A REALTOR® at Sotheby’s International Realty in Los Angeles, Corey Nelson has 13 years of industry experience. As a REALTOR® dedicated to providing informed advice to buyers and sellers of Los Angeles area property, Corey Nelson stays apprised of developments in his industry.
In early 2017, the Los Angeles real estate market entered a new phase when a buyer paid 3,300 bitcoins to purchase a $3.225 million mansion in Manhattan Beach. Bitcoin is an open-sourced cryptocurrency that exchanges outside the banking system, moving directly from the account of one owner to the account of another.
The independence of Bitcoin appeals to many big-ticket home buyers, who express appreciation for the ease of moving the cryptocurrency without fees or significant third-party participation. Bitcoin has also found a following among non-US buyers, for whom government regulations can challenge the sending of large sums of money.
However, the unregulated nature of Bitcoin makes its value ephemeral. The 3,300 bitcoins involved in the aforementioned transaction is now worth close to $34 million, or 10 times its value a year ago.
Not all sellers are willing to accept such a changeable currency because it offers them no inherent guarantee of the value they will receive. In response to this uncertainty, sellers who choose to accept Bitcoin are taking steps to protect their interests.
One strategy is to employ an investment banker who can create a futures contract that stabilizes the value of the cryptocurrency for a period of several months. Lenders, title companies, and other organizations are still leery of Bitcoin because of its volatility and the difficulty in verifying and tracing it.
The industry is still working out ways of providing assurance to stakeholders, but the currency may be finding its place. Since the first home sale with Bitcoin, more than three dozen listings have appeared that accept Bitcoin as a form of payment.