Cryptocurrencies are still among the most impressive economic buzzwords on the internet, despite the turbulence experienced in the last period. They started to make splashes in the real estate realm soon after the first transaction with Bitcoin was finally conducted. Ever since, the cases of crypto homebuying began to increase in frequency, witnessing a boom in 2022 when millions of dollars were poured into Miami’s housing market, with other places following suit. Ethereum represented the second cryptocurrency to be used in home-buying transactions after Bitcoin, remaining among the favorite cryptographic alternatives to this date, regardless of the fluctuations in price. Buying a home with cryptocurrency is possible, but it is an endeavor you must consider deeply, given that the winter isn’t over in the housing market.
Numerous offerings can be paid for in digital money, from luxury timepieces to cars, to even real estate. With the rise of digital coins to pay for all sorts of services and goods, some real estate sellers willing to experiment with cryptocurrency in new ways have made it possible to purchase property with something other than the traditional currency – digital money.
Can you get into real estate with cryptocurrency?
Taking Bitcoin or any other cryptocurrency for a property is possible, and the law permits it, even though it’s not such a common practice. It is a voluntary action, meaning that real estate owners aren’t obliged to accept payments in digital currency, but they can do so if they want.
Another frequently asked question among cryptocurrency enthusiasts is if it is possible to pay a mortgage with cryptocurrency. While cryptocurrencies can enable you to buy a home, they can’t be used to pay a traditional mortgage.
However, it is possible to split the payment methods. For instance, a real estate seller may prefer to be paid a portion in fiat money and another fraction in cryptocurrency.
How to seal a deal with cryptocurrency
You can choose from several options when you’ve decided using your cryptocurrency is the best way to purchase a home.
Conduct the transaction directly with the seller
It is not the most straightforward job to find a seller who accepts trading property for cryptocurrency, given that they’re knowledgeable of the traditional financial system, which has worked well so far. Besides several limitations and a cumbersome amount of paperwork, many home estate sellers are inclined to refuse cryptocurrency for convenience. However, several sellers remain on the lookout to gather Ethereum, Bitcoin, or other cryptocurrencies. If you find someone interested in digital currency, your offer may be preferred over others.
Use cryptocurrency as collateral to borrow money
Another way to use cryptocurrency to get a home is to borrow against it, using it as collateral to receive a loan in fiat currency that can be later used to make the payment. However, the tricky thing here is that you may have to prove to the IRS the provenance of your money when your account balance climbs to significant levels. The interest rates you’ll pay will also be higher compared to a typical mortgage. Conversely, if you decide you’d better profit from holding your cryptocurrency in your wallet until the cryptocurrency market bounces back, you can still store it as a long-term investment.
Cash in on your cryptocurrency
Among the easiest ways to use your crypto funds to buy a property is to turn it into fiat money after finding a converting service that best suits your needs. After the exchange, you can use the money to buy the desired home. If this is your approach, prioritize gaining professional insight into the taxing process. Such a transaction implies less protection and a capital gains tax imposed after selling your digital currency.
The whole crypto home buying process can be summarized in four main steps:
- You need to find real estate sellers willing to accept your crypto funds in exchange for a property
- You’ll need to sort through them to find the one best-versed in cryptocurrency transactions and related experiences
- You will need a digital wallet fit for your purposes
- Last but not least, the process will be conducted with a title insurance and escrow company specialized in conducting crypto transactions.
What are the reasons why a home purchaser would use cryptocurrency?
The home purchasing experience differs from investor to investor. Yet, several potential perks generally associated with these types of payments are worth noting.
Faster and cheaper transactions
Whether we talk about legal fees or agent commissions, hefty price tags are inescapable in real estate transactions. Cryptocurrencies, conversely, have realized the dream of disintermediation, thus removing the costs usually associated with the involvement of banks or any other intermediary or third-party verification. Additionally, using cryptocurrencies in real estate transactions reduces the lengthy timescale involved in conventional dealings. Transactions done like this are finished in several minutes to hours. Sometimes, cryptocurrencies can save upfront costs and be a cheaper alternative to traditional techniques, with the case of the expensive wire transfers standing as proof.
Traditional real estate investment usually meets several constraints and obstacles, mostly from geographic limitations that may hinder foreign ownership or put off investors who are strangers to the respective local market. On the other hand, cryptocurrencies enable access to the global market, empowering any interested investor to buy property from anywhere in the world. Thus, paying for a property globally without converting currencies, going through the difficulties posed by local regulations, and any other potential impediment becomes easier.
Cryptocurrency may make real estate investment opportunities more accessible to a broader pool of investors who lack the sufficient capital needed to venture into the crypto market the traditional way. Despite the low acceptance rate, they can enhance accessibility to homeownership and facilitate the purchasing process.
You can buy a home with cryptocurrency, but you must carefully consider the downsides.
Indeed, several disadvantages in the cryptocurrency homebuying process are not to be overlooked. Such an undertaking can be complicated if your deal has specific conditions, like unique seller/purchaser contingencies or lengthy inspections. Additionally, depending on the legal framework, you may be in for some potential legal issues due to the anonymity. Cryptocurrency transactions are irreversible, meaning receiving your funds back if a litigation dispute appears may not be probable.
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