Full disclosure, I'm a big fan of Bitcoin and other cryptocurrencies. It's an exciting development in the financial world. I'm not going to get into the thoughts and theories behind this type of "currency", but we are going to focus on a new trend that might be upon us. Homes and condominiums are beginning to be listed and sold for Bitcoin. Should you get in on this as an early adopter? What does it mean for a home seller or buyer? Fad or Future?
The biggest consideration when accepting or making a Bitcoin offer is clearly volatility. The cryptocurrency is, to say the least, extremely volatile and not for the feint of heart. If you're listing your home, your asking price, in comparable dollars, could dramatically change during the time your home or condo is on the market. There aren't many home owners that have the luxury of having their asking price fluctuate 5%, 10%, or 20 plus percent between the time they list and the time they sell. At the time of this post, Bitcoin has gone up 10% in the last week. That means your asking price, in actual fiat currency, just went up 10% also. This possibly just made your home vastly more expensive than comparable homes in the market, thus less attractive to buyers. Alternately, it could have dropped 10+ percent. Are you ready to take dramatically less for your home? Ultimately remember, the price of your home will be recorded as the dollar value of the commodity used for the transaction.
As a buyer, do you want to deal with this volatility also? A typical closing can take 30-45 days. While you fully understood the value of your offer when you made it, the value could also wildly fluctuate. If you made an offer on 12/1/2017 of 28 BTC for a home ($294,000) and closed on 1/6/2018, your 28 BTC offer is now valued at $462,000. That's a significant difference, which might, in the long run, have extreme tax ramifications.
Value is a major consideration, but there are a number of different other aspects that you need to worry about. We can't get into them all here, but just be aware that if you sell for Bitcoin, you might have problems liquidating that amount of coins. You can't just go to the bank and flip it all for cold hard cash. As a buyer, if you were smart enough to get in on Bitcoin early and want to buy a home with it, you might have severe tax issues when that transaction takes place. Capital gains on Bitcoin is a real thing, and could further change the financial dynamics of your purchase.
Right now, Bitcoin sales are a novelty. It creates a buzz around a property that might not normally be there. Something that should only be practiced if you know risks and are willing to take them. If the price stabilizes, it could become another tool in the home buying and selling process. Another option for helping further home ownership is always great for everyone. In most cases, buying your home is the largest transaction you will make in your life. Buying or selling with Bitcoin is a gamble right now. If you want to be cool, make the news, and be talked about on Twitter, do it. If you want to have a stable financial transaction, crypto is not the way to go.
Sean Montgomery is a former CTO who is co-founder of Property Sprocket with Melanie Coker. He believes that technology has and will continue to dramatically change the real estate industry, ultimately lowering costs for home sellers and improving the selling and buying experience in the process.