Last year, a New York Times investigation showed that a large portion of luxury, multimillion-dollar homebuyers in that city were foreign nationals with dubious backgrounds who were dumping money into American real estate to evade the prying eyes of their home governments. The U.S. government announced two weeks ago that it will begin monitoring all-cash home sales of $1 million or more in two counties — New York (a.k.a. Manhattan), and Miami-Dade, where fraud is also expected.
In response to an article about the new program, Melissa Hoff Roth, a Fort Lauderdale realtor, shared her own thoughts about the crackdown on Miami’s condo market on Facebook. She wasn’t exactly upset.
“Got cash?” she wrote. “The Ft Lauderdale market is hot and a better deal than Miami anyway! Give us a call!!”
That’s right: Hoff Roth, and her business partner, Howard Elfman — who is both the president of the Fort Lauderdale Association of Realtors, and director of the entire state’s Association of Realtors — believe the federal monitoring program will push these foreign buyers out of Miami and up into Broward. And they think this is a good thing.
“It’s a blessing for Broward,” Hoff Roth said. “And it’s happening just as Miami is falling.”
In February 2015, the Times reported that a huge portion of New York’s luxury apartments and condominiums — in buildings like the Time Warner Center or Trump Tower — were owned not by real humans with names, but by shell companies, like “Columbus Skyline LLC.” Because of the way the companies were set up, it was virtually impossible for the average person to figure out just who owned the apartments. For nearly a year, a team of Times reporters worked to uncover the names behind 200 apartment-owning companies, and found that a sizable portion were owned by foreign investors from nations like China or Russia. Of that number, 16 people had been the subject of “government inquiries” in their home countries.
On January 13 of this year, the Treasury Department’s Financial Crimes Enforcement Network announced it would begin to force title-issuing agencies to “identify the natural persons behind companies used to pay ‘all cash’ for high-end residential real estate in the Borough of Manhattan in New York City, New York, and Miami-Dade County, Florida.”
“We are seeking to understand the risk that corrupt foreign officials, or transnational criminals, may be using premium U.S. real estate to secretly invest millions in dirty money,” Financial Crimes Enforcement Network Director Jennifer Shasky Calvery said in a statement.
It has long been suspected that Miami’s current real-estate boom has been fueled by foreign criminals, largely from Russia, and Latin America, who are attempting to launder ill-gotten money into legitimate real estate. A 2013 report in The Nation magazine uncovered “more than a score” of foreign criminals and shady figures who owned property in the county.
Elfman, however, said he thinks the money-laundering concerns are overblown.
“I think the majority of people purchasing are just wealthy people who don’t want their governments to know what their assets are,” he said. “Across the board — Asian countries, like China, tend to want to know what assets people have. Latin American countries, same thing. These governments might try to take money from people.”
When asked if there might be a reason said investors want to skirt around the eyes of the government, Elfman said he sees no moral dilemma in marketing to these folks.
“The hypothetical person is a businessperson from, say, China, who wants a secure investment in the U.S., considers this a good market, and just doesn’t want his or her funds scrutinized,” he said. “In Miami, those transactions happen every day. In Broward, this is not as commonplace. Our market tends to be more people buying first or second homes. But if Miami is going to be scrutinized so much, I think people will start to look a little closer and move it up to Broward.”
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For example, one of Fort Lauderdale’s luxury residences, Riva, is largely filled with American tenants, the complex’s director of sales, Marijke White, said. Some of Riva’s units cost in excess of $1 million.
“The majority of our buyers are people downsizing, coming from New York, Rhode Island, Massachusetts,” she said, adding that she wasn’t exactly knowledgeable about the Miami market’s possible issues with money laundering. “But we’re hoping this will push more foreign buyers toward the Fort Lauderdale area. People who are international know Miami on the map. You could be in China, and mention Miami and people will say, ‘There are all those TV shows there!’ But nobody knows Fort Lauderdale.” After living in Fort Lauderdale for 30 years, she, at least, said she doesn’t believe the county will become a haven for foreign criminals.
And neither does Elfman, for that matter.
“It’s pretty good for Broward,” he said. “We’re going to say, ‘We’re not going to look into your pocketbooks, your bank accounts. If you have money, if you can provide a cashier’s check. We’ll work with you.”