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Are Cash Buyer Disclosure Laws Really Working?

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Cash-buyer disclosure rules have little impact on sales

NEW YORK – Feb. 5, 2019 – 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. They required title insurance companies to report the identity of the buyer in any residential transaction of $300,000 or more that involved a "shell company" – buyers that had a corporate name and no 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 found that the new law has had no real impact on luxury purchases: 84 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.

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 that list isn't made public.

Initially, the new disclosure rules may have alarmed some buyers. But once the buyers understood that their names and identifying information could still be kept confidential, they were no longer as worried, brokers say.

"I really don't think anything has changed," says Pamela Liebman, president of Corcoran Group, to The Wall Street Journal.

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

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Information provided by Florida Realtors.  Click here to see the original article.

Reprinted with permission Florida Realtors. All rights reserved. 

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