Bitcoins make splash into Park City real estate market
Buyers and sellers are beginning to make use of the cryptocurrency
November 11, 2017
When Russ Smith picked up a call and heard the words, "What do you know about Bitcoin?" he did not have a precise answer to give. About two months later, he was finalizing a deal with a client using the new currency.
Smith, state manager of the Real Advantage Title Insurance Agency in Park City, recently made one of the first real estate transactions with bitcoins in the country and likely the first in Utah. The $3.5 million transaction was also one of the largest reported real estate deals to date using bitcoins.
Bitcoin is a form of cryptocurrency created in 2009 that is tied to no banks or country. Its value is based on algorithms from computers dependent on its use in the marketplace.
"It's basically a stock that you can use via a credit card," Smith said.
While bitcoin has become popular in some corners of the internet, it is only recently being used to purchase real estate. The first recorded bitcoin purchase for real estate in the U.S. took place in California in 2014. After a few years, another deal was finalized in Texas, Smith said.
He started looking into it after receiving a phone call from Dougan Jones, executive chairman of the real estate agency Engel & Völkers. Jones had received a call from one of his listing clients telling him that he would accept bitcoin for his property in Sundance. Another seller quickly followed suit.
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Jones realized that he needed to find a title agency that could help with those transactions, so he called Smith.
"I asked him if he would look into it, because it is coming at us in our industry," Jones said.
Jones' seller did not find a buyer with bitcoins, but the seed was planted in Smith's mind.
In the meantime, Bob Struwe, a real estate agent for High Country Properties who worked with the buyer in the recent transaction, was doing his own research on bitcoin transactions because his client wanted to use the currency for a property purchase. It turned out to be hard to convince anyone to take him seriously.
"We were running into a real problem," he said. "His ideal scenario would be if a seller would take Bitcoin, and I knew that was going to be pretty remote."
Part of the problem is that many states, including Utah, do not consider Bitcoin legal currency, so it makes deals difficult for agencies. Plus, many people do not trust the currency because of a lingering negative connotation, Smith said. The buyer did not want to be identified in this story or have the seller know because of the stigma.
"Initially, a long time ago, it was conventional wisdom that bitcoin was considered a money laundering avenue," Smith said.
Luckily, Smith knew that it was legitimate and he and Struwe began the deal.
"It was an unbelievable success," Struwe said. "For us, (Real Advantage) was amazing to work with. The first time doing anything this complicated and large, there are some problems here and there, but everyone worked together so well."
The entire transaction took only seven days.
A typical cash deal takes three weeks to 30 days, Smith said.
Part of the reason the transaction closed so quickly is because bitcoins change value just as stocks do. If the value went up or down before the deal was closed, it would have caused some hiccups.
Smith said the setup for the deal was difficult because neither the market nor the government is prepared for bitcoin. He and Karen Kasperick, senior escrew officer at Real Advantage, had to find a way to quickly convert the bitcoins so it could be put into the title agency's trust accounts as U.S. dollars.
They eventually found BitPay, the same payment service used in the Texas transaction in September.
As more transactions take place around the country, real estate firms and title agencies will find it easier to make use of bitcoins in the market, Smith said. He believes bitcoins will only grow in popularity, and Park City should be ready.
"As we see more and more of these transactions happen, people will become more comfortable with it," he said. "And that's when the constituencies will start pressuring their local government to start moving toward moving cryptocurrency mainstream."
Smith and Jones agree that making Park City ready for Bitcoin transactions would be beneficial for the tourism market, since many foreign nations are jumping on the cryptocurrency bandwagon before the U.S..
"A lot of the people that we get in Park City are from overseas," Smith said. "They're very comfortable with it. If a hotel or a lodging company or any type of tourism starts taking cryptocurrency, I think that would be huge."
Since Struwe's involvement in the deal, he has received calls from people around the world interested in purchasing properties with their bitcoins. He, Smith and Jones believe that buyers and sellers are ready, but they need to be ready as well.
"It's our obligation to know enough about it to speak intelligently and represent our client in any form of consideration," Jones said. "Since our clients are coming to us offering bitcoins and proposing to receive bitcoins, we need to come up to speed. I think it is something we have a duty to understand and educate our clients on."