• There is now unprecedented scrutiny on shell company real estate purchases, especially in Miami.
  • Not all shell companies are bad, and the parties involved may have perfectly legitimate reasons for using them.
  • Extra care and review needs to be taken by all parties.

In this monthly column, Anthony Askowitz explores a hypothetical Miami real estate situation from both sides of the broker/agent dynamic.

This month’s situation: A top Miami agent has a prospective buyer for a big sale — but the agent is not completely sure of the actual identity of the buyer.

Agent perspective

I should be thrilled to have a prospective buyer ready to write a contract for this big-ticket listing of mine, but instead, it has me completely stressed out. We accepted the cash offer knowing that the purchaser was a LLC, or a shell company, and my seller is really excited to get things moving.

But with so much attention in recent months on the use of illegal shell company money being laundered in Miami real estate, it has me nervous. Are these people really legit? Who is responsible for knowing the true source of this money? Am I putting my seller, company, commission, or the sale itself at risk if some red flags turn up?

How am I supposed to advise my client? It has me thinking about recommending to my client that we reject the offer and wait for a “traditional” buyer, even it means less money.

Broker perspective

My agent is absolutely right to be wary about this offer. Between the recent federal Geographic Targeting Order (which requires title companies to identify the true owners of shell companies that pay $1 million or more in cash for homes in Miami) and the “Panama Papers” exposure of dirty money used to purchase Miami real estate, there is now unprecedented scrutiny on the use of shell companies to buy homes.

At the same time, who doesn’t want to close a big deal on a lucrative cash offer? It’s a tricky situation, but there is no need to be stressed out — or to consider rejecting the offer — at this point.

It’s also important to recognize that there are many legitimate reasons to buy real estate through a shell company. A deep-pocketed investor may want to conceal their identity to avoid bidding wars, or to quietly gather small parcels for a larger, big-vision project. A wealthy family may want to hide their assets in order to protect themselves from kidnapping plots. Each case should be examined on its own merits.

How to meet halfway

In this new age of regulations and scrutiny, all parties involved in Miami real estate transactions are going to have to do their due diligence to the fullest extent. That includes both agents, their respective brokerages, the banks, attorneys, and the title companies. Ultimately, it is the seller who will make the decision, based on advice from their agent.

In the coming years, Miami real estate offices will need to put more focus and resources in the area of anti-money laundering compliance. A local financial crime consultant suggests a voluntary, five-point risk-reduction plan for brokerages that would help avoid unwanted law enforcement attention.

Anthony Askowitz is the broker-owner of Re/Max Advance Realty in South Miami and Kendall, and also a working Realtor who sells more than 150 homes a year.

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