SF Apartment : May 2018
The Bitcoin Buyer
by Katherine Tom
Bitcoin made headlines earlier this year when it hit an all-time high of $19,000, and it appears that some newly minted millionaires are looking to spend their windfalls on something a little less virtual. Though the real estate market has typically been slow to jump on technological advances, Bitcoin is starting to play a role in home sales, and even the rental market. With cryptocurrencies becoming more mainstream by the day, it’s only a matter of time before these types of transactions become more commonplace. In fact, in a recent report by Tampa-based RE/MAX Action First,RE/MAX President Kenny Hayslett posits that, “the most mysterious thing about Bitcoin and other cryptocurrencies is why they aren’t used more.”
If you are like most people, you probably have a few questions about how Bitcoin real estate transactions work. Well, at its most basic level, buying a property with Bitcoin is surprisingly easy. In theory, all buyer and seller need to do is agree on a price and transfer the money between “wallets”—a secure transaction that takes about 15 minutes and carries negligible fees (on the order of a few dollars).
However, the reality is a bit more complicated. Even though most Bitcoin transactions are closer to all-cash offers—meaning there are no lender requirements to consider—most buyers still want title insurance and some way to handle escrow. Finding companies willing to handle this for Bitcoin transactions can be tricky. In addition, there are agents’ fees to consider.
Emma Prok from SF Climb real estate is one local agent who’s prepared to address all of these intricacies. She currently has three Bitcoin-accepted properties on the market and works with an escrow/title company that handles these types of transactions. She even has relationships with cryptocurrency lawyers, accountants and financial advisors, ready to answer any questions that may come up. Her listings include a 3-bedroom in Napa listed at $2.4 million (that’s 270 Bitcoins, give or take, as of March 21, 2018) and a 5-bedroom mansion in the Marina district, with an asking price north of $5 million.
As it presently stands, Bitcoin listings are a bit of a novelty act, something to generate some buzz and maybe help the seller cast a slightly wider net. Take the example of the Oakland home that advertised it would accept Bitcoin earlier this year. The listing garnered attention from news outlets including Fox News 2 and SFGate. In an interview with the San Jose Mercury News, Sean Beattie, the listing agent, revealed, “The type of response has been unlike anything he’s ever seen... After listing the property on Friday, calls and emails have been coming in ‘every five minutes’ from Italy, China and elsewhere across the globe.” The house is no longer on the market, but when I reached out to Beattie to find out whether the eventual buyer paid in Bitcoin or a more traditional currency, he did not respond.
Nevertheless, some sites are already banking big on Bitcoin’s increasing impact on the real estate market. Open Listings, a start-up backed by Y Combinator (the ultra-successful accelerator behind Dropbox, Airbnb, Stripe and Instacart, among others), aims to streamline the entire house-buying process. Though the bulk of their listings are traditional, they do have a Bitcoin category (featuring 34 properties, as of this writing). In a recent blog post about trends, they predicted that “tech-savvy buyers who’ve mined their way to Bitcoin and other crypto riches will want to know if there is a way for them to buy a house using Bitcoin.”
Another start-up, Propy, specializes in blockchain (the technology behind Bitcoin and other cryptocurrencies) properties. They offer homes in five cities: San Francisco, Los Angeles, Dubai, Beijing and Auckland. One of Bitcoin’s big promises is borderless transactions and, for real estate, this means opening the doors to more international buyers.
Propy makes a compelling argument for why the real estate industry should consider blockchain as a possible solution for its current inefficiencies. “Blockchain is currently considered one of the most secure technologies for digital asset transfer due to its distributed nature and use of sophisticated cryptography,” the company argues in a report on decentralized title registries. “Smart contracts, therefore, offer a potential solution for the management of real estate transactions via the introduction of a universal, distributed ledger that does not require trust in a single third party.”
The smart contracts to which the report refers are one of the built-in features of blockchain technology. The terms of the contract are written directly into the blockchain transaction and when an agreed-upon triggering event (for example, an expiration date or contract signing) occurs, the transaction completes and the money is deposited. If the conditions are not met, the money automatically reverts to the original owner. This eliminates the need for a middleman.
While blockchain transactions, which can take upwards of 15 minutes as they’re currently structured, are considered too cumbersome for grocery store and other everyday transactions, Propy argues that 15 minutes is still considerably faster than the current methods of title transfer.
Ultimately, the company’s goal is to make real estate sales faster, more secure and more standardized.
Despite the promise of Bitcoin, any discussion of crypto-currency has to address its detractors’ number one concern: its volatility. The same wild swings that created overnight wealth for lucky investors also come with stomach-churning drops, often as much as 25 percent in a single day. From a home buyer’s point of view, that’s an excellent argument for diversifying assets by buying into the much more stable real estate market. And for sellers who can’t stomach the roller coaster ride, it’s easy to set an agreed-upon price and convert to dollars before the sale is finalized.
In fact, most Bitcoin for real-estate sales thus far have involved converting the Bitcoin to cash at some point in the process, through a third-party like Bitpay. Sotheby’s handled just such a sale in Austin—the first Bitcoin-only real estate sale ever in Texas—late last year. According to CNBC, “BitPay...converted the bitcoins into dollars for the buyer. Given that Bitcoin’s value is a moving target day to day, the risk was all on the buyer side. The seller agreed to a fixed price in dollars.”
Meanwhile, Carol Burke and Stephan Cassis, two Miami realtors who are some of the earliest pioneers of Bitcoin real estate sales, are developing a proprietary platform that allows people to buy houses in Bitcoin without the extra step of converting to cash first. Earlier this year, the pair oversaw the $6-million sale of a Miami mansion, which Vice Money reports “was the biggest Bitcoin-to-Bitcoin real estate transaction to date.” In that same article, Cassis boldly predicts, “I think in a few years you’ll see 15 to 20 percent of real estate transactions using Bitcoin, so we got into the game early.” Miami has become a bit of a nexus for cryptocurrency, hosting the most recent North American Bitcoin Conference, as well as over-the-top crypto-themed cruises and yacht parties.
For those Bitcoin investors who aren’t yet willing to commit to homeownership, one New York-based company has added Bitcoin as a payment option for renters. Manage Go is a platform for managing rental properties, mostly dealing with traditional electronic rent payments. But earlier this year, they quietly launched an option on their website to pay with Bitcoin. Manage Go converts the payments to cash before depositing them into landlords’ accounts, so there’s no risk to the landlord. So far, interest appears to be minimal, but the future moves fast.
Katherine Tom is a San Francisco-based freelance writer.