USING CRYPTOCURRENCIES IN REAL ESTATE TRANSACTIONS2018-01-25 11:45:20 Posted By Amir Hamzehali
Buying and Selling property with Bitcoin has attracted a lot of attention since luxury brokerage Sotheby’s International Realty announced in September last year that it had facilitated one of the first U.S. home sales for bitcoin in Austin, Texas.
Is this really going to be a worldwide method of payment for real estate transactions in future, or it would be something as short-lived as this currency’s peaked value!
The important question is; why some Buyers or Sellers might be interested in exchanging real estate with cryptocurrencies in the first place when we have a great medium of exchange called the Dollar!
A sharp increase in Bitcoin values last year turned a swath of early adopters into millionaires in a matter of months. This along with relaxed capital gain tax regulations for trading cryptocurrencies motivated some of this nouveau riche to seek trading their digital currencies with something tangible such as real estate!
The real motivation for the home Sellers to trade their homes with bitcoin is not completely clear. One reason could be the Sellers’ incline in receiving the funds directly into their digital wallet or the sale of their homes being considered as an all-cash transaction.
Whatever the motivations, this type of real estate transactions would not be beneficial to the market participants if the main focus is the purchase or sale of the real estate than the trade of digital currencies or the use of the tax loopholes.
The Sellers who want to sell their properties in bitcoin will limit their market to those Buyers who own bitcoins! The Buyers who are also willing to pay for their real estate purchase in bitcoin should only search for the properties that are listed in bitcoin which consists a very small portion of the market!
Another problem arises when the Buyers and the Sellers want to negotiate a deal in a currency that fluctuates daily. The Sellers accepting bitcoin should keep a sharp eye on the daily fluctuations in the currency’s value due to its volatility.
This would also create a lot of confusion for real estate professionals such as lawyers and realtors to charge their fees for their services, and also for the government charging taxes such as the Property Transfer Tax that has to be calculated based on the property’s market value in national currency at the time of agreement.
It seems all this excitement about trading real estate with cryptocurrencies is losing steam quickly since the value of digital currencies are nose diving! The government’s implementation of stricter capital gain taxes and the regulations to stop money laundering when cryptocurrencies are used have also accelerated this declining trend.