Christie’s New Crypto Real Estate Announcement Picked Up by New York Times

Real estate in the United States just passed a new milestone. The luxury firm Christie’s now has a $1 billion portfolio of homes whose owners will accept cryptocurrency from interested buyers. And the firm has just opened a division exclusively for buyers who want to pay with the digital coins.

As you might imagine, the homes with willing sellers are not for everyone. One is a $63 million home overlooking Los Angeles. Then there’s the $118 million Bel Air mansion. And so on.

So, will this matter to ordinary home buyers? You might be surprised by Christie’s predictions.

The Times Reports…

Christie’s International Real Estate put together a team of crypto experts and attorneys to facilitate crypto-only deed transactions.

Aaron Kirman is the CEO of Christie’s International Real Estate of Southern California. Kirman opened the new division just this month. The move follows several successful crypto-based transactions Kirman has handled for some big spenders in California.

Sensing “a shift in the market,” Kirman decided to go all-in. In the United States, Gallup polls say, 14% of us are crypto owners. And the interest in digital assets, as with real estate assets, is international.

“It’s only going to get bigger over the next few years,” said Kirman, as reported by the Times on July 24.

Why Do People Want This?

Here’s what crypto-based deed transactions have going for them:

Privacy

The wealthy among us often hope to make purchases off the radar. So, they’ve traditionally set up limited liability companies or private trusts.

The Christie’s crypto buyers may too have LLCs, but they’re using them to move crypto assets instead of traditional funds that are stored in banks. This makes it harder to follow what they’re doing with their assets.

Blockchain technology, then, offers a new route to an old goal. Transactions have long numbers to identify who’s doing what. Buyers’ names are not out in the open. Christie’s Aaron Kirman says crypto deed transactions are so private that even the sellers don’t always know who’s buying. The sellers communicate through lawyers with the buyer agents. Lawyers check up on the source of crypto to be sure it was legally acquired.

Control

The Christie’s team can eliminate the role of an institutional lender, letting deed holders sell to their peers.

Instead of wiring funds from one account, to escrow, to another account, the new crypto-focused division is set up for settling deals directly between the parties.

Although pairing people who want to work this way is far from an ordinary activity, Kirman told The New York Times, buyers who intend to do it their way, using digital assets, keep turning up.

Smooth Transactions, From Anywhere in the World

Christie’s finds that its well-heeled home shoppers value smooth, prompt deed transactions. Today, the rails developed for cryptocurrency can make those transactions happen.

The process is streamlined, without involvement of financial institutions and their underwriters.

And paying with crypto might save a buyer a lot of money. While the Times doesn’t explore this point, it’s notable that cutting out a number of middle people could mean avoiding a number of traditional transaction fees, too. This is especially the case when people are buying property from abroad. And that’s what some customers want — global access to real estate.

Why Christie’s Crypto Makes Sense

Christie’s is not new to transactions that rely on digital assets rather than dollars. The international firm has a record of managing auctions for non-fungible tokens (NFTs). And yes, lest you wonder: NFT houses are still very much a thing.

Christie’s was also ahead of its time in 2022 when it unveiled an auction platform on the Ethereum blockchain. Ethereum is also still very much a thing. It’s turned out to be red-hot this year among the world’s leading wealth-chasers.

For luxury firms like Christie’s and Sotheby’s, venturing into the world of digital assets is simply a logical progression. These companies are responsible for catering to a savvy and curious international population and its new generations.

Plus, it’s getting harder to turn a profit in the high-end real estate world. Meeting the moneyed where they are is important.

Not Quite Ready for Prime Time?

Some critics say a crypto-based purchase is not as easy as promoters make it out to be. For example, a commentator at Pymnts.com takes issue with the tax rules and guardrails — or, rather, the continued need for both.

An underappreciated element of friction is doing the taxes, the commentator notes:

In the United States, every crypto transaction — including swapping one token for another or making a purchase — can trigger a taxable event. Users must track cost basis, capital gains and holding periods, often with little institutional support.

So, tax policy is still playing catch-up in the fast-moving world of digital assets.

The commentator believes that the level of trust in this area is still not where it needs to be. “In crypto, the ethos is code is law, and if you lose your keys or fall for a phishing scam, you’re on your own.”

True — although the new Christie’s division is mainly targeting people who want to use crypto in place of cash payments. Cash also lacks safeguards.

But the critic is right to note that crypto’s simplicity is overstated. Christie’s customers can afford lawyers to smooth out their paths.

What’s In It for the Rest of Us? Surprising Predictions

As for Christie’s, the firm is looking to expand into transactions that involve lender financing. Seems timely. Realtor.com® has just reported that crypto-backed mortgages are “gaining traction” as a new way to buy second homes.

As for the broader market, Kirman speculates that crypto-based deed transactions could make up more than a third of all U.S. residential purchases in just five years.

Kirman’s enthusiasm for crypto’s prospects is surprising, yet not absurd. Recently the U.S. Federal Housing Finance Agency directed Fannie Mae and Freddie Mac to consider cryptocurrency among the reserve assets of applicants seeking mortgages.

Even The New York Times has been bitten by the bug. The paper tells us that “cryptocurrency — once seen by many as obscure or risky — has been embraced by Washington and is now poised to envelop the housing market.”

Envelop?

In any case, the point is made. What counts as a legitimate payment, or a legitimate asset, is changing. This is going to impact who can engage in deed transfers — and how they do it. So, whether or not crypto soon accounts for a third of all home sales or not, it’s a trend to watch.