A underwriter bulletin released yesterday by First American Title Insurance Company provided further clearance on how title underwriting guidelines will view real estate transactions utilizing cryptocurrency.
Until there is a more efficient way to convert cryptocurrency in order to meet the “good funds” standard that all title underwriters mandate, real estate transactions will not be easily transacted via Bitcoin or any other cryptocurrency. Purchasing directly from a seller who accepts cryptocurrency is only going to work when the transaction is an all-cash transaction with no mortgage or tax payoffs. Even still both sides will have to pay for transfer tax, recordation costs and title insurance with real dollars. Attached is a directive from First American Title Insurance Company highlighting their direct issues with the premise that cryptocurrency can be used for a real estate transaction.
A forward-thinking title insurance and escrow agent can certainly work with an intermediary who would convert the currency and wire to the title company directly. Typically the process would include an affidavit between the buyer and title insurance company advising the borrower that they may owe more if there is any fluctuation or dramatic change in value at conversion.
Still, there are many other issues that the First American release points towards as concerns with such transactions, including FINCEN; FRPTA; Tax withholdings in certain states and 1099 reporting.
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