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Buying Real Estate in Miami with Cryptocurrency
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·5 min read

Purchasing real estate with cryptocurrency has gained significant attention in recent years, and Miami has emerged as one of the prominent cities where such transactions have taken place. The process of buying real estate in Miami with cryptocurrency involves several steps and considerations. Here's a breakdown of how the process works and what you need to pay attention to:

  • Find a property and negotiate the terms: The first step is to find a property in Miami that you are interested in purchasing. Once you have identified a property, you will need to negotiate the terms of the sale with the seller or their representative, just like in a traditional real estate transaction.

  • Engage a real estate agent and legal counsel: It's advisable to engage the services of a knowledgeable real estate agent who is experienced in cryptocurrency transactions. They can guide you through the process and help you navigate any complexities that may arise. Additionally, it's essential to have legal counsel specializing in real estate transactions to ensure all legal requirements are met.

  • Determine the cryptocurrency to be used: Decide on the cryptocurrency you intend to use for the purchase. Bitcoin (BTC) and Ethereum (ETH) are commonly accepted, but it's crucial to confirm the seller's preferred cryptocurrency.

  • Verify the seller's willingness to accept cryptocurrency: Before proceeding, ensure that the seller is willing to accept cryptocurrency as a form of payment. Some sellers may be hesitant or unfamiliar with cryptocurrency, so it's important to have clear communication and agreement on the payment method.

  • Perform due diligence: Conduct thorough due diligence on the property, including title searches, inspections, and any other necessary assessments. This step is crucial to ensure that the property is in good condition and all legal aspects are in order. As a rule we are working with title companies to perform that search for you.

  • Determine the purchase price: The purchase price is typically agreed upon in fiat currency (e.g., US dollars). However, it will be converted to the equivalent value in cryptocurrency at the time of the transaction based on the prevailing exchange rate.

  • Execute the purchase agreement: Once the terms are finalized, a purchase agreement is drafted and signed by both parties. The agreement should outline the terms of the sale, including the agreed-upon cryptocurrency to be used, the conversion rate, and any specific conditions or contingencies.

  • Complete the transaction: On the closing date, the cryptocurrency is transferred from the buyer's wallet to the seller's wallet. The transfer should be conducted securely and transparently to ensure the funds are received by the seller. It's crucial to work with a trusted escrow service that specializes in cryptocurrency transactions to facilitate a smooth and secure transfer.

Advantages of purchasing real estate with cryptocurrency in Miami:

  • Speed and efficiency: Cryptocurrency transactions can be executed quickly, bypassing traditional banking systems and eliminating the need for extensive paperwork, reducing the overall transaction time.

  • Global accessibility: Cryptocurrency enables international buyers to participate in Miami's real estate market without the limitations imposed by traditional banking systems or currency exchange restrictions.

  • Potential for asset appreciation: Investing in real estate with cryptocurrency allows investors to benefit from potential appreciation in both the property value and the cryptocurrency itself, potentially amplifying investment returns.

Disadvantages of purchasing real estate with cryptocurrency in Miami:

  • No Title Insurance: Title insurance underwriters do not issue policies for properties bought with Bitcoin. This poses a challenge as the insured amount in an Owner's Title Policy is typically based on the purchase price, which is usually the fair market value. If the value of Bitcoin drops between the contract and closing, the title policy may overinsure the transaction, as the fair market value was not paid for the property. Selling the Bitcoin and purchasing with US Dollars (USD) is often considered a best practice to address this issue.

  • Difficulties in Obtaining a Loan: Fannie Mae, a major mortgage lender, does not recognize Bitcoin or any other digital currency unless it has been converted into USD and deposited into an eligible asset account for at least two months. Fannie Mae also requires a clear paper trail to demonstrate that the funds in the cryptocurrency account were previously owned by the borrower. This can create obstacles for buyers who intend to finance their real estate purchase using cryptocurrency.

  • Challenges with "Good Funds": Florida Administrative Code 69O-186.008 mandates that title insurance agents may only disburse funds that have been collected, settled, and credited to their trust account. While there are limited exceptions, such as certified checks or cashier's checks, digital currencies are not explicitly included. Therefore, buyers should convert their digital funds into USD before the transfer to ensure compliance with "Good Funds" requirements.

  • Claw Back Risks: The American Land Title Association has raised concerns about digital currencies, citing issues related to security, stability, payment assurance, and consumer protection. There is a risk of funds being clawed back or charges being reversed, which can create complications and uncertainties in real estate transactions involving cryptocurrency.

  • Marketing Challenges: Despite the growing popularity of cryptocurrency, the majority of sellers still prefer traditional US Dollars. In a competitive real estate market, where sellers receive multiple offers, the choice between Bitcoin and USD may not be favorable for sellers. This can limit the attractiveness of cryptocurrency offers in comparison to offers made in traditional fiat currency.

  • Market Fluctuations: Cryptocurrencies, including Bitcoin, are highly volatile assets. Sellers may be hesitant to convert their largest asset, real estate, into Bitcoin due to concerns about the cryptocurrency's price fluctuations. The significant value swings observed in cryptocurrencies can create uncertainties and risks for both buyers and sellers.

  • Payment of Property Expenses: While the Bitcoin amount may cover the agreed-upon sales price of the property, other settlement expenses, such as loans, property taxes, releases, payoffs, recording fees, and service fees, typically need to be paid in USD. Converting cryptocurrency to cover these expenses can introduce complexities and potential conversion costs.

  • Disclosures and Closing Documents: Determining the value to enter on federally mandated closing documents, such as the Closing Disclosure, can be challenging when the purchase is conducted with cryptocurrency. The fluctuating nature of cryptocurrency values makes it difficult to accurately represent the transaction value in USD on these documents.

  • Government Reporting Requirements: Purchasing real estate with cryptocurrency may trigger reporting obligations to entities like FinCEN, the IRS, and state tax authorities. Buyers and sellers must be aware of and comply with these reporting requirements, including reporting the amount of the transfer and any associated tax obligations.

It's important to carefully consider these disadvantages and conduct thorough research and due diligence before proceeding with a real estate transaction using cryptocurrency. Working with experienced professionals and seeking legal and financial advice can help navigate the complexities and mitigate potential risks associated with such transactions. But main solution to most of the issues is easy: Convert the Bitcoin to U.S. Dollars and then use the USD to buy the property.