Want to buy a house with Bitcoin? Here’s what you need to know.
Bitcoin has gained a lot of attention over the past few years, but to most is still a mystery. You’ve seen it on the news, the internet and some of your friends may have even invested in it. The price of bitcoin has jumped from as low as a few dollars to over $19,000 each. The usage of Bitcoin is picking up very quickly as more and more businesses and individuals are becoming aware of its benefits and advantages over traditional currencies. Bitcoins are growing in popularity, and there is a growing trend of businesses accepting Bitcoin as a form of payment. Many big companies like WordPress, Overstock.com, and Reddit accept Bitcoin, and it’s becoming an alternative way of paying for regular things. More than $1.5 billion worth of bitcoins are currently in circulation around the world, with millions of transactions occurring daily. Because of the increased popularity and growth, both buyers and sellers are looking for ways to capitalize on the bitcoin boom. One of these ways is by introducing it in the real estate industry. Although bitcoin and other types of cryptocurrency have not gone mainstream, bitcoin-friendly real estate listings are slowly trickling into the market. More and more sellers are adding bitcoin as a purchasing option in their listings.
You can now buy a house with Bitcoin-yes, it is possible!
What exactly is Bitcoin?
Bitcoin in simple terms can be referred to as a virtual currency which is used worldwide as a global money system currency. It was the first cryptocurrency to be created and has since then been used for electronic purchases and transfers. It acts as a decentralized digital currency, as the system works without the involvement of central bank or single administrator and uses encryption techniques to regulate funds. Every single purchase is immediately logged digitally (on computers) on a transaction log that tracks the time of purchase and information on the ownership of bitcoins. A transaction in bitcoin is nothing more than a transfer of value between one bitcoin address and another. When you send bitcoin to someone, the transaction details are signed using your private key, and it includes details such as the value you want to send, an address to send it to, and other pertinent details about the transaction. In case of bitcoin, there is no involvement of a third-party financial institution which verifies these transactions. Since, no third party or intermediary is involved, so users (buyers and sellers) can make transactions directly thus making the network peer-to-peer.
In September, 2017 a house was purchased in Texas using only bitcoin for payment. And Kuper Sotheby’s Sheryl Lowe, the buyer’s agent, said in a press release:
“In all of my 33 years of closing transactions, I honestly couldn’t have expected something so unique to go so smoothly. In a matter of 10 minutes, the Bitcoin was changed to U.S. Dollars, and the deal was done!”
Want to buy a house using Bitcoin? Here’s how it can be done.
- The first step to buying a house with bitcoin is to find a seller willing to accept bitcoin as payment for the house. That could mean they’re a fellow cryptocurrency enthusiast, and are willing to accept bitcoin as payment, or like you are bitcoin investors.
- Secondly, they should be willing to tolerate the additional step of converting the buyer’s bitcoins to a real currency, such as U.S. dollars which will be required if they are not bitcoin investors.
- The transaction process will be simplified if the seller is willing to accept bitcoin directly. The transaction would basically proceed like a cash sale, but with bitcoins instead of dollars.
- However, if the seller insists on receiving payment in cash, you’ll have to use a bitcoin exchange to convert your bitcoin to U.S. dollars (or whatever fiat currency the seller prefers). The exchange won’t be instant. Depending on a number of factors, including network congestion, it could take 10 minutes or a couple days. Companies offering bitcoin exchange services to convert bitcoin into cash usually charge fees. They may either charge a flat fee, or charge a percentage of the amount you’re converting.
- Once you have an accepted offer, the title and escrow companies have to agree to handle the transaction. It can be tricky to find title insurance and escrow companies who feel comfortable handling virtual currency transactions. To take on your home purchase, they may require you to cash out your Bitcoin so that your transaction can be treated more like a traditional house purchase. Some real estate agents have resorted to converting bitcoin to cash, then back again to close sales. But at the end of the day, if you want to buy a house with bitcoin, there are ways to make it work.
- The Internal Revenue Service (IRS) considers bitcoin property rather than a true currency. If you hold Bitcoins as a capital asset, you must treat them as property for tax purposes. That means when you exchange bitcoin for cash, any capital gains are taxable, between 15 percent and 20 percent, depending on how long you had the bitcoins. However, when you buy a house, you’ll be responsible for paying property taxes on it. Those taxes cannot be paid with bitcoin, so be prepared to pay the tax with cash.