Deals Done in the Dark Persist in Spite of Disclosure Rules

February 4, 2019

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Anonymous home deals continue among cash buyers in some luxury corridors, despite disclosure laws that have tried to end such transactions.

Three years ago, the federal government issued disclosure rules to crack down on anonymous cash buyers in luxury markets like Miami and New York City in an effort to sniff out money laundering using real estate. Title insurance companies were required to report the identity of the buyer in any residential transaction of $300,000 or more that involved a “shell company,” with a corporate name and without a mortgage. The U.S. Treasury Department has since extended that rule to 12 more metro areas, including Dallas, Chicago, and San Francisco.

However, a Wall Street Journal analysis of New York City shows the new law has had no real impact on luxury purchases. Eighty-four percent of condos costing $10 million or more were purchased using a corporate name, an increase from the 78.5 percent in the year the rules had gone into effect.

Initially, the new disclosure rules may have alarmed some buyers. But once the buyers understood their names and identifying information could still be kept confidential, they were no longer as worried, brokers say. Information on the buyer is turned over to the U.S. Treasury Department to be matched against a government database of suspicious financial activity. But it is not made public.

“I really don’t think anything has changed,” Pamela Liebman, president of Corcoran Group, told The Wall Street Journal.

Source: 
Anonymous Condo Buyers Thrive Despite Disclosure Rules,” The Wall Street Journal (Jan. 29, 2019) [Log-in required.]