This post was originally published on inman.com
Article By | Sotheby’s International Realty
About three years ago, Brett Dickinson, REALTOR® and Global Advisor with Pacific Sotheby’s International Realty, received a request he had never heard before. “I had a client who wanted to sell his property with Bitcoin,” he says. “We were in escrow to sell it at the full price of $6.8 million.”
At the time, Dickinson and his team had to improvise. “In order to complete the transaction, we found an escrow who could handle the transaction, as it was still so early in the cycle.” But he notes that accepting and processing payments in cryptocurrency is no longer as novel as it once was. “Now, almost everyone does it,” he says.
It’s true that cryptocurrency has built considerable momentum over the last few years, particularly with the rising value of Bitcoin. Now that it’s making a foray into the luxury real estate market, here’s what you need to know today to be ready for tomorrow.
Who’s paying with crypto?
“Cryptocurrency can be used at any price point, as long as the seller is comfortable accepting it, and I believe we will see many more sellers, in all price ranges, willing to accept cryptocurrency,” says Alison MacCracken, Senior Real Estate Specialist with Sotheby’s International Realty – Beverly Hills Brokerage.
“In the past year, trading platforms like Robinhood and forums such as Reddit’s Wall Street Bets have created an entirely new pool of investors, and that will spill into the real estate market and use of cryptocurrency,” she adds.
John Galich, a Real Estate Professional also with Sotheby’s International Realty – Beverly Hills Brokerage, has seen a wide range of inquiries into cryptocurrency transactions. “I’ve had clients ask about using or accepting it in all price points,” he says. “I recently marketed a property under $1 million that was available to purchase with Bitcoin.”
However, most of the clients who want to transact with cryptocurrency are currently looking and listing in the higher end of the real estate market, and many of them are overseas.
“It’s my understanding that it’s most appealing to foreign buyers who would prefer not to liquidate their crypto assets into a fiat currency, and would like to purchase directly with their cryptocurrency,” says Galich.
It’s a trend Dickinson has noted as well. “Since allowing Bitcoin, we have received several inquiries and requests for showings from buyers abroad. Bitcoin is widening our buyer pool.”
He has also observed that the surge in value of Bitcoin has created a new category of buyers who are newly minted millionaires and entering the high-end market for the first time. “For example, one of my young condo owners purchased Bitcoin at $2,000 and just called me to look at waterfront estates!”
Challenges in the present
But as MacCracken notes, this is still an obscure space for many. “The wealth created around cryptocurrency and blockchain has brought new buyers into the real estate market,” she says, “but to date, cryptocurrency has not been the preferred form of currency to close transactions.”
Digital assets come with several layers of complexity. “There are a lot of additional steps beyond a typical sale for the agents, sellers, and buyers,” explains Galich. “Each party will need a lawyer who has a detailed understanding of how cryptocurrency transactions work, and can review instructions related to the payment.”
“Also, unless the home that’s for sale is owned without a loan, the deal becomes much more complicated. Banks usually won’t accept cryptocurrency as payment.”
Opportunities in the future
Dickinson is optimistic that buyers, sellers, and banks will become more open to cryptocurrency payments in the coming years. “It’s actually not that complicated as long as everyone agrees to exchange the Bitcoin into dollars at a specified date and time,” he says. “Most of our transactions are wires anyway, and that’s pretty much the same with Bitcoin.”
Dickinson says that one of his sellers, with a $17.54-million listing, has decided to accept Bitcoin as a payment option because the logistics are so straightforward. “As long as there is liquidity in the market and both buyer and seller are comfortable with the currency, there is really no issue,” he says.
A time to learn and adapt
So how can agents prepare for the cryptocurrency transactions coming their way? “You’ll need to really understand how the process works and do a lot of reading—and ideally, acquire cryptocurrency of your own,” advises Galich. “Purchase a product or service with your newly acquired cryptocurrency.”
Dickinson agrees. “Definitely own and trade a small amount of it to familiarize yourself with the currencies, apps, and companies,” he says. “And speak to your legal and escrow companies on how it will work. They can walk you through it, as well as the liability exposure.”
Along with the right legal, tax, and financial advisors, MacCracken encourages agents to embrace change. “Have fun with the marketing and get creative!” she says.
Whenever a new trend emerges, it’s a chance for agents to push boundaries and differentiate themselves. Take this opportunity to learn, evolve your practice, and expand your clients’ horizons.