One popular misconception about Bitcoin, the original digital cryptocurrency, is that you can’t use it for normal, real-world purchases. Many people mistakenly assume that you can only use Bitcoin to make purchases on the dark web.
In reality, Bitcoin is now traded on many popular investing forums, and is even accepted at certain stores, restaurants, and ATMs.
Digital currencies, which are not backed by a gold standard and amass value as people invest in them, have become quite popular, and Bitcoin value is expected to continue to appreciate in the years to come.
For people who have held onto Bitcoin as it increased in value over the last decade, the amount of Bitcoin may be sufficient to make a major purchase, such as a home on the Seattle real estate market.
Seattle Has Already Seen a Cryptocurrency Home Purchase
Believe it or not, purchasing homes with cryptocurrency isn’t just a concept. On December 29, 2017, a buyer who purchased a home in Tukwila, Washington for $415,000 used multiple kinds of cryptocurrency to fund the 10 percent down payment on the property.
In this case, the buyer converted his cryptocurrency coins into United States dollars before closing on the property. The buyer claims that the entire down payment was made up of profits made in short-term trades of cryptocurrencies since June of 2017.
For this buyer, the biggest challenge was proving that the cryptocurrency funds were his own, and not a loan. After all, one of the many features that draw people to cryptocurrency is the lack of government regulation and banking oversight.
In many ways, is an anonymous means of transferring money, which could make it more difficult to produce a necessary paper trail when it comes time to purchase a home.
In this situation, because the purchase of the cryptocurrencies was recent and through a bank account, the buyer was able to establish proof that he had made the initial investment. That, in turn, eventually resulted in his ability to secure a mortgage for the property. The buyer most likely paid capital gains tax on the profit he made from his June investment when he filed his 2017 taxes.
[Related: Guide to Buying a Home in Seattle]
Cryptocurrency Transactions Are Increasingly Mainstream
More than 15,000 businesses around the world currently accept Bitcoin as payment for goods and services, and 36% of small-medium businesses in the U.S. offer Bitcoin as a payment option.
Because cryptocurrencies such as Bitcoin have been all over the news for both technology and finance, more people than ever before are aware of the existence of, and possible uses for, Bitcoin. This exposure and a variety of resources online make it easier for buyers to connect with sellers who will accept the appropriate amount of money via Bitcoin.
For those with major investments in Bitcoin or similar cryptocurrencies, a cash purchase via Bitcoin transfer could very well be possible.
Sellers will want to verify the current market value of the currency used. However, provided that the amount you bid on a property reflects the current value of the cryptocurrency and the value of the home, making a home purchase funded solely by Bitcoin or a similar digital currency is possible.
[Related: 15 Essential Questions to Ask When Buying a Home]
Be Prepared to Cash in Your Bitcoin to Complete a Purchase
While some sellers may allow for a totally digital sale of their home, others are much more likely to accept a Bitcoin purchase if you convert your funds to United States dollars prior to closing.
This conversion obviously involves an extra step for the buyer, but it could make things overall much simpler. Being willing to convert your cryptocurrency funds to standard American currency will help ensure that you aren’t limiting the potential properties you can purchase.
If you’re a buyer looking to convert your digital funds into real-world cash, a number of options exist. One of them, obviously, would be to sell cryptocurrency online via a trading platform. However, if you have a large amount of Bitcoin, multiple transactions may be necessary to liquidate and capitalize your Bitcoin investment.
You could also use a conversion service, such as BitPay. BitPay is one of several service providers that allow buyers to pay with Bitcoin and sellers to accept Bitcoin for transactions. People can easily convert the coins in their Bitcoin wallet to standard currency, all for a minimal fee.
Typically, you will pay a percentage of the amount you convert to offset the expense of providing the service. That amount, however, could be as low as 1 percent. You may have to factor that fee into your offer to make it attractive to the potential seller.
[Related: Best Times to Buy a House in Seattle]
Cryptocurrencies Help Globalize Businesses and Real Estate
Choosing to pay for a purchase with Bitcoin or another cryptocurrency bypasses the need to convert funds between two standard currencies. Given that banks and money changing services often charge fees that could exceed the fees associated with Bitcoin conversion, it’s easy to see potential benefits to real estate purchases involving Bitcoin.
For investors, Bitcoin purchases may have led to significant profit. They can then convert those Bitcoins into United States real estate investments, without the need for an intermediary currency exchange.
Do you have any questions about purchasing a home using Bitcoin? Seattle Mortgage Planners can help you, as well as guide your traditional home-buying process from start to finish. Contact us today and let’s get started!