Cobuying a home with cryptocurrency

Crypto has exploded in recent years, regularly appearing in headlines, commercials and conversations. With the advancement of NFTs, ubiquity of cryptocurrencies and blockchain integration, it makes sense that real estate adopts new technology.

This leaves many groups wondering what they can spend cryptocurrency on? Can they make large purchases, such as co-buying a home? The answer can be complicated, so let’s look at what is involved in making large purchases with cryptocurrency and examine whether it's a feasible option for home buyers.

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Can you use cryptocurrency to co-buy a house?

Can you use cryptocurrency to buy real estate? The short answer is yes, but both the buyer and seller must be onboard. Also, you’ll need title and insurance companies that are experienced handling crypto transactions rather than traditional cash or a loan-backed offer.

While crypto real estate transactions seem like a thing of the future, they’re certainly taking place, including a $22.5 million Miami Beach penthouse and two condos at 389 East 89^th Street in New York City. 

How do you buy a home with cryptocurrency?

There are two primary ways you can use cryptocurrency to buy a home, including:

1. Converting cryptocurrency to U.S. currency

One of the simplest ways to use your cryptocurrency to buy a home is to sell the cryptocurrency for fiat money (dollars) using a service like BitPay, then use that money to purchase a home. Keep in mind there are some restrictions like you’ll need to keep the fiat money in an account in your name for at least two months before it’s considered an asset you can use to purchase a home. Also, be aware that any money you make from selling cryptocurrency may also be subject to capital gains tax, so check with your financial advisor or tax attorney.

2. Transferring cryptocurrency directly to the seller

While it can be challenging to find a seller willing to accept cryptocurrency as payment for a home, many sellers are warming up to the idea. In those cases, offering cryptocurrency might push your offer to the front of the line.

It is important to note that home valuations are locked in as of the effective date. Thus, if the transfer will be in bitcoin, the contract should note the purchase price is Z amount of bitcoin, valued at X amount on Y date.

At closing, the buyer will transfer to the seller via ABC Wallet Z amount of bitcoin in accordance with the contract. The parties then must each be responsible for wiring in their cash to close in USD to the closing agent. The closing agent will be authorized to record and close once the closing agent receives notice from the seller that the seller has received the cryptocurrency owed to the seller in accordance with the contract.

From there, the title company will calculate everything based on the “exchange” calculated on the effective date, and each party wires in their cash to close.

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Pros and Cons of Buying a Home with Cryptocurrency

If you want to co-buy a home right now with cryptocurrency, it is possible but it may be a bit difficult. Outlined below are some of the pros and cons of buying a home with cryptocurrency right now.

Pros

• It is transparent. You can see how much people are bidding and who is bidding
• It streamlines the contract process, limiting what is now a mountain of paperwork
• It makes it possible to trade properties online the way cryptocurrency tokens are
• There are fewer middle people in the transaction, which may result in fewer fees and a more efficient closing process
• You don’t need to take out a mortgage on a property

Cons

• Crypto deals are rare in real estate right now
• Few homebuyers own a significant amount of cryptocurrency to buy a home
• A limited amount of lenders, real estate companies and industry players accept crypto as payment
• As cryptocurrency is digital, it is susceptible to hacking
• As we have seen in recent months, the value of cryptocurrency is constantly changing and has been especially volatile as of late

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Nestment, Inc. does not guarantee and is in no way responsible for the accuracy of information provided in this blog post. All information is provided “AS IS” and with all faults. Data presented here may not reflect all real estate activity in the market.  While the information on this site is about legal and tax issues, it is not intended as legal or tax advice or as a substitute for the particularized advice of your own attorney and tax professional.

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