It does not apply to any cooperative purchases where title insurance is not required, whether cash purchases or not- though many cooperatives are requiring title insurance policies, especially in the case of estate sales.

Of course, most co-ops are purchased in individual names, so public disclosure has already been made, generally speaking.

The change in addition to the lower bar

is that so many new areas are added to what was already in place.

Now impacted are purchases above $1.5mm in the other four NYC boroughs (The Bronx, Staten Island, Queens and Brooklyn) along with a number of areas in Florida, Texas and California.

AND- if ANY portion of the purchase is made with a check, cash or “cash equivalent,” like wired funds, then the purchase must now be reported.

They have done away with what is called a de minimis exception.

As one title company told me:

“Now, the only things that can be paid to the seller by check, cash or a cash equivalent are normal closing adjustments (without reporting requirements).”
Luckily mortgage rates are low, as so many purchases will fall under this new reporting rule (in California, $2mm or higher, in Florida $1mm or higher in specific counties for each) unless borrowers are financing some portion of their purchase.

Mortgage brokers, rejoice?

Not so fast…
Title insurance agents are concerned, as am I.

They feel that those buyers most concerned will be foreign buyers purchasing homes over $10mm.

We have already seen a significant cooling in that segment of the market this year.

My colleagues in Florida are seeing it, too.
I have found in my work with investors that the LLC structure is set up to allow them to actually make the purchase happen at all, for estate planning, or both.

So, nothing nefarious.
However, with recent items in the news such as the 1MDB scandal, where laundered money from Malaysia may have been used to invest in various real estate in Manhattan, US government agencies want to know more.

Few buyers like having their governments knowing what they own in the US, given country-specific asset taxes- but the US does not want to be seen as enabling foreign investors to dodge taxes.

As a result, I’m not sure that anyone will be able to keep his/her identity private anymore, if the press wants to know who bought what.

I imagine some creativity around the legal addresses of LLCs, perhaps housed at attorney offices, may help keep the press at bay.

Or perhaps short-term borrowing against a property of some very small amount may allow a buyer to shield her identity.

Otherwise, I suspect secrecy is going to be hard to maintain.
And if $3mm+ purchases have slowed down, and we are seeing signs of a less red-hot condo market in other boroughs like Brooklyn, these new requirements can only add headwinds.

I’m mostly concerned for condo sellers, and developers of new condominiums.

Even foreign investors who want to finance will have trouble, given that their assets are not in the US.

Banks such as HSBC that offer programs for foreign buyers may see an uptick in their business.

Net result?

Fewer sales.

Nearly every single apartment for sale in Manhattan new development is over the $3mm level.

Or?

Perhaps we will see a resurgence of smaller apartments in new developments?

Stay tuned…