Real estate

Is Bay Area Real Estate The Next Frontier For Crypto?

The real estate listing reads like your typical Bay Area condo – a tidy, two bedroom, one bath, with upgraded appliances, granite counter tops and just a 10 minute bike ride to Google Headquarters and the downtown Mountain View.

But the Silicon Valley seller and agent has added a sweetener for crypto geeks: Bring your offers in bitcoin, Ethereum or other virtual currency and we’re ready to consider a deal.

“It’s not as hard as it sounds,” said real estate agent Greg Bryant, who listed the property for his client, a tech professional. “Sellers should be less afraid.”

Realtor Greg Bryant is seen in the reflection of a mirror as he shows this news agency his client’s condo in Mountain View, Calif., on Wednesday, Jan. 19, 2022. (Dai Sugano/Bay Area NewsGroup)

Cryptocurrency — which is gaining traction with investors, venture capitalists and, more slowly, traditional banks — may start to play a small role in Bay Area real estate. But real estate sales made entirely in cryptocurrency remain extremely rare. Several Bay Area agents interviewed reported no recent crypto transactions, and spokespersons for online brokers Zillow and Redfin report almost no instances of crypto being used to market properties.

Cryptocurrencies are a form of digital payment not backed by any government or central bank. Currency is “mined” by computers and can be used to buy and sell goods, or traded online.

Still, more and more buyers can invest in the notoriously volatile cryptocurrencies to help build wealth quickly for a down payment. A Redfin survey in December found that nearly 12% of first-time home buyers plan to sell cryptocurrency to help fund a purchase. The number of first-time buyers turning to crypto investments has increased from 5% in 2019 to 9% in 2020, according to previous Redfin surveys.

“The market is very tough for first-time home buyers,” said Redfin chief economist Daryl Fairweather. These buyers, she said, “are using crypto as a way to break into the middle class and upper middle class.”

With the median price of a single-family home in the Bay Area now exceeding $1 million, it’s hard for many young couples to save $200,000 to even compete in the nation’s most expensive real estate market.

Still, the volatile cryptocurrency market can make or break a fortune quickly. Bitcoin, for example, saw its value fluctuate between $34,000 and $65,000 last year, and Ethereum has ranged from around $1,400 to $4,800.

Fairweather said there are less risky ways for homebuyers to enter the market, including government-backed programs that help new buyers without requiring a standard 20% down payment. “For most people,” she said, “they should avoid the risk.”

But some are willing to accept the risk and use real estate as a way to convert virtual currency into tangible property. Agents say that certain legal structures can help buyers defer taxes on crypto gains.

Los Angeles agent Piper Moretti made her first crypto trade five years ago. The idea was so novel that she researched to see if other California agents had made similar deals. She found just one, the $1.6 million sale of a Lake Tahoe property in 2014 to a Silicon Valley entrepreneur.

Moretti’s first crypto client had substantial investments in virtual currencies. But, she said, “the seller didn’t want to take any crypto.” His client converted the cash virtual currency, much like the sale of stocks or other stocks, allowing the sale to proceed.

Moretti has had five sales involving crypto, mostly in Southern California and the Caribbean.

Some lenders are willing to provide short-term crypto-backed loans, she said. However, most are hesitant to consider crypto as collateral for a loan. They want the currency converted to cash before approving a loan and then go through another financial review and waiting period, she said. Often, the additional funding and regulatory steps involved in a cryptocurrency deal can take weeks or months – time that can scuttle a deal in the fast-moving and competitive California markets.

“The process itself is really clunky,” she said. “There’s all this new wealth (but) it’s volatile.”

Still, Moretti thinks it’s getting easier as lenders get more comfortable counting virtual currency as part of a borrower’s assets. Attitudes towards virtual currency have cleared up, she said, moving from a niche market for speculators to more mainstream acceptance.

Bryant hopes Silicon Valley is ready to embrace the concept of the 990-square-foot condo not far from the shops and restaurants of Castro Street. The first floor unit features small front and back yards and is a short walk to the community pool.

An interior view of a 2-bedroom condo for sale in Mountain View is seen on Jan. 19, 2022. (Dai Sugano/Bay Area News Group)

Bryant’s client, who declined to be interviewed, bought the property a few years ago and recently purchased a larger two-bedroom condo in San Francisco with crypto. They converted the crypto to cash for the San Francisco purchase, Bryant said.

Regarding the sale of the old unit, Bryant and the client agreed to accept crypto offers. They’re hoping it will increase interest — and the condo’s final price, Bryant said. The seller expects to start accepting offers in a few weeks.

Bryant worked with lawyers to set up a legal structure that would allow a buyer to defer taxes on crypto investment gains, he said.

Buyers and sellers should start considering crypto, Bryant said. “It’s a great opportunity.”

An interior view of a 2-bedroom condo for sale in Mountain View is seen on Jan. 19, 2022. (Dai Sugano/Bay Area News Group)