Cryptocurrency Transactions: What brokers need to know about cryptocurrency transactions.
When Nancy Barreto Hogan, general manager for Brown Harris Stevens Real Estate in Miami, heard that agents Stephan Burke and Carol Cassis had a buyer who wanted to purchase a two-bedroom condo using Bitcoin, she wasn’t sure what to think.
“We were a bit unnerved by it,” she says. “After all, it wasn’t a currency controlled by the federal government, so there were many question marks.” However, with some planning and research, the transaction went off without a hitch. Here are some of the lessons Hogan learned and her thoughts on how you should prepare your brokerage for cryptocurrency transactions.
Check your coverage. “Make sure your E&O insurance covers cryptocurrency transactions,” she says, adding, “I have been very involved in the mortgage fraud crisis and was on the Mayor of Miami’s mortgage fraud task force, so I am extra careful.” Some companies can combine professional liability insurance with a customized bitcoin theft insurance policy.
Secure legal representation. “Find an attorney who has worked with digital currencies before,” suggests Hogan. “Just make sure you don’t exceed your role as a Realtor® by directly passing legal advice on to your customers.”
Create an office policy. For sellers, the transaction works like an all-cash purchase. However, for buyers, the transaction is a bit more complicated. Generally, the buyer must sell the bitcoin or digital currency and convert the proceeds to U.S. dollars. Due to the volatility of the currency, if that conversion happens after a loss in value, the seller might not have the money to purchase the property. That’s why it’s vital to have an office policy in place to determine how to handle currency shifts.
“We are working on a policy that will require agents to include a disclosure concerning what happens if the cryptocurrency they are using loses value before closing,” she says.
Consider including an optout clause in the contract. You may also wish to consider a contract clause that allows both parties to walk away without penalty if the cryptocurrency falls outside certain parameters during a specific period of time.
“As [cryptcurrency sales] unfold, the best advice I can give to brokers and managers is to educate yourself.
“Don’t be naïve and always get the advice of an attorney with these transactions,” she says.