What the latest crackdown on LLC buyers means for NYC real estate

By Virginia K. Smith  | July 29, 2016 - 1:59PM

After measures earlier this year aimed at outing shadowy, anonymous real estate buyers, The Real Deal reports that the U.S. Treasury is doubling down on their commitment, expanding the reach of required disclosures.

Initially, the Treasury launched a pilot program in March in Miami and NYC—two cities with especially high rates of all-cash, LLC-masked real estate deals—that required title insurance companies to disclose the actual names of purchasers. In NYC, the requirements fell on all-cash, LLC buyers of properties $3 million and up. Since the Treasury reports that more than a quarter of all transactions monitored since the start of the program have been "linked to possible criminal activity," per The Real Deal, they're moving forward with plans to expand the disclosure requirements to all five boroughs of NYC, as well as areas in Florida, California, and Texas that tend to be popular with foreign buyers looking to stash their cash.

Additionally, the government will be scrutinizing cash deals over $1.5 million instead of $3 million in NYC. As we wrote when the Treasury first instituted these measures, there are plenty of possible loopholes for buyers who'd prefer to stay anonymous, including using a wire transfer or simply taking out a small, perfunctory mortgage to avoid getting flagged as an all-cash deal (for example, getting a loan of $1 million for a $100 million purchase).

Still, the Treasury is framing this as a "data gathering tool" to help fine-tune its approach to the use of real estate as a money laundering tool, so it might be a nuisance for buyers with nothing to hide. In any case, we'll be watching how this process develops.


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