uptake with businesses adopting related features as consumer interest grows.
Just under one year ago, a buyer used Bitcoin to purchase a mansion in Manhattan Beach in Southern California’s first real estate sale using the daddy of cryptocurrency. Many similar listings to this one are appearing all over the world as more and more people attempt to take advantage of the cryptocurrency’s unpredictable nature.
Neeraj Agrawal, director of communications for the Coin Center, a virtual currency-focused think tank, explained his support for using Bitcoin in real estate transactions. He stated:
Within the context of real estate, it makes sense to use cryptocurrency in those types of transactions. Cryptocurrency is a way to send large amount of money pretty easily with relatively low fees and little interference from middlemen.
Will Accept Bitcoin for Real Estate
According to the L.A. Times, the two San Diego homes currently being sold for Bitcoin are listed for sale at the price of $19.8 million in either Bitcoin or cash.
Andrew Canter is the chief executive of the real estate brokerage and investment firm, Canter Cos. He is selling both his home and his friend’s, and Canter is using any marketing techniques he can to tap into potential markets, saying:
We realized there is so much new wealth in the crypto space. There are a lot of new buyers and a lot of people who have seen their wealth fluctuate over the last year.
Canter clarifies the steps and risk management a seller must take when doing a transaction using cryptocurrency. If a buyer does use Bitcoin, he will likely use an investment bank that will write a futures contract. Futures are a contract to buy or sell an asset at a specific date for a specific price. This will lock in whatever the Bitcoin is valued at when the deal is made for several months.
Canter also reasoned that although there may be a financial benefit, it is largely based on the preference of the seller because the cryptocurrency’s price can fall as quickly as it rises. Additionally, there is not necessarily a tax advantage to selling a home for Bitcoin. When the seller resells the virtual currency, they are required to pay a capital gains tax, cutting into the profits of the sale. Of course, this occurs if the sold cryptocurrency nets a gain from when it was initially received.
Bitcoin and other cryptocurrencies are making transactions more easy and efficient, but the coin’s unpredictable value will truly determine whether Canter turns a profit. One issue facing buyers and sellers is that many banks refuse to handle escrow or housing loan applications that deal with cryptocurrency as they often have no experience in doing so.
However, people are becoming more accustomed to using cryptocurrency as time passes, and people who have listed real estate for virtual currency have often received positive attention. Chances are that the use of cryptocurrency in real estate will become more common in the near future.
What do you think of Bitcoin being used in real estate? Is selling your home for cryptocurrency something you’d do? Let us know in the comments below!
Images courtesy of Pixabay.