NY Cracks Down On Tax Evasion & Luxury Home Buyers
Tuesday, January 19, 2016
New regulations are hitting the NY property in 2016. How will they impact buyers, owners, and sellers of luxury property in the Empire State?
New York has been heating up its verbal warnings about cracking down on criminal activity in the financial and real estate market for some time. The NY Fed recently enforced new due diligence on Scotia Bank, and Governor Cuomo has promised more is in the works. As we rolled into 2016 the US Treasury announced even bolder rules which seek to target NYC’s luxury property market. As of March 1st
those purchasing $3 million plus properties will have to reveal their identities, even if they are paying cash or are purchasing through an LLC.
The Real Deal notes that intense buying activity in 2015 has now pushed NYC property to being assessed at $1 trillion. Note that actual sales prices and ‘market value’ is much higher. However, this fast pace of growth, which exceeded 10% in the last 12 months is being at least partially blamed on organized crime. It is believed that high-end real estate is being used to evade taxes and launder dirty money. By forcing buyers to reveal their identities the American Bankers Association says that FinCEN is focusing on the 20% of real estate transactions most likely to uncover the big fish that are engaged in these activities.
Right now regulators are focusing on just two US property markets Miami and New York. The New York Times recently praised the new rules, saying that America had become one of the world’s top tax havens due to the enhanced privacy available to luxury home buyers.
Not everyone is happy about the moves. While the National Association of Realtors
has publicly backed anti-money laundering
policy, some individual agents have voiced concerns in the press. They fear that stripping away privacy protections could keep some buyers out of the market. After all, there are good reasons to use LLCs and to pay cash for high-end homes. It offers legal tax protections, keeps individuals’ identities secure from criminals, and enables them to act quickly to get the best prices on new homes and condos, while avoiding the costs of getting a mortgage. Others don’t see much difference, at least for honest buyers who are not trying to illegally evade tax or launder money for terror organizations. Not much is really private today anyway. Providing the new information collected is kept secure by title companies and the government there shouldn’t be too many increased risks.
Ultimately there may be some deals stalled as some buyers put on the breaks. Others may seize this opportunity to grab even better deals on NY properties they have been watching.