Good news and bad news, as they say. First, I’m the right guy to ask because I’m a cryptocurrency fan. I’ve been buying, selling and well just holding about 16 different cryptocurrencies for about a year now.
While I think Bitcoin and other cryptocurrencies are indeed the future of money and transactions, we just aren’t there yet. Bitcoin and others fall into a legal gray area when it comes to being recognized as payments. So, while I have read about some real estate transactions that were accomplished around the country using Bitcoin, most likely the Bitcoin was converted to dollars “at the table” and then the transaction happened.
The other thing about Bitcoin is that it is wicked volatile. At the time of this writing, a bitcoin is worth $9,424. By the time you read this email it could have swung by $500 up or down easily. So, let’s say you were selling a house for 500k that would translate to 53.03 Bitcoin. Like I said, the price of Bitcoin could rise or fall quickly. If the price of Bitcoin were to go down by $800 in one hour (about the time for a closing to happen) then your seller effectively sold for 457k. Conversely, the buyer could overpay by tens of thousands of dollars if the price skyrocketed. Your commission of 3 percent could rise or fall by 5, 10 maybe even 15 percent by the time you get back to your car after the transaction.
While it is very interesting to sell a property for Bitcoin, I would not recommend it at this time. The final nail in the coffin is that the title insurance companies cannot insure transactions with Bitcoin and are not able to get a loan for the property restricting the pool of buyers to cash buyers, or well “Bitcoin buyers.”
There are many experts who say cryptocurrencies are a fad and are destined to value out at zero. But those are the people who are most threatened by cryptocurrencies. I can find experts who will tell you, with an absolute straight face that a Bitcoin will be worth one million dollars by 2020. Let’s hope they are right. The truth lies somewhere in the middle but I know our grandkids will be using cryptocurrencies every day for all kinds of purchases, including real estate.
Bitcoin is the most well-known cryptocurrency but there are hundreds of different cryptos being developed for all kinds of projects. Burstcoin is an environmentally friendly cryptocurrency alternative to Bitcoin, which uses a lot of power. Ethereum features “smart contracts” which could aid in real estate transactions. There are other coins being developed specifically for real estate transactions.
So, while we may not be using Bitcoin, Burstcoin or Ethereum right now, our kids sure will.
This article was brought to you by Matthew McDonald with Cumberland Title.