There is a lot of hidden money that flows through high-end real estate, often from anonymous, foreign buyers.
So the U.S. Treasury Department said Wednesday it will begin to track and identify these buyers of luxury real estate, beginning in two hotspots for high-end properties where all-cash transactions are fairly common: Manhattan and Miami-Dade County in South Florida.
The reason for the tracking of high-end real estate is to sharpen the crackdown of money laundering via the housing market.
It is the first time the U.S. government has required real estate companies to reveal names behind all-cash transactions, and its impact on the real estate industry could be significant. Although there are legitimate realtors that offer cash for homes, this crackdown will most likely have an affect the real estate market.
Miami-Dade County has the highest percentage of cash buyers in the nation, about 53 percent, driven primarily by deep-pocketed foreign buyers. The national all-cash share of home sales is about 32 percent, according to CoreLogic.
The expanded federal government crackdown was inspired at least partly by a series last year in the New York Times that looked at the increasing use of shell companies in the buying of real estate by foreigners seeking safe havens for their money in the U.S.
A top Treasury official, Jennifer Shasky Calvery, told the New York Times that her agency had seen cases in which multimillion-dollar homes were being used as safe deposit boxes for ill-gotten gains, through the use of shell companies.
“We are concerned about the possibility that dirty money is being put into luxury real estate,” Calvery, the director of the Financial Crimes Enforcement Network, the Treasury unit running the initiative, told the Times. “We think some of the bigger risk is around the least transparent transactions.”