The Ins and Outs of Cryptocurrency Real Estate Deals
Some real estate professional are excited about the potential of cryptocurrency, while others remain perplexed by the concept, reports Forbes. Adam Bergman, president of IRA Financial Trust Company and a tax partner with IRA Financial Group, was excited to offer his home for sale with the cryptocurrency Bitcoin available as a source of payment. Bergman discussed the potential arrangement with brokers, attorneys, and title insurance agents, to understand the ins and outs of cryptocurrency real estate deals.
Bitcoin sales involve more risk, higher volatility
Most notably, Bergman found that cryptocurrency deals can involve more financial risk. While the U.S. dollar is a very stable currency, the same is not true for digital currencies like Bitcoin. He recommended working with a real estate attorney familiar with Bitcoin. It’s also important for home sellers to know which digital tokens they are willing to accept and for what percentage of the total transaction.
Since cryptocurrency values can fluctuate, it’s important that the sales contract take such matters into consideration. Bergman recommended agreeing on a U.S. dollar price and deciding which cryptocurrency would be used. Cryptocurrency sellers and buyers also need to discuss payment processing and determine a fluctuation limit during the closing period.
Blockchain and payment technology lags in some cases
The blockchain, the user network which verifies every cryptocurrency transaction and makes it a matter of public record, will play a vital role in recording of the exchange of the cryptocurrency. However, blockchain technology is also an emerging technology in the real estate sector, allowing whole “smart” contracts and deeds to be recorded digitally. However, the legality and availability of such real estate blockchain data uses remains limited.
Bergman also notes that fiat currencies, like the dollar, will still play a role in your cryptocurrency real estate transaction, if for no other reason than the fact that many real estate services still require payment in dollars. This is true for attorneys, real estate agents, and title insurance companies, particularly.
Anonymous and private transactions depend on federal law
One of the unique features of cryptocurrencies is the ability for all transactions to be a matter of public record on the blockchain, while at the same time, the identities of the buyer and seller to remain private or even anonymous. However, with an American real estate transaction anonymity is not always possible. Recent FinCEN law, notes the article, requires title insurance companies to report the identities of natural persons behind shell companies, such as an LLC entity, in certain jurisdictions and over certain dollar amounts.
Bergman told the news outlet that the process for purchasing a home using cryptocurrency is not too different than for using fiat currency. However, in order to have a successful home sale, it’s important to work with experienced attorneys to follow procedure and protect against excess risk.