Although bitcoin has been around since 2009, 2017 seemed to be the year when it truly hit the mainstream. The valuation soared to $20,000, and suddenly headlines and social media were awash in a bitcoin-fueled frenzy. The value has since dropped and the excitement cooled, but there’s no doubt that blockchain technology is having a lasting impact on businesses and consumers.
The property sector is a prime example of an industry where blockchain technology represents opportunities, as well as potential pitfalls.
Buyers and renters
One application of bitcoin in real estate is as a way to buy property and pay rent. Stories about “bitcoin for mortgages” began emerging in 2013 with stories about villas in Indonesia, Paris apartments, and land in Lake Tahoe that were paid for with bitcoin. In 2017, Kuper Sotheby’s International Realty claimed to be the first brokerage in Texas to close a home purchased entirely with bitcoin. The firm said the sale signified its commitment to keeping up with trends in tech-savvy Austin.
More recently, paying rent in bitcoin has emerged as the next frontier. At the end of 2017, a Brooklyn-based rental platform called ManageGo announced that in 2018, tenants could pay using bitcoin, as well as fellow cryptocurrencies Litecoin and Ethereum, through the company’s mobile app. ManageGo’s VP said they viewed it as a “next-level amenity,” like a fancy gym. Brooklyn brokerage Brookliv also accepts bitcoin, with broker Ari Weber describing it as a way to “attract young clients.”
Real estate platforms and brokers are viewing cryptocurrencies as a way to stand out in a crowded market and appeal to a certain clientele, but what’s the appeal for consumers? Someone with a sizeable bitcoin account may find it easier to pay directly with bitcoin than to jump through the hoops of converting it to cash.
Cryptocurrency is not particularly liquid. The cryptocurrency also tends to be unpredictable, at least relatively speaking, which can work for or against a renter (or a landlord). If the value of bitcoin drops from one month to the next, the currency won’t go as far.
From a landlord or build owner’s perspective, the fact that bitcoin is unregulated and risky should be of concern. Accepting the currency is one thing, but dealing with some sort of a dispute, should it arise, is quite another. Taxes could also be a challenge. Furthermore, it’s wise to accept payment in the same currency as expenses.
Whether accepting bitcoin for rental payments will really catch on remains to be seen, but there are a number of other ways that blockchain technology is transforming the real estate industry.
One is how MLS property data and title records are stored, accessed, and shared. All real estate transactions go through the Multiple Listing Service (MLS), which tracks representation, contracts, appraisals, listing agreements, and more. The MLS is notoriously fragmented and the information is not always useful because it’s often restricted or out-of-date. In terms of title records, they are stored locally and unavailable online.
The blockchain enables databases, like MLS data and title records, to be tracked and shared securely. For example, Chicago’s Cook County tested the use of blockchain technology for transferring and tracking property titles in 2016. Someone who buys a property receives a digital token, in addition to a paper deed, and documentation of token transfer serves as proof of ownership. These tokens could ultimately replace deeds. By streamlining the title portion of a property sale, blockchain technology could save buyers time and money, and reduce fraud.
Another application of the blockchain is to facilitate transactions. One of the greatest innovations of the technology is that the parties on either side of a transaction don’t need to trust each other to do business. Because each user has a unique cryptographic identity, their financial information can be securely and efficiently shared. Funds won’t release until a transaction has gone through.
Like any cutting edge technology, it will take time for the effects of bitcoin to be fully understood by businesses, brokers, and consumers alike. There are a number of companies ahead of the pack who will provide early insight into whether buying a home or paying rent with bitcoin (or accepting it as payment) is a good idea. It’s definitely one of the top real estate trends to watch in 2018.
Sourced by April Wong, director of Marketing at Chime Technologies