Are Bitcoins Coming to Real Estate?

Bitcoin Image

If someone offered you Bitcoins for the sale of your house would you take it?  You would probably say what’s a Bitcoin and quickly do a Google search.  What you would find is that in 2013 the first sale of a home in Southhampton was offered in Bitcoins.  There were no takers.  Since then, there has not been one sale of a home in the United States using Bitcoins even though there is an organization called International Blockchain Real Estate Association (IBREA) promoting the use Bitcoins in real estate transactions.

The Story of Bitcoin

The story of Bitcoins has been very exciting so far since its creation in September 2009.  It involves a handful of competing cryptologist software nerds that wanted to eliminate the banks and governments from our monetary system by creating a worldwide digital currency.  One person Satoshi Nakamoto came out on top with his technology.  The strange thing is that Satoshi Nakamoto has never come forward to meet anyone. In fact Satoshi has stop communicating with the software designers who helped him in creating this new technology.  Satoshi has disappeared!  To get the whole story, Netflix has a great documentary called “Banking On Bitcoin” which tells the intriguing story of Satoshi, the rise and fall of new instant millionaires, the use of drug dealers and money launders, and the eventual crackdown by the US government.

Since the US government has establish new regulations in controlling the use of Bitcoins, the industry has taken off astronomical.  The reasons for its success is because it speeds up monetary transactions anywhere in the world, cut transaction costs, and reduces fraud!  Currently one Bitcoin is worth $16,720.  In 2009, one bitcoin was worth less than one penny.  To date, there are more than 2.5 million items you can use bitcoin to buy.  The largest retailer accepting bitcoins is Overstock.com.  Amazon is still evaluating the acceptance of bitcoins.

How it works

A Bitcoin is not a shiny coin, but a digital currency on the web called cryptocurrency.  There is a maximum cap of 21 million Bitcoins available in the world as defined by Satoshi.  Bitcoins are tracked on a ledger by computers using a technology created by Satoshi called Blockchain technology.

Understanding Blockchain technology is confusing and complicated.  Blockchain technology involves people called miners who solve mathematical problems to discover the limited amount of bitcoins. (Sounds crazy right?)  As part of solving the mathematical problems and discovering bitcoins, a block or a computer ledger is created that keeps track of every bitcoin. Every block created by a miner is required to connect to every other miner’s block in a chain.  The Blockchain technology creates ledgers using digital balances of public and private “keys.” These keys are a string of numbers and letters linked through a mathematical encryption algorithm. This is the secret to Bitcoin’s security and relative anonymity. The public key is like a bank account number and the private key is like an ATM pin.

Individuals and companies have Bitcoin “wallets” to store keys they purchase from online exchanges There are a limited number of Bitcoin ATMs, where you get a key printout. Like cash, if you lose that piece of paper, you’ve lost your Bitcoin.

The Future of Blockchain Technology in Real Estate

Is Bitcoin or cryptocurrency part of the future of real estate transactions? It’s not so much a question of “if” as it is “how and when,” although the medium (Bitcoin vs another cryptocurrency) has yet to be finally determined.

As long as forms of cryptocurrency are accepted, homes will undoubtedly be purchased this way. Do home owners have anything to fear? As long as they use a licensed agent, a reputable lender, and title company, these transactions shouldn’t hamper the sale.

While Bitcoin is still viewed as a somewhat speculative currency, blockchain technology is here to stay. As an instantly verifiable and secure public record, information can be quickly and easily accessed. This may be the most exciting part for the real estate industry.

If property titles could be secured in the blockchain, it could transform and speed up the mortgage and title process. It could also lessen fraud by preventing the forgery of documents. The International Blockchain Real Estate Association (IBREA) is certainly working toward that end. Its more than 500 worldwide members met this spring in Newport Beach, Calif., to collaborate on mainstreaming this technology. IBREA’s initiatives are ambitious. It’s seeking to create universal platforms that are “open source, nonprofit, secure, and scalable” for property and title, as well as for digital deeds. Insurance and other essentials of real estate transactions could also be added to the blockchain. The IBREA hopes to promote and set standards for real estate transactions using cryptocurrency and set up industry best practices for the escrow process.

San Diego’s Housing Refugee Crisis

You read about and see on the TV news the Syrian refugee crisis, but San Diego is experiencing its own quiet refugee crisis.  It is not caused by civil war, but is caused by crushing rents and crazy sale prices. Who are these refugees?  They are the people we care about the most, our children.

Dan McSwain’s recent article in the San Diego Union-Tribune explores this new family problem.  He attributes this to high government housing fees and limits on new construction.  Our children have become “distant housing refugees” moving to other states like Arizona, Nevada, and Texas to find affordable housing.

McSwain points out, if you doubt that local government fees are a problem.  Lynn Reaser, Chief Economist of the Fermanian Business & Economic Institute at Point Loma Nazarene University, who in 2014, led a research team that found local regulations accounted for an astounding 40 percent of the cost a new house, condo or apartment in San Diego County.  Reaser’s team can demonstrate how $180,000 of that $450,000 house or apartment owes to local regulations.

Now you might think that these regulations protect the environment from dirty hordes of new residents. In fact, the opposite is often true, as Harvard economist Edward Glaeser has argued persuasively in a series of papers.

“In California’s case, preventing local construction for environmental reasons only ends up increasing  carbon emissions by pushing building to less salubrious climes,” Glaeser wrote.

In San Diego’s case, anti-growth policies in the 1990’s and 2000’s contributed to a historic construction boom in Southwest Riverside County.  Those people who moved to Temecula, got in their cars and commuted back to their jobs in San Diego over an hour down Interstate 15 causing immense traffic problems and increased carbon emissions.

I encourage you to read the entire McSwain article as it furthers breaks down other California regulations such as the expanded California Environmental Quality Act of 1970 that limited public projects.

I don’t expect any of our regulations and fees to change especially since the homeowners are benefiting from these high prices.  However by reducing local government regulations and fees, we can make housing more affordable thereby keeping our children here in San Diego.

 

Open House Security Ideas

Holding an open house is an act of faith. You clean, declutter, and prepare your home to look its best, hoping at least one of the visitors will fall in love enough to make an offer, preferably all-cash. At the same time, open houses are invitations to strangers to walk among your most prized possessions, often with only a single real estate agent present—and so there are very real security concerns, for agents and homeowners alike.

At least 40% of the agents surveyed by the National Association of Realtors® for its 2015 Member Safety Report say they have experienced a situation that made them fear for their personal safety: Vacant houses, model homes, properties in remote areas, and open houses all caused trepidation. The study found that many now carry weapons for self-defense—no wonder when agents have been killed in the past.

For homeowners, however, self-defense takes place long before strangers show up at the door—and start looking in the refrigerator, the cabinets, the pantry.  You probably know to lock up or take away valuables, but here are a few more things to remember:

Say ‘No’ to drugs

Remove all prescription drugs from your medicine cabinet, even the ones you think are harmless. There are so many tales of open house visitors rifling through medicine cabinets and taking a few pills, or even whole bottles.

Control your remotes

Most people don’t think about the extra garage remote they leave dangling from a hook near the back door. It’s small and easy to slip into a pocket, so take it with you when you leave for the open house.  All keys, remotes, and fobs should either be locked away or in your pocket.

File this under ‘Lock & Key’

There’s a trend in home office decor to make file cabinets pretty and portable—but portability and security are not always compatible. Buy a heavy, non-rolling commercial-grade filing cabinet that locks—and into it put your important documents: birth and marriage certificates, financial statements, basically any legal, medical, or personal information you wouldn’t want falling into someone else’s hands. Identity theft is real and should be taken seriously.

What about my 50-inch flat-screen?

While it’s unlikely that anyone could walk out of your open house with your TV or other large electronics, they could come back for it. That’s why the next item is so important:

It ain’t over till you check your doors & windows

While agents will go through to make sure all lights are off and the house is in good condition after an open house, they might not check the doors. Unscrupulous people have been known to unlock a window or basement door with the thought of returning later. After the open house, walk through your house and check every window (even on the second floor), gate, and door to be certain that they’re all locked.

If you have any other comments on the security of your home, please contact me at “Ask Broker Mark.”