Can You Buy Real Estate With Cryptocurrency?

With the increase in value that Bitcoin and many other cryptocurrencies have been seeing over the past few years the question that sometimes gets asked is can one buy a house using cryptocurrency.  The answer to that is it depends. Generally, homes in the US are usually bought using US Dollars.  Converting cryptocurrency to dollars does allow one to buy that home with the cryptocurrency they have but is not as direct as it would be if the buyer directly transferred the cryptocurrency to the seller and did not have to convert to dollars.  This article explores the possibility of using cryptocurrency to buy real estate.

What Is A Cryptocurrency?

From Investopedia “A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend.”  Currency is a medium of exchange which most of us know and use as the dollars and coins in our wallets/purses.  Dictionary.com defines cryptography as “the procedures, processes, methods, etc., of making and using secret writing, as codes or ciphers.”  So the crypto part of cryptocurrency is the aspect of making it secure from theft and counterfeiting.  We also use digital dollars and cents when we buy things with credit cards or debit cards but that money is not tracked/secured to the level a cryptocurrency would be.  There is a lot more to it than defined/explained above but the quick definition of cryptocurrency is that is a virtual medium of exchange which can be used like money to buy and sell things.

There are many different cryptocurrencies in use today.  The original crypto coin Bitcoin was invented in 2008.  After that many other cryptocurrencies came into existence.  One can obtain cryptocurrencies through exchange websites like Coinbase.com,  Crypto.com, Gemini.com and many more.  Just like a stock exchange one deposits cash with the cryptocurrency exchange and then can buy the cryptocurrency of their choosing.  The other way of obtaining cryptocurrency is through the process known as cryptocurrency mining.  With cryptocurrency mining one is using their computers processing power to perform certain activities for the benefit of a particular cryptocurrency after which one can get cryptocurrency in exchange.

How Can One Buy Real Estate With Cryptocurrency?

If the transaction is an all cash deal where there will be no financing involved then the chances of buying real estate with cryptocurrency are good.  Of course, the seller has to be willing to accept cryptocurrency in exchange for selling their house. The tricky part becomes how is the transaction handled.  

Most banks are not setup to accept cryptocurrency for deposit into their accounts so that can cause some challenges when it comes to trying to buy/sell a home using cryptocurrency.  Most (if not all) local governments who also get their cut of the transaction in the form of taxes and transfer fees also do not accept cryptocurrency as payment for those fees/taxes.  If the home is being purchased with a mortgage then generally US dollars will need to be used when paying the monthly payment on that mortgage.  Most title companies who will be preparing the new deed and closing paperwork also do not accept cryptocurrency in any form and therefore the cryptocurrency will need to be converted to dollars and transferred to the title company.

In a traditional cash transaction  (using dollars) the money is wired into a title company who holds that money in an escrow account.  The title company prepares the deed documents and arranges for any mortgage payoff.  Once both the buyer and the seller are ready to close the title company pays off any mortgage by wiring money to the lender and prepares checks or wires money to the parties who are to receive money as part of the sale.  If the seller has equity in their home they will be getting money from the sale.  Funds will need to be used to pay taxes, transfer fees, title company fees, real estate agent commissions, home warranty fees and any other fee associated with closing.  So while the buyer and seller can agree to transact with cryptocurrency (like Bitcoin or Etherium) they still will need to bring cash to the table.

There are risks associated with trying to buy or sell real estate using cryptocurrency.  Currently cryptocurrencies can be very volatile when compared to the price of US Dollars.  The price of Bitcoin had an all-time high of $64,000 plus dollars in April 2021.  As of the writing of this article the price is in the low $40,000 range.  It can take a real estate transaction thirty or more days to close considering the need for inspections, appraisals and more.  In that time the price of any cryptocurrency can change quite a bit.  If the house sale is priced in terms of the cryptocurrency (for instance 6 bitcoins) then the actual dollar value will vary once the sale closes and the risk is on the seller.  If the price is set in dollars with the equivalent amount of cryptocurrency being paid upon closing the risk shifts towards the buyer.

Since most title companies will not take cryptocurrencies for the transaction there can come the issue of who does what first.  Does the buyer transfer the cryptocurrency first and then the seller signs over the deed to the buyer or vice versa?  Once the cryptocurrency is transferred it cannot be recalled like a traditional money wire sometimes can be.  Until there is an escrow like service for cryptocurrency real estate transactions, there is the risk of the transaction going bad because the cryptocurrency was never transferred but the deed was or the seller took the money and ran without transferring the deed.  A lot of factors still need to be sorted out before any cryptocurrency can become an easy transaction for buying and selling real estate.

Other Cryptocurrency Benefits For Real Estate

With cryptocurrency and the associated technologies can come other benefits for real estate transactions.  Features of cryptocurrency such as blockchain which is used to keep track of cryptocurrency transactions also can be used for keeping track of the deed history of real estate.  As the blockchain exists in multiple different computers at the same time the chance of forging a digital blockchain deed is much harder as compared to a paper document.  With a paper document anyone with a printer and some software skills can create a passable forged deed.  The nature of blockchain would prevent that from happening.

Smart contracts associated with cryptocurrency and blockchain could be used to help conduct real estate transactions.  Smart contracts are basically actions that happen with cryptocurrency or with blockchain when a set of conditions are met.  One could see cryptocurrency payments being forwarded to the sellers account once the seller transfers the deed to the buyer, sort of like an escrow process done automatically.

Many of the Central Banks around the world are considering offering their own digital currency.  In the US the Federal Reserve is currently researching digital currency and how to go about implementing it.  If the Federal Reserve issues its own digital coin this could change how real estate transactions are done.  With Federal Reserve backing, traditional banks and title companies would have a means for accepting the Federal Reserve cryptocurrency for the buying and selling of real estate.  Most local governments would also accept a Federal Reserve cryptocurrency which means one can buy and sell real estate using cryptocurrency without having the need to bring dollars to the closing table.

Bottom Line

Homes and other types of real estate can be bought with cryptocurrency provided both the buyer and seller agree.  Dollars will still need to be brought to the closing table to pay for taxes, title fees and more.  If the Federal Reserve implements their own cryptocurrency everything can change pretty quickly and the buying and selling of real estate with cryptocurrency will become an everyday occurrence.

Additional Resources

• Closing Costs Explored -  Learn about what closing costs are involved with buying real estate and who is responsible for paying what.
• Taxes When Selling A Home - Learn about the taxes and fees involved when buying or selling real estate.
• How Long Until The Mortgage Is Clear To Close? - When buying real estate with a mortgage understanding the time frames involved can help with the planning process.  Buying a home with a mortgage does add time to the process.

About the author: The above article “Can You Buy A Home With Bitcoin?" was provided by Luxury Real Estate Specialist Paul Sian. Paul can be reached at paul@CinciNKYRealEstate.com or by phone at 513-560-8002. If you’re thinking of selling or buying your investment or commercial business property I would love to share my marketing knowledge and expertise to help you.  Contact me today!

I work in the following Greater Cincinnati, OH and Northern KY areas: Alexandria, Amberly, Amelia, Anderson Township, Cincinnati, Batavia, Blue Ash, Covington, Edgewood, Florence, Fort Mitchell, Fort Thomas, Hebron, Hyde Park, Indian Hill, Kenwood, Madeira, Mariemont, Milford, Montgomery, Mt. Adams, Mt. Washington, Newport, Newtown, Norwood, Taylor Mill, Terrace Park, Union Township, and Villa Hills.