Are you wondering if you can purchase a house with Bitcoin? Here is a guide on how you can buy a home using Bitcoin.
The blockchain technology behind Bitcoin is challenging the status quo of the real estate industry. Those early adopters and traders of this digital asset create tremendous amounts of wealth and use it on real estate purchases. As a result, they are fueling an already hot market. Furthermore, smart contracts have the power to enable faster, more agile transactions and property transfers. So, here is how you can purchase a house using this digital money.
Buying Directly from the Seller
The process of buying real estate from a private seller will vary from seller to seller. Some may be comfortable with 100% Bitcoin transactions, while others could opt for a split between Bitcoin and fiat currency. If a trade involves fiat currency and this digital asset, the real estate buyer will have to send this electronic money from one wallet to another.
Real estate sellers who are unwilling to receive this virtual asset directly can convert their Bitcoin to dollars to complete the purchase.
But if you complete a real estate transaction using Bitcoin, you may have to make some cash payments to government agencies and intermediary parties. The crypto trader can help facilitate Bitcoin real estate transactions on behalf of buyers and sellers.
Using one’s Bitcoin as a Collateral
People can leverage their digital assets for real estate to use them as a down payment. Several new fintech platforms are rolling out products for leveraging. Bitcoin lenders such as BlockFi and Unchained Capital provide crypto-backed loans whose annual percentage rates range from 1% to 6%. People can use these loans for major purchases like autos and real estate.
The lending companies claim to help everyone from the unbanked to high-net-worth individuals expand their lending options by leveraging Bitcoin assets.
Additionally, a Bitcoin-collateralized loan is intriguing because borrowers don’t have to liquidate their Bitcoin holdings to access financing. They avoid the need to cash out their Bitcoin and therefore avoid creating a taxable event to buy a house.
On the other hand, Bitcoin-collateralized loans have a few cons, including:
- They aren’t available in all states yet.
- It is hard to determine the loan-to-value (LTV) ratio because this digital money is highly volatile.
Benefits of Buying a House with Bitcoin
Bitcoin and blockchain technology give buyers and sellers an opportunity for a more seamless and secure way of recording and proving property ownership.
Using the blockchain and Bitcoin to purchase a house does not expect every partaking party to fill out endless paperwork. Also, even though the real estate industry is risk-averse, Bitcoin-only transactions from real estate deals are slowly but certainly finding their way into our everyday life.
Many countries are formulating laws that allow blockchain technology to participate in property sales and prove property ownership. As a result, some process characteristics still involve traditional financial institutions.
Get an Inspection and Home Warranty
Upon deciding to purchase a new home using this digital money, make your sales contract committee on a final home assessment by a professional that you can hire. Please don’t infer that because a home is newly constructed, it isn’t going to have drawbacks. Municipal examinations for code violations are not as thorough as an independent professional inspection. Authorities deem you to have your home checked when potential problems are easier to spot during each building phase. If the builder opposes this, contemplate that as a red flag.
The real estate market is undoubtedly changing due to the increasing Bitcoin transactions and the use of blockchain and smart contracts. Nevertheless, understand how this virtual currency works and how to use it to purchase a house.