Historic Kruger house for sale in South Capitol neighborhood

Nothing demonstrated to us how fast technology changes real estate than a recent situation we had when a prospective buyer asked if they could pay for a home with bitcoin.

Like many people, we knew a little about bitcoin because of all the crazy speculation, but we didn’t have any firsthand experience using it. We told the prospective buyer that we didn’t know but would find out.

We have talked often about the rapidly changing world of technology and how it is impacting real estate. Changes are happening to real estate marketing and the way listings are disseminated and syndicated by thirdparty vendors like Zillow and Trulia. Changes are occurring to how real estate services are rendered through changing business models like Opendoor. Now, even the consummation of the real estate transaction is changing with the advent of cybercurrencies.

For those new to bitcoin, it is considered the original digital currency, or cryptocurrency, of which there are now more than 2,000. Ethereum, Lisk and Litecoin are some others, but bitcoin is the most well-known. Launched in 2009, it works through blockchain technology, which is not unlike a fancy Excel spreadsheet where each cell is encrypted. The goal of bitcoin was to have an electronic cash system that’s peer-to-peer without the usual trusted third party like a bank or government. This concept is as attractive for privacy advocates as it is for criminals.

The first recorded transaction using bitcoin was on May 22, 2010, when two pizzas were purchased for 10,000 bitcoin. For those who follow bitcoin’s value, that would be about $32 million a pizza by our most recent calculations.

Cryptocurrencies are slowing creeping into the world of real estate. A 2017 sale of a newly built home in Austin, Texas, is credited with being the first real estate transaction using bitcoin. The tech-savvy buyer paid in bitcoin, transferring funds directly to the seller without using banks or title companies. In this case, the risk-adverse seller chose to have the proceeds paid in cash at the closing table. There are exchanges like BitPay or BitBay that will convert bitcoins to other currencies for a fee.

Yes, you can purchase a home with bitcoin.

When cybercurrencies start mingling with actual currencies in real estate transactions, several questions arise, especially related to capital gains and taxation. Bitcoin is not a U.S. currency, so if you bought your house in U.S. dollars and sold it and received bitcoin, would you be subject to capital gains? Or if a property were bought and sold in bitcoin, would it need to be

reported to the IRS? The answer in both cases is yes. The IRS provided guidelines for virtual currency in March 2014. Although cryptocurrencies are not given true currency status because they do not have legal tender status in any jurisdiction, they are considered property. As property, they are subject to capital gains tax. For taxation purposes, if you buy and sell in bitcoin, the fair market value of the bitcoin on the date of acquisition is used as the basis. Capital gains are calculated on the difference between the basis and the value of the net proceeds.

To answer the question of our potential buyer, yes, you can purchase a home with bitcoin. And it’s not as exotic as you might think. It has value, albeit volatile, it has a marketplace where people buy and sell their coins, and it has an exchange market that will convert bitcoin into any currency you choose. So regardless of whether cryptocurrencies become the new norm or they fade away into nostalgia like the pet rock, they are a viable way of buying and selling real estate today.

Roger Carson and Melissa Pippin-Carson are Realtors at Keller Williams Realty. She was the 2017 president of the Santa Fe Association of Realtors. Call them at 505-699-3112, email twicethesellingpower@gmail.com, or follow them on Twitter @CarsonandCarson and at www.facebook.com/carson and carson. santa fe real estate.