Proposed regulation on real-estate purchases made in all cash

[Dan H.]

Proposal to regulate all cash offers to reduce use of RE to launder money.  Not sure what effect this will have on investors who make all cash offers or sellers whose RE for some reason does not qualify for traditional financing.  I suspect it will come down how successful the treasury is in their goal to minimize the burden on the real-estate industry.

Too much still is not known to know how big a burden these new regulations will be.  I like being able to purchase all cash without more bureaucracy (possibly less bureaucracy) than a financed purchase.  The cash purchases often provide the best opportunity for return.

Eliminating money laundering and the underlying crime is likely worth some additional burden.  The challenge is eliminating the money laundering opportunity while not being too burdensome to legitimate RE buyers and sellers.

WSJ:

In taking aim at a significant source of corruption, the Treasury’s Financial Crimes Enforcement Network, or FinCEN, announced a proposed regulation on real-estate purchases made in all cash. The initiative, subject to a public comment period, would seek to make nationwide current reporting requirements on transactions in 12 metropolitan areas with residential property selling for more than $300,000, officials said.

“Increasing transparency in the real-estate sector will curb the ability of corrupt officials and criminals to launder the proceeds of their ill-gotten gains through the U.S. real-estate market,” said Himamauli Das, FinCEN’s acting director. “Addressing this risk will strengthen U.S. national security and help protect the integrity of the U.S. financial system.”

Details of the initiative still to be worked out include which types of real estate, including commercial property, would be included. The U.S. Treasury’s goal is to minimize the burden on the real-estate industry while offering up a fuller accounting of property sales that could be used by law enforcement or national-security agencies, according to officials.

Shell-company real-estate purchases, while legal, have been used by money launderers because the deal can be made anonymously. Experts say such deals have been used by foreign leaders who have stolen money from their countries, human traffickers and other criminals. Property has been seized across the U.S., from Manhattan apartments to California mansions, but the problem remains.

More than $2.3 billion was laundered through U.S. real estate between 2015 and 2020, according to an analysis cited by the Treasury.