Welcome to a new feature here at Get REALty. On a periodical basis, we will write a post on how an emerging technology will affect the real estate industry. You might not think technology has much to do with real estate, or affect how you buy, sell or invest in real estate. As you will learn, however, technology does have a direct impact on the real estate market in a number of different ways.
If you are seller, imagine you get a strange offer from a buyer who is willing to buy your house in bitcoins. Would you do it? Would you even know what bitcoin is? With the recent surge in cryptocurrency value in the last several months, it might be time to start paying attention. In short, cryptocurrency is a new form of money that was invited ten years ago by Satoshi Nakamoto as way to take central control (government and banks) out of the picture. The currency is driven solely by its market and it is strictly an online form of money ruled by a technology called a blockchain, which is a a digital ledger that records all transactions made with the coin. It is through blockchain that makes this cryptocurrency very favorable to consumers because you can remain anonymous as the ledger is made up of public and private keys with no individual information being conveyed. There is also a limited amount available so the price consistently goes up and up. If you were lucky enough to get some bitcoin when it first came out, you would be sitting on a goldmine right now.
How does this new form of money come to play in real estate? Believe it or not, people have putting real estate on the market for bitcoins for almost eight years now with urban legend having the first one taking place in Canada in 2010. Most people would be surprised to know that many today are looking for ways to use this cryptocurrency in real estate and some have established some good systems and procedures to make use of this technology. There is plenty written about it on the Internet today since it is still a new to most people. We have found three ways that cryptocurrency will change real estate.
1. Buying and selling a house will change – If cryptocurrency takes off like many authors believe it will, buyers will see some strange new additions to listings in the future inviting buyers to purchase their home with cryptocurrency while sellers might be surprised with an offer made to them in the new digital currency. By placing “cryptocurrency is accepted” on listings, it brings attention to the property and creates a buzz for the property that sellers and agents love (via the website UpNest on its blog in this posting). The post listed high end transactions as being the most likely price points to tackle cryptocurrency for its listings. Many of the sellers are accepting payment totally in bitcoin while others are looking to split it between bitcoin and US currency. Realtor magazine listed in this post that 37 homes were bought and sold last year with bitcoin. Matthew Murphy over at Forbes writes in this article that many of these digital currency customers will be millennial
A London Block Exchange study found that millennials are cryptocurrency fans, with 5% already investing cash in cryptocurrency, 11% “definitely planning” to invest in 2018 and another 17% “seriously considering” a digital currency investment by the end of this year.
Not surprisingly, the Realtor.com post writes that many of these new bitcoin buyers are into tech and are in their 20s to lower 40s. The post also indicates that many of the cryptocurrency users are international players who find it difficult to get their country’s currency out of through their homeland’s tight regulatory system. With digital currency, it is done all online out of sight of the regulatory bodies and can be done totally anonymously.
2. Blockchain will make title work much easier – We have pretty much bought and sold homes the same way for decades now. Sure, we have had technology make some things a whole lot easier, but the actual processes we use to get the house sold has been stagnant for years now. With cryptocurrency, we will see some changes to this process. Specifically, blockchains are a technology we can utilize. Murphy writes about it extensively in his Forbes article. He writes that we will soon be able to do the entire transaction online as blockchain technology can make MLS data more centralized, track title and deed information more easily and add a level of security to the process we currently have to rely on archaic pen and paper to provide. Just imagine a world where you no longer have to travel to a title company to sign paperwork after a lengthy process of researching title issues. Matthew envisions in his article that he would not be surprised if most real estate transactions are done digital in five to ten years.
3. Cryptocurrency brings it own set of challenges – In Upnest’s post, the site went into some detail about the challenges facing real estate by transitioning over to digital currency and blockchain. First and foremost, there is the lingering threat of hackers in every corner of the digital world, The industry will need to build in safeguards to insure that these hackers can’t get into systems. Cryptocurrencies (at least so far) have not exactly been the most stable of currencies with values going up and down significantly within a few days or even hours. Will buyers and sellers want to take the risk of selling using digital currency if they don’t know how much it will translate over to other forms of currency? This question will need to be explored further before it becomes more mainstream in the industry. You never know if government and other bodies might step forward to place some rules and regulations on how the digital currency can be used in their countries. Much of the allure of the cryptocurrency today is the freedom of its use and anonymous nature. Even today, we are seeing some buyers and sellers being charged capital tax gains when they use bitcoin to make purchases. How this regulatory environment plays out will dictate the digital currency acceptance in the future.