The marriage between cryptocurrency and real estate is still in the honeymoon phase, and it remains unclear whether this is a union that will stand the test of time.
Bitcoin’s value has gone through numerous peaks and valleys, but wild price fluctuations haven’t stopped real estate brokers and agents from listing properties for interested crypto buyers. If crypto continues to grow in value and popularity, it opens another segment of the market for real estate agents to reach potential clients.
Using crypto as cash
After enduring several bear markets, the real estate industry may record historic transaction volumes in cryptocurrency in 2024. Bitcoin reached a new all-time high of over $73,000 on March 14, 2024, and increased in value by 159.42% year over year, gearing up for a fresh bull run.
In September 2017, the Lone Star State saw its first crypto real estate deal involving a newly constructed custom house in Austin, Texas, for an undisclosed amount. The buyer paid in bitcoin, and the seller received U.S. currency. The broker associate who oversaw the transaction partnered with a local title and escrow company to ensure everything went smoothly — and it did. The payment’s conversion from crypto to U.S. dollars took about 10 minutes.
In February 2022, a Florida Realtor made history after listing a Gulfport residence owned by a crypto brand co-founder and sold it as a non-fungible token (NFT) at an auction. After getting listed, the property found itself ensnared in a bidding war between two anonymous buyers. The winning bid was 210 ether — Ethereum’s native cryptocurrency — amounting to about $630,000 post-conversion.
Real estate tokenization made this deal possible. The owner turns the property into a token and mints an NFT to represent its ownership. Whoever holds the NFT effectively owns the physical property in the real world. Selling it to another party means transferring the house’s ownership to the buyer. The proceeds were less than the seller’s asking price, but the landmark transaction proved NFT homeownership is feasible and instantaneous.
The same year, a real estate agent in Louisville, Kentucky, helped a seller who wanted to accumulate bitcoin discard an Iroquois house for about $65,000, minus commission and other fees. The taker was a fellow bitcoiner aspiring to become a long-term landlord. The agent witnessed blockchain’s title and escrow use cases and the importance of setting U.S. dollars as the base price to assuage misgivings about crypto.
Using crypto as collateral
Some cryptocurrency holders buy a house without selling assets to cover everything or put down enough to qualify for a mortgage. Instead, they use their digital currencies to borrow capital necessary to finance a home purchase and defer capital gains taxes.
This strategy is enticing from a wealth-generation point of view. Acquiring an uncorrelated asset in real estate allows crypto holders to diversify their investments and keep portfolio values from fluctuating significantly during stock market downturns. At the same time, they retain ownership of their cryptocurrencies — which may increase in value over time — as long as they repay what they owe accordingly.
Homebuyers can choose between two paths when taking this route — crypto-backed mortgages and decentralized finance (DeFi). Crypto-backed mortgages are similar to traditional home loans, except the borrower pledges cryptocurrency holdings to secure the loan. The lender releases funds in U.S. dollars or another fiat currency equivalent to the collateral’s value. The two parties decide the monthly installments’ currency.
On the other hand, DeFi lending takes place in apps where any crypto holder can be a lender or a borrower without intermediaries. Depositors contribute funds to the lending pool, allowing them to park their assets and earn high interest. Borrowers can acquire funds to buy a house from the pool and receive them quickly through smart contracts, assuming they qualify.
Smart contracts ensure fast distribution of funds. DeFi platforms can have distinct rules, so participants must do their homework to understand the app’s borrowing approach, collateral requirements and more.
Are you ready to close crypto real estate deals?
Cryptocurrency real estate transactions aren’t the norm. They remain a small fraction of the total transactions in the U.S., but they are increasing in frequency, and that trend could continue if crypto gains in popularity. Crypto transactions may be an avenue for agents to explore to reach more clients and develop a niche.