Randy Gilbert, J.D.
Chief Happiness Officer
Florida’s Title Insurance Company
(954) 500-Title (8485)
But there is a way. When buying real estate, there is nothing more reassuring to a seller than when a buyer pays using a good-old-fashioned irrevocable wire transfers. But with the advent of digital currencies, consumers want to instantly transfer money using apps like Venmo, Zelle, PayPal, or ACH or Bitcoin.[1]
Problem #1 – No Title Insurance. You will not find an underwriter who will issue title insurance for a property bought with Bitcoin. The insured amount of an Owner’s Title Policies is the purchase price. Purchase prices are typically the fair market value. If Bitcoin drops in value from contract to closing, the title policy may be overinsuring the transaction because the fair market value was not paid for the property. So the best practice would be to sell the Bitcoin and then purchase with U.S. Dollars (USD).
Problem #2 – Getting a Loan using Bitcoin. Fannie Mae does not recognize Bitcoin or any other digital currency unless it was previously converted into USD and deposited into an eligible asset account and previously seasoned for at least (2) two months. Fannie also requires a paper trail showing that funds from the cryptocurrency account were previously owned by the borrower.
Problem #3 – Not “Good Funds” Florida Administrative Code 69O-186.008 entitled “Escrow Requirements” says in part that, “a title insurance agent… may not disburse funds unless the funds are collected funds … mean[ing] funds deposited, finally settled and credited to the title insurance agent’s or title insurer’s trust account.” There are a limited number of exceptions (e.g. certified check; cashier’s check; money order; checks from certain banks and credit unions; checks from licensed mortgage brokers; trust checks from lawyers, real estate brokers, title agents, and personal checks of $500 or less) but none of the exceptions seem to refer to digital curencies.
Therefore, the buyer should first convert its digital funds into USD prior to transfer. If the buyer has Bitcoin, but the seller wants cash, then the transaction is no different than a normal transaction. The title company is typically not concerned with what legal assets – stock, bonds, other land, or Bitcoin – may have been sold to generate the buyer’s funds which are ultimately wired into the title company’s trust account. Our concern is receipt of “Good Funds.”
Problem #4 – Claw Back, the American Land Title Association put out a memo declaring digital currencies problematic; because they do not have the same level of security, stability, payment assurance, and consumer protection due to the risk of funds being clawed back or charges reversed.
Problem #5 – Marketing. Right now the real estate market is hot for sellers. Offering to sell a property in either USD or Bitcoin may create a marketing buzz, but when sellers are currently receiving multiple offers, why would a seller choose Bitcoin instead of US Dollars?
Problem #6 – Market Fluctuations. Sellers may not want to risk their nest egg by converting their largest asset into bitcoin which is highly volatile. During March 2021 Bitcoin fluctuated over $10,000.
Problem #7 – Paying Off Property Expenses. While the Bitcoin amount may satisfy the agreed-upon sales price of the property, what about other settlement expenses which need to be paid off in USD like: loans, property taxes, releases, payoffs, recording fees and of course our fees?
Problem #8 – Disclosures . What value to enter on the federally mandated Closing Disclosure?
Problem #9 – Government Reporting. Reporting to FinCEN, the IRS, and state tax authorities the amount of the transfer.
Conclusion. Convert the Bitcoin to U.S. Dollars and then use the USD to buy the property.
DISCLAIMER: Topics discussed are general concepts, not intended to constitute legal advice, accuracy, nor completeness, and may not be relied upon as such; consult an attorney or accountant. The author is neither an attorney nor an accountant. FTIC is a national award winning title insurance company known for its white glove customer service and “No Junk Fee Guarantee.” ®
[1] Transfers using Cybercurrencies like Bitcoin involve the Bitcoin Recipient: (1) Opening the Recipient’s “Wallet” found at Wallet.Bitcoin.com; (2) Select “Receive”; (3) The Recipient’s Wallet will generate a QR Code (if you’re on your phone) or a link if on your desktop; (4) Provide the Recipient’s link or QR code to the Bitcoin Sender who will now: (5) Open the Sender’s Bitcoin Wallet; (6) Click” Send”; (7) Copy and paste the Recipient’s QR Code or link into the Sender’s Wallet App; (8) Enter how much the Sender wants to send; and (9) Slide to Send.
