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Many conversations about the future of luxury real estate these days involve the rise of cryptocurrency. But while many agents may have nominal familiarity with it, not everyone really knows what it is or how it really works. Three top Sotheby’s International Realty agents explain why learning about cryptoassets can benefit your business.
Tony Tate, global real estate adviser at Premier Sotheby’s International Realty, started mining Bitcoin over a decade ago, and when it became pegged to the US dollar in 2011, he began investing in real estate and other companies. It was also in 2011 that Michael Kelczewski, real estate broker at Brandywine Fine Properties Sotheby’s International Realty, came across Bitcoin creator Satoshi Nakamoto’s now famous white paper and began to educate himself in this burgeoning space.
For Kevin Pane of Sotheby’s International Realty – Encino Brokerage, it all started when he was assisting his brother in managing a client’s portfolio. “I was looking at all the earnings and all the different businesses – the returns were amazing,” he says. “But it’s not like you invest your money today and become a millionaire tomorrow. Each token represents real companies doing real business in real markets, and it’s important to understand what’s going on.
Mastery of crypto builds credibility with buyers
Inquiries about cryptocurrency transactions are becoming more common in luxury markets. Often, buyers specifically ask about Bitcoin; As the original cryptocurrency, Bitcoin is considered an exchange rate barometer for crypto as a whole, which can fluctuate widely.
“Crypto is still the Wild West,” says Pane. “The SEC covers the stock market – there are insider trading rules and there are financial accounting laws. There is none of that in crypto.
One benefit – and potential challenge – he points out is that because all transactions reside in the distributed ledger, all due diligence records are readily available. Through “smart contracts,” blockchain technology could quickly connect buyers and sellers through a digital exchange, while agents can continue to add value as trusted advisors, bringing much-needed expertise to customers navigating through this emerging space. “It’s important for people to understand the tax ramifications of every transaction, because the IRS absolutely reviews crypto, as it should,” Pane says.
“Also, how do you transact through an Escrow in a fully transparent manner? A lot of people own crypto in a decentralized way, which means they might have $5 million worth of crypto that nobody knows about, and then when they go to buy a house, they run into all kinds of Anti-Money Laundering and Know Your Customer Laws. Without forgetting that all the parties must know the origin of these funds.
Tate agrees. “If someone isn’t dealing with an experienced professional who has experienced partners, it could literally kill a deal,” he says. “Making sure you’re dealing with the best of the best from both sides is key.”
International customers can benefit from cryptocurrency
As Kelczewski notes, cryptocurrency generates wealth around the world, creating new millionaires in parts of the world where stable, standardized banking services may be a relative scarcity. “I think agents who represent international clients will appreciate the ability of cryptocurrency to transfer and store value.”
When advising title companies, Tate is also quick to alert them to benefits. “Once I showed them that using crypto assets to fund real estate transactions is safer than sending a wire transfer – and eliminates 100% of wire transfer fraud – it really gets their attention,” says -he.
“Not to mention that crypto is borderless, so you don’t have to wait eight business days for an international transfer and spend a lot of money to transmit it,” he adds. “I oversaw and helped facilitate a transaction where someone from Australia moved $143 million worth of crypto assets in 36 minutes to fund a commercial real estate transaction.”
Officers should also be aware of potential challenges. “Think of crypto like a stock, for example,” says Pane. “Today we could agree on 25 bitcoins for the million dollar property, but all of a sudden bitcoin is going up 30%, and now I would have to give you 19 bitcoins. And so the challenge becomes, how do you lock in that rate and keep both parties happy until the close?”
Research, consult experts and educate yourself
Talking to experts and investors can help agents gain first-hand experience in the cryptocurrency space, as well as sites like coinmarketcap.com, considered by many to be the authoritative source on the value of the most credible coins.
Then agents can start to dig a little deeper into how crypto will continue to shape the industry. “In the not-too-distant future, the digitalization of real estate will occur, and at that time I suspect crypto and web3 systems will be widely adopted,” Kelczewski predicts.
This may seem like a new frontier for many agents, but as cryptocurrency becomes mainstream, more customers will ask about it. By acquiring a solid foundation today, agents can continue to provide excellent service and evolve with changing customer needs.