Feds Go After Miami, New York City Real Estate Cash Deals
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MIAMI (CBSMiami) -- The U.S. Treasury Department announced Wednesday they will be going after Miami and New York City buyers, who are snatching up high-end real estate with cash.
In the past, cash buyers have not had to identify themselves. Now they will.
It is estimated that one out of every two homes in Miami are bought with cash. Some of that money comes from legitimate investors but it's long been rumored criminals, including drug kingpins, are parking money in Miami real estate. Now we may finally find out the truth.
From penthouses starting at $700,000 to million dollar views, Miami's real estate market defies logic. With an average household income under $50,000, a majority of the people who live here can't afford to.
Yet million dollar condo listings are on a tear with more than half of them paid with cash. In fact, Miami sells the most real estate in the nation for cash.
Peter Zalewski, founder of CraneSpotters.com said, "This has always been that factor out there, but nobody has wanted to sort of lift up the rock and take a look at it."
That is until now.
The Treasury Department's financial Crimes Enforcement Network, or FINCEN, announced Wednesday they will be requiring high-end buyers in New York City and Miami to disclose their identity.
Many cash buyers use an LLC or shell company. South Florida just saw a Key Biscayne mansion sell for a whopping $47 million. The buyer? A shell company named Boca Breeze. The real owner is unknown.
"Really what LLC's are used for today is privacy. Many of which are Latin American investors or investors from overseas who are trying to hide maybe because it's illicit, but more than likely it's because they are concerned they are going to be kidnapped or get shaken down in their home country," Zalewski explained.
FINCEN will be requiring title insurance companies to report buyers' names. The requirement applies to deals worth more than a million dollars, paid for with cash, and using a shell company. Title insurers would collect a driver's license and/or passport of any beneficial owner. A beneficial owner is someone who has a 25 percent interest or more in the deal.
Once enforcement begins in March, Zalewski wonders what the fallout could be.
"You got to start to wonder if this isn't one of those watershed moments where some of that extra cash and these record prices that we are accustomed to achieving suddenly becomes something of the past," he said.
Critics argue this is too little too late. They also are concerned the enforcement is temporary. It starts in March and ends in August but FINCEN could extend the order.