Housing Muddy Money?

Is this a ghost hunt, or is there something to it?

Federal officials have become very aware of large housing purchases with cash lately, and they have been poking around several large housing markets. But their work hasn’t netted very many money-laundering cases as of yet, but the new administration so far does not seem to be pulling back on efforts but instead seem to be doubling down.

The U.S. Treasury Department is taking a hard and expanded look at luxury homes that have been bought with cash and through wire transfers, as these may be signs of suspicious activity – like drug dealers, corrupt foreign politicians, and others – laundering money through .S. real estate.

What started as a temporary initiative in select markets has now been extended and expanded to include seven significant U.S. housing markets, including all of New York City, three affluent counties in Florida, and the San Francisco and San Diego areas of California.

What Treasury has been eyeing house purchases from these so-called “shell companies” – companies that are created so their owners can remain private. Shell companies are often an effective way for money to be laundered when the owners of the company aren’t revealed, so it’s difficult to determine if a transaction is legitimate and above-board.

During the current initiative, Treasury gathered information o nearly 250 high-value cash transactions involving real estate in these markets. And of those, about three in 10 have been deemed “suspicious” because of the buyer. There is no word yet whether any of the suspicious transactions have resulted in any prosecutions or whether there are criminal investigations taking place.

It does seem, however, that Treasury has found enough happening to deem it necessary to grow the investigation and expand it, even though the initial investigation was initiated by an Obama-era Treasury Department.

There is nothing inherently wrong with paying cash for a home, whether as a residence or as an investment; it happens all the time in many markets. What seems to bother authorities is when the buyer hides inside a shell company. Transparency is always the best route in these transactions, even if Treasury decides to flag your transaction for scrutiny because of the amount of cash paid and the method by which the transaction takes place.

If you are in the market to pay cash for your next real-estate deal, whether it’s an investment or not, it is wise to know that federal investigators have their eyes out. Your deal may likely be scrutinized unless you are wide open and transparent about who you are and why you are buying the real estate. It’s unfortunate that some bad characters tend to upset housing markets and create problems for innocent homebuyers, but it’s the reality of the situation and you know that it will be wise to have good advice from a professional before embarking on such a transaction.

And keep in mind that, while Treasury may reveal where it has been investigating, it does not mean that other markets are not being watched. Do you think the feds will actually give away everything?

It is a good idea to research the neighborhood in which you are looking to buy, and find out if there are any transactions that are suspicious in the area, as that may be inflating the price fo the house you want to buy, and it may affect the overall quality of the neighborhood if there are too many dark clouds over transactions. Dark clouds mean rain, and you don’t want rain on your deal!

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Melissa Thompson

Melissa is a mother of 2, lives in Utah, and writes for a multitude of sites. She is currently the EIC of HarcourtHealth.com and writes about health, wellness, and business topics.