Distributed.com spoke with Karen Sharpe, an agent at Nourmand & Associates, to discuss her firsthand experiences with the new trend.
“For many years, real estate agents were afraid to venture into the unknown territory of working with a buyer who paid for a home with cryptocurrency, but that is all changing now,” Sharpe said. “There are new lenders that have emerged who enable the crop of crypto millionaires to give their portfolios liquidity without having to sell their cryptocurrency.”
The instability of crypto prices makes it difficult for real estate agents and buyers to keep up a regular relationship but using crypto as collateral can solve this problem.
“Those who believe in cryptocurrency believe that it is cyclical,” said Sharpe, “very similar to the real estate market.”
She went on to note that the trend might have started “to become more popular before the crypto crash,” but, nevertheless, she truly believes “that the trend will continue over the long run in an upward fashion.”
Considering that her agency typically deals with luxury homes, and based on the extreme wealth that many crypto holders have accumulated during the space’s meteoric rise last year, one might assume that it is typically mansions that are purchased with cryptocurrency. But Sharpe disputed that presumption, saying that this model did not reflect her experience with many buyers, but instead “cryptocurrency buyers are interested in all types of homes: starter homes, luxury homes and everything in between.”
From this perspective, it should come as no surprise that federal entities have taken notice of the demand for crypto not only in outright purchases but also in mortgages.
“Fannie Mae indicated that it is possible,” said Sharpe, and “a majority of mortgage companies won't understand cryptocurrency, but the trend is leading towards more and more companies taking it into consideration.”
The number one risk for entering into these sorts of arrangements is what Sharpe calls the “volatility factor.” A provision that crypto real estate agents commonly employ, then, is “to put some sort of provision into the purchase contract stating that the initial deposit used to hold the property while going through escrow will be held at the current daily rate until the transaction closes. This will protect the buyer from overpaying and the seller from getting less than the agreed on purchase price.”
So, in real estate, it seems that individual financial actors are more than willing to accomodate all the necessary quirks of the crypto business. Despite the complications that the most recent downturns have brought to the industry, the space has still shown a remarkable ability to adapt and incorporate a decentralized technology into any number of financial institutions.