As cryptocurrencies become increasingly popular with both the tech-savvy and the bold investor, more and more use cases are being found for these alternative currencies. For example, there are now homes, commercial properties, and bare land that you can buy using cryptocurrency.
How Do You Buy a Home With Crypto?
There are a couple of things to keep in mind when attempting to buy a home with cryptocurrency. First, the seller must be willing to accept cryptocurrency, which not all are, and second, your purchase will be treated like a cash transaction, so no partial financing will be allowed.
If you’re interested in a specific home, you’ll need to ask the seller if they will allow you to make an offer in crypto before you do so. Otherwise, you risk your offer being rejected outright, and that’s no fun at all. If you’re not as picky, then you may want to look at homes that are listed with crypto as a payment option. These tend to be higher end homes, but there are still sometimes more average options. Ask your Realtor for more information on this.
As for the second point, because cryptocurrency is still considered a volatile asset class, banks don’t want to get in bed with a shared transaction using crypto. There are a few that will finance with crypto as your security, but they will usually ask for the total amount of the transaction in crypto as collateral, as well as the home in some cases.
Pros and Cons of Buying a Home With Crypto
For the crypto savvy, and anyone with significant crypto holdings, it might make sense to buy your home using your cryptocurrency. This works especially well if you’ve had it for years and have seen massive value appreciation. In that case, the $100 per coin that you might have put into Bitcoin years ago will help you buy a home that’s worth 200+ times that. Not a bad deal at all for you.
However, if you’ve recently purchased crypto, or you’re buying it just to use it to buy a home, it’s not necessarily guaranteed to play out in your favor. For example, if you bought Bitcoin on June 30 at $19,000 per coin for a $400k home, you’d have roughly 21 coins in hand. You’d write your sales contract for 21 Bitcoin, rather than $400k, and until the closing date came around, the actual cost of your home in dollars will continue to float.
Even closing a couple of weeks later on July 19, when Bitcoin was at about $23,500, the seller would get an extra $94,500 that you weren’t counting on paying for that house. Suddenly your $400k home is a $500k home, and there’s nothing you can do about it because you agreed to pay in Bitcoin and not in US dollars. This is among the biggest risks for buyers who choose to pay in cryptocurrencies.
If the market went the other way during that period, well, you’d have gotten a bargain. But because cryptocurrencies are so unpredictable, there’s simply no way to know what’s going to happen between contract and closing. Some people are transacting this way, though, and there’s nothing inherently wrong with it, provided you understand the significant financial risks involved.
If you have questions about buying or selling your home, you may contact me to see how I can help you.
Michelle Lohman, Associate Broker
Realty One Group
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