Digital currencies continue to take hold in real estate – this time, across the Atlantic. RE/MAX London recently announced a trial program with payment platform GoCoin that will support digital currency payments on property rentals throughout the country.
“RE/MAX just topped representation in over 95 countries; this represents over one third of the world, hence the importance of providing extensive options of payment methods for our clients and consumers in today’s market,” said Peggy Su, regional owner and director of RE/MAX London. The firm is the first in the U.K. to offer the ability to make such payments.
Manhattan brokerage BOND New York was purportedly the first real estate firm stateside to accept digital currency early last year. Purchasing real estate with digital currencies (i.e., Bitcoin, Litecoin) can be an attractive option for foreign real estate investors who often bear the cost of wire transfers and fluctuating exchange rates.
“Most, if not all, U.S. banks charge receiving wire fees ranging from $10 to $20,” explains Kelly Cutchin, Country Manager USA for currency and international payment specialist Moneycorp. “These fees, on top of the margins which banks take off of the actual exchange rate, add up to a substantial amount which can cause a foreign buyer to back out of purchasing. An exchange rate fluctuating by 5-10 percent over a three month period is not uncommon and unfortunately, if the rate moves in an unfavorable direction, it could cost a real estate agent a sale.”
Since adopting Bitcoin capabilities, San Francisco-based real estate crowd-funding platform RealtyShares has successfully completed $250,000 in digital currency transactions – 70 percent of which were in the residential sector, estimates RealtyShares CEO Nav Athwal.
“Bitcoin has helped us bridge the gap for investors,” says Athwal. “We’ve had a growing number of investors from foreign countries – Canada, China, parts of Europe – and in order to transfer funds to complete their investment, they had to send a wire. [Bitcoin] cuts out the banks and lets them do an instantaneous transfer for a very nominal fee.”
Despite the growing popularity among investors and progress for other technologies like drone marketing, it’s unclear whether currencies like Bitcoin will crack the housing market. Officials have cautioned both investors and consumers on the use of digital currency – without regulation, users risk identity theft or fraud and lack the protections associated with purchasing securities.
“Virtual currencies may have potential benefits, but consumers need to be cautious and they need to be asking the right questions,” said Richard Cordray, director of the Consumer Finance Protection Bureau (CFPB) in an August 2014 statement. “Virtual currencies are not backed by any government or central bank, and at this point consumers are stepping into the Wild West when they engage in the market.”
REALTOR® Brian Block, Block Real Estate Group/RE/MAX Allegiance, echoes that sentiment.
“I don’t see this digital currency coming too soon to the U.S. housing market,” says Block. “It’s still relatively untested, unstable and unreliable to be used for what most people is their largest ever financial transaction.”
Still, an opportunity exists for brokers seeking a competitive edge. Aside from truly globalizing their business, jumping on the Bitcoin bandwagon can provide a value proposition that’s likely unique to their market.
“There is a real interest [in digital currency] from a subset of the real estate industry,” says Athwal. “It can be a powerful tool for marketing. Brokers are always trying to cut through the noise, and having this asset is one way to do that."