Actual condo, virtual price - buying via bitcoin

Posted: January 19, 2016

For sale: new Manayunk condos, "ideal for live/work lifestyle of entrepreneurial start-ups."

Price: 987 to 1,040 bitcoin.

Keller Williams Real Estate's Susanna Kunkel, listing agent for the four remaining units at Falcon Condominiums in the 3800 block of Terrace Street, believes it to be the first bitcoin listing in Philadelphia.

Kunkel has never traded in the virtual currency herself, but she readily acknowledged that she is trying to connect to a particular group of buyers who probably use bitcoin: the high-tech denizens of North Third Street in Old City, known to some as "Nerd Street."

"I'm looking to start the conversation," she said. "I'm trying to show those in this market segment that I respect them."

Andrew M. Hinkes, a lawyer with Berger Singerman in Fort Lauderdale, Fla., and a bitcoin expert who has spoken on the topic at seminars nationwide, said the virtual currency is regulated by the U.S. Treasury's Financial Crimes Enforcement Network - the same agency that last week announced a temporary anti-money-laundering crackdown on pricey homes bought secretly with cash in Miami-Dade, Fla., and New York City.

"Technology companies such as Microsoft and Dell accept bitcoin," Hinkes said, but if you want to use it "to purchase real property, you need to find someone who will take it."

The bitcoin-to-dollar exchange rate fluctuates regularly.

"The exchange rate can drop by $20 per bitcoin in a week," Hinkes said.

On Thursday, for example, one bitcoin was worth $432.75. By Saturday, the rate was one bitcoin to $370.

The condos are listed from $365,000 to $395,000 on the Trend Multiple Listing Service, which doesn't use bitcoin.

The exchange-rate fluctuation would be at the buyer's risk, Kunkel said. If a unit went under contract Saturday, the rate would apply. Contract language would, however, provide for the buyer to make up the difference at settlement if the rate dropped, or would benefit if it rose.

Thus far, three of the seven Falcon Condominiums have sold. According to the city's Office of Property Assessment, Units 1, 2, and 3 sold between Nov. 21, 2014, and March 19, 2015, for $145,000, $353,000, and $380,000.

Bitcoin, used in online purchases of commodities, is not widely used in buying real estate.

The National Association of Realtors "doesn't have any data on bitcoin transactions," said Adam DeSantis, a spokesman for the trade group.

Trulia, the real estate search engine, also doesn't track bitcoin transactions, said spokeswoman Andrea McDonald.

"We did a quick search to identify instances where a seller or renter explicitly said in a listing that they would accept bitcoin," McDonald said.

The number was "quite small," she noted: four for-sale homes and three rental properties nationally in the last five years.

'Biggest hurdle'

Marc Shaw of World Wide Land Transfer in Trevose, who is working with Kunkel, said of a Manayunk bitcoin sale: "The biggest hurdle we as a title insurance company would need to comply with is the 'Good Funds' rule" - meaning that there needs to be money in accounts to cover escrow items.

"The seller would have to own the house free and clear, because a lender would be unlikely to accept bitcoin to pay off a loan balance," Shaw said.

It would be possible, however, to complete the transaction in both dollars and bitcoin, he added.

There are firms that will do that for you, Hinkes said, including freezing the exchange rate and setting up an account to which to send the bitcoin.

Area real estate agents contacted said they were mostly unfamiliar with bitcoin or wouldn't consider using it.

"I have never even heard of one," said Jeff Block, of Berkshire Hathaway Home Services Fox & Roach in Center City. "I deal with high-end [properties], and there's no discussion of bitcoin there."

Challenges

Even Kunkel doesn't think bitcoin transactions will become the norm in residential real estate.

"I have condos in Manayunk well-suited to the North Third Street entrepreneur who is looking for more space in a similarly hip environment with parking," she said. "I'm simply matchmaking."

Hinkes said bitcoin transactions present challenges for title companies, whose agents are by state and federal law - including the Patriot Act - required to verify sources of funds.

"Bitcoin is pseudo-anonymous and uses a public ID generated by wallet software," he said. "It is not a wire transfer or cashier's check in dollars from a recognized lender."

Jerome Scarpello, president of Leo Mortgage Inc. in Ambler, said, "The deed says 'for consideration in U.S. dollars.'

"In real estate, you are buying a bundle of legal rights guaranteed by the exchange of legal currency," Scarpello said. "How does a title company defend title if bitcoin isn't widely recognized?"

aheavens@phillynews.com

215-854-2472@alheavens

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