For luxury home developers and brokers in Miami and Manhattan who are already contending with slumping prices and slowing demand, the US government’s move to start scrutinising all-cash buyers marks more bad news.
Yesterday, the Treasury Department’s Financial Crimes Enforcement Network (FinCen) said it will seek out the identity of individuals behind limited-liability companies that pay cash for high-end residential real estate.
Starting in March, title insurers will be required to reveal the true “beneficial owner” who is behind the anonymous entities.
FinCen is concerned that such opaque deals — used by wealthy investors seeking to avoid the public gawking that comes with buying expensive property — may also be made by people attempting to hide assets and launder money, according to the statement.
By casting such a wide net, the new disclosure rules may discourage legitimate purchases and further dampen interest in high-end sales in the two markets.
Demand for Manhattan’s most-expensive homes is slipping while apartments from a high-end construction boom pile up on the market.
Resale prices for the top 20% of the market peaked in February and have fallen since.
“Part of the large swath of people who purchase under limited-liability companies do it for privacy — celebrities, the wealthy — and are not doing something illegal,” said Jonathan Miller, president of New York-based appraiser Miller Samuel.
“I’m not downplaying that there aren’t people who are using ill-gotten gains to purchase apartments, but it stereotypes the whole segment and it seems to be some kind of over-reach by the federal government. ”
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