Ryan Nichols buys home with the cryptocurrency, but says purchase wasn’t easy
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Time will tell, but for now, the U.S. dollar is still the coin of the realm if you want to buy real estate in Sedona.
That was the experience for Sedona computer business-owner and Bitcoin enthusiast Ryan Nichols when he explored purchasing an investment property in Sedona this spring. Amidst his journey, Ryan also found himself wondering, “How much are moving companies?” as he prepared for the exciting transition.
In March, Bitcoin was sitting at a high point in value, having risen 1,000% over the past year. Nichols was in the enviable position of sitting on a pile of it — figuratively speaking, since as a digital representation of value, Bitcoin is not something you could actually sit on.
Bitcoin started the virtual currency trend in 2009, but it is now one of many virtual currencies or “crypto-currencies,” which are a roughly $1.8 trillion market as of May 20. Bitcoin miners use computations to create a “proof of work.”
Nichols said he started buying Bitcoin in 2017, and his early stake in the recently booming Bitcoin ensured a generous budget as he looked for a vacation rental property in Sedona to turn some of his virtual currency into something more tangible. Eventually he settled on a swanky West Sedona house with pools and views for $1,949,000.
“If something does happen [to Bitcoin], at least we have a home,” Nichols said on April 29, the day escrow closed on his new rental home. His girlfriend, Dyanna Sells, a Realtor with Your Team by Kathy Cox at Realty One Group, represented Nichols in the purchase.
But Nichols was not content to simply convert some of his virtual currency into a house — he wanted Bitcoin to be part of the real estate transaction, and that proved to be far more difficult than finding the right property in Sedona.
Nichols is upfront about having an agenda in trying to involve local financial companies in the home purchase — “to legitimize the use of Bitcoin.”
Using Bitcoin in the real estate transaction was not a convenience; it added complexity and took weeks of work to locate a title company that would take Bitcoin, but eventually the deal was done.
Nichols has a financial stake in Bitcoin, but part of his enthusiasm for the virtual currency appears to stem from an earnest belief in its benefits.
Nichols said he first learned about Bitcoin in 2011, when he was in “a hippy phase and not really happy with the current monetary system.” The idea of a currency that wasn’t controlled by a national government appealed to him.
Now Nichols, a true believer, invests in Bitcoin whenever he can. When he quit smoking in January, he said he put all his saved cigarette money toward Bitcoin.
But many financial companies in Arizona take a dimmer view of Bitcoin. For them, the U.S. dollar rules.
“They think [Bitcoin’s] a trend and it’s not real money,” Nichols said of some of the responses he received from title agencies.
Some financial advisors are beginning to include virtual currencies in investment portfolios, while many other are not, including the financial services firm Edward Jones, which states on its website, “We believe cryptocurrencies are highly speculative and don’t offer a way to purchase or hold cryptocurrencies or future contracts on cryptocurrencies …. We recommend following time-tested investment principles and not letting the fear of missing out negatively impact your long-term investment strategy.”
There are many companies that facilitate Bitcoin transactions, including mainstream payment services like Paypal, Cash App and Apple Pay. One complication of using Bitcoin as currency is the IRS treats virtual currency as property for tax purposes, so buying something with Bitcoin could result in recognizing a capital gain or loss — another layer of complexity to using it in real estate purchases.
Nichols said he called 50 to 60 title companies in Arizona looking for someone willing to accept Bitcoin, but he couldn’t find a single taker.
“Every single person tried to stop us,” Nichols said.
Eventually, Nichols contacted BitPay, one of the largest Bitcoin payment service providers in the U.S., for help, and the company referred him to Southern California-based Guaranty Escrow Inc. Because Guaranty Escrow is not licensed in Arizona, it did the Bitcoin-dollar conversion, then transferred the funds to a local title agency, Stewart Title Company.
“There’s a lot of jumps to it,” Barbara Baker of Barbara Baker Realty, the Realtor representing the sellers, said. “But it can be done.”
Baker emphasized that the sales contract for the home purchase was not written to say “pay in Bitcoin.”
At a stipulated date, Guaranty Escrow converted Nichols’ Bitcoin to U.S. dollars, which were then transferred to Stewart Title in Arizona.
Chelsea Little, the escrow officer with Stewart Title Company in Sedona, said she’s received many inquiries about using Bitcoin in real estate transactions, but this was the first time the Bitcoin holder found a “solution.”
But for Little, the experience hasn’t changed the industry landscape.
“We deal with U.S. dollars,” Little said. “There really was no liability for us.”
Little added, “I don’t foresee us dealing directly with Bitcoin.”
Baker said she would do a similar transaction again as a representative for the sellers. For buyers using Bitcoin she would advise them to contact a tax accountant.
“[Bitcoin’s] not real money,” she said. “I don’t know how it’s taxed.”
Bitcoin has come a long way, but it hasn’t been invited to join the country club yet.
But Nichols thinks it would be a smart move for some title companies in Arizona to add the ability to deal with Bitcoin.
“There’s a lot of money in crypto that wants to be spent, but there’s a bottleneck,” he said.
In 2011 Nichols started his successful computer service business as a “poor little hippy guy” with a $500 gift from family. He hopes his Bitcoin investments will be the start of another successful business venture, and standing in the shade of a tree in front his new house, it seems to have helped him to a good start.
