Manhattan and Miami already get mauled. Now expanding to San Francisco, Silicon Valley, Southern California, even Texas!
Cash sales of homes – mostly the domain of foreign and affluent buyers – fell to 32% of total home sales in April, down 2.8 percentage points from a year ago, according to a new report from CoreLogic. For the first four months, cash sales dropped to 34%, the lowest since 2008.
In Florida, the number one destination for foreign homebuyers, cash sales accounted for 46% of sales, and in New York, for 44%, both decreasing as well. The “strong dollar” and “global uncertainty” were blamed.
In Manhattan and Miami, the luxury condo markets are already getting mauled. For example, we reported that in Manhattan, condo prices plunged 14% in just three months.
We also reported that foreign investors were pulling back, particularly Chinese investors, the most prolific of all foreign buyers. The number of homes they purchased over the 12-month period had plunged 15%.
So is it just the “strong dollar” and “global uncertainty?” Or could there be more to the story?
Today, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) announced that it would expand a program it had kicked off in January to identify and track secret homebuyers who hide behind shell companies.
The expanded program will “temporarily require US title insurance companies to identify the natural persons behind shell companies used to pay ‘all cash’ for high-end residential real estate in six major metropolitan areas,” up from the two areas designated in January, Manhattan and Miami, among the biggest destinations of global wealth:
FinCEN remains concerned that all-cash purchases (i.e., those without bank financing) may be conducted by individuals attempting to hide their assets and identity by purchasing residential properties through limited liability companies or other opaque structures.
Real estate purchases in the US have been a perfectly good way to launder large amounts of money, no questions asked. Brokers and banks and other industry professionals have played along. Everyone in the world knew it. And they came to launder their cash.
These folks don’t mind paying a little extra. So as an industry-pleasing side effect of this influx of opaque money, luxury home prices soared, from where they trickled down to the rest of the market.
The New York Times, whose investigative reporting on money laundering in the real estate business, particularly in Manhattan, appears to have stirred the Treasury Department into action, explained in January:
It is the first time the federal government has required real estate companies to disclose names behind cash transactions, and it is likely to send shudders through the real estate industry, which has benefited enormously in recent years from a building boom increasingly dependent on wealthy, secretive buyers.
Apparently, this first experiment in Manhattan and Miami was successful for the government, according to the release today:
The initial GTOs [Geographic Targeting Orders] are helping law enforcement identify possible illicit activity and informing future regulatory approaches. In particular, a significant portion of covered transactions have indicated possible criminal activity associated with the individuals reported to be the beneficial owners behind shell company purchasers.
This corroborates FinCEN’s concerns that the transactions covered by the GTOs (i.e., all-cash luxury purchases of residential property by a legal entity) are highly vulnerable to abuse for money laundering.
So with these successes under its belt, FinCEN outed its expanded list and the minimum purchase prices for each area that would trigger the reporting requirement:
New York: Manhattan with a threshold at $3 million; Brooklyn, Queens, Bronx, and Staten Island at $1.5 million.
Florida: Miami-Dade County, Broward County, and Palm Beach County, all at $1 million.
California: San Diego County and Los Angeles County; plus in the Bay Area, San Francisco, San Mateo County, and Santa Clara County, all at $2 million.
Texas: Bexar County (San Antonio area) with a threshold of $500,000.
Through this expansion, “we will learn even more about the money laundering risks in the national real estate markets, helping us determine our future regulatory course,” the release said.
It’ll send more shock waves through the global community of secretive cash buyers of US luxury real estate.
Already, after the reporting experiment kicked off in January, these secretive foreign buyers stepped back in Manhattan and Miami. Builders didn’t expect this to happen, and banks didn’t either. They all loved these large quantities of opaque cash, and they developed the luxury towers in Manhattan and Miami to accommodate these folks. Those towers that are already far enough along will keep going up. The opaque foreign cash is likely to dry up.
Now some of the toniest areas have been added to the list, including a big part of Southern California, San Francisco, and a big part of Silicon Valley, a favorite target for foreign investors, particularly from Asia.
Like in Manhattan and Miami, these areas have experienced a phenomenal building boom. In the Bay Area, and particularly in San Francisco, high-end condo towers are sprouting like mushrooms, some of them marketed directly to investors in China.
This tsunami of new units that’ll continue for years comes at the worst possible time, now made even worse by the jitters of foreign investors that everyone had counted on. Those who want to remain hidden behind shell companies are likely to stay away. And this could be the next big shoe to drop on these overpriced trophy housing markets.
It’s not like San Francisco’s crazy housing market doesn’t already have enough problems. Read… These 2 Forces Will Crush the San Francisco Housing Bubble
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This is a very bad development for those of us who got squeezed out of affordable homes by the easy money bubble.
If I were a real estate agent that helped people launder money in Bay Area, I’d advise them to buy the stuff middle class fellows buy — at 1M to 1.5M. So, now the launderer will buy two homes instead of one. Worse, those homes will be where people like you and I would live.
As usual, these actions are not well thought out and reek of idiotic middle manager mentality. These artificial limits will only inflate the bubble for the salaried man.
They should really use Palantir for identifying the crooks without using these artificial limits. This is after all what Palantir claims to do for the govt. FinCEN is govt too.
Don’t assume that the regulators don’t already see that. I expect it is their intention to inflate mid-range housing and further spread the “wealth effect” in these locales. Many owners of mid-range California real estate are actually middle-class average Joes who bought cheap 20-30 years ago and use their houses as ATMs to keep up appearances, and they will enjoy spending this extra equity boost as well.
This is most likely a deliberately planned stimulus program.
Raises property tax revenues too, no trial yet for LA County Assessor aka John Noguez http://www.latimes.com/local/lanow/la-me-ln-john-noguez-20160721-snap-story.html
That was a slam dunk case 4 years ago.
I lived in a mob neighborhood in New York City many years ago and got to see money laundering up close. They buy a tear down and rehab it into a mansion. I saw 50K properties turn into 500K properties. By the time the city catches up with them nobody remembers what the old house looked like or how much was spent on the improvements. The records only show the 50K value of the old property, if that, and like the Chinese buyers one purchase begets another.
California: San Diego County and Los Angeles County
If they’re not including Orange County in the net they’re missing a major part of the action. Irvine is overrun with Chinese housebuyers.
I lived in Irvine 20+ yrs ago and many of my neighbors were Taiwanese and Koreans back then. We lived in newer development Westpark II and lived in a new and ex-model homes. I looked up the price for fun and was floored…
It’s still just an experiment. They’ll expand it over time.
I just sold my house in SF east bay suburb and moved to a smaller rental house. Relocated to SF 5 yrs ago from Seattle area and bought a house in Aug 2011 since kids were starting middle and high schools and new employer’s relo policy stipulated that I buy a house within 6 months. Timing was good and by sheer luck bought near the low.
My listing agent and the agent that handled our rental who is Chinese both said Chinese money dried up this year due to RMB depreciation and higher hurdles to get money out of China. We got 2 offers within a day and both were Indians. In fact most of the people moving into the neighborhood appear to be Indians based on Nextdoor website welcome notifications. I sense the greater fool theory at work with hot Chinese money drying up. About half of the rentals we looked were owned by Chinese landlords.
Homes in my development and neighboring developments were going pending within days of this past winter and spring but something changed in late June. I expected more active market with schools out but listings are getting stale and even price reductions.
Thanks for the info. I’m now hearing similar stories from some realtors I hang out with at my swim club in SF.
Your company’s relocation policy required that you buy a house?
How is that legal?
I’m assuming the company bought their old house or deployed some similar financial mechanism to get them out of the mortgage.
Otherwise yeah, it is flagrantly illegal. But I don’t think that’s what’s going on.
While Austin, TX, may not be the Bay Area, we’ve experienced the same slow down this summer. A house right next door to ours, which sold within days of being listed twice over the last four years, took well over 30 days to sell this summer and that was after two price drops (eventual selling price was even lower than final listing price).
Not sure what’s going on here as we don’t have the influx of foreign money like the big cities on the coasts do, but things are definitely slowing down. Way down from what they’ve been literally since we built and moved in 4.5 years ago now.
This is a much more sensible strategy than simply putting a blanket 15% tax increase on foreign buyers as they are about to do in British Columbia. Name, shame and eventually lock up the criminals. And there are a lot of them out there in the real estate industry. Today, it is the Chinese laundering money in RE, tomorrow it could be ISIS or Mexican drug cartels.
There are a few things I don’t understand.
First, according to modern monetary doctrine inflation is always good and the more the better. Hence foreign buyers loaded with cash bidding asset prices up (inflationary pressure) should be good news. Then why am I hearing the words “affordability” more and more these days? merely because this is an election year in the US?
Second, I don’t understand why the US government should care whence this money comes from. If these foreign buyers broke the law in China or Thailand, it’s none of Washington’s business. These people may be shady characters, but they pay their taxes and do what most economists demand us peasants do “Pump money into the economy”.
Third, coming so soon after the whole FATCA charade I cannot but think this is yet another desperate attempt by the US government to keep a stranglehold over world economy as new important players such as China emerge and its grip starts slipping. Washington cannot accept its age og hegemony is drawing to a close, if it hasn’t ended already, and like a big whale struck by harpoons, thrashes in the water desperately, trying doing as much damage as it can.
MC, in case you have missed it, the US government and many other governments are trying to stop money laundering. One, this is money that escapes taxation on a global basis. So it’s a target. And two, it is often the result of criminal activity (drug trade, etc.) and therefore is a target.
Real estate transactions have been exempt from these anti-money-laundering reporting requirements (something the industry lobby pushed through back in the day). But that’s now changing in the US.
MC, this might be a ‘misdirection’ kind of ploy, pretend we’re interested in doing something about this, for cosmetic purposes, but in reality, we want the spice to keep flowing in.
The US has a major problem with supporting the value of the dollar, huge trade deficits, that would normally plunge a currency. So keep the money flowing back to the US to support the dollar. It’s like the flight from NIRP. The Fed won’t move any rates to interfere with international flows. The spice must flow, into the USD.
This is nonsense.
if you have a couple of million in a house and want to sell to a Chinaman for cash then first go get yourself a company off the shelf and transfer the house to the company. You simply incorporate your assets
Have the bulk of the shares in whomever name is not on title. If both you and wife are joint the use the kids names.
For $20 you can buy a UK based company fresh off the shelf and the UK company receives the cash from the buyer and you transfer the shares owning the house to the UK company.
Pay the entire amount to yourself as a dividend, non taxable in the UK as you are non resident or domiciled, leave in UK if you prefer or use ATM and company card to get cash anywhere and whenever you need it.
I use a numbered ATM card, (no name on the card) from an Asian bank and can withdraw about $800 a day anywhere in the world.
I got the card re laminated with our company logo and “membership card” etc on it and it doesn’t even look like an ATM card now.
Now the Chinaman owns the UK company, still zero taxes as all parties are offshore and the company owns your house. and the Chinaman registers the title to the house now being owned by that company.
Very cheap very cost effective and very efficient
What are you talking about? Are you trying to get readers on this site to use your money laundering services? Sure sounds like it.
This was an article about US real estate, and how the US government is tracking WHO is behind the shell companies. The UK never once came up.
don’t know the intentions of the poster, but I think he uses the UK to avoid paying taxes.
I have heard similar tricks from wealthy Dutch people who have huge (domestic) income and wealth and pay almost zero taxes by routing all money through corporations in UK or Cayman Islands. Our tax office raised concerns about the relatively large number of people who pay with foreign (often anonymous) credit cards from these tax heavens all year in the Netherlands at ‘normal’ stores – they certainly aren’t tourists on a short visit ;-)
But of course politics decided they don’t want to know ;-(
I don’t think it is a good idea for ordinary citizens, because apart from the morals you probably have to keep well informed about changes in tax regulations etc. to avoid getting into trouble which means regular visits to the kind of lawyers and tax advisers that I would prefer to avoid.
His point is, if the authorities shine the spotlight on RE transactions, launderers will start exploiting the Corporate Veil.
A property incorporated can change hands infinite times under the radar vide share sale or transfers
This is a joke, right? You sell your home, go thru some incredibly complicated ownership shuffle, then withdraw the proceeds bit by bit from an ATM?
Selling for cash is not the problem. Buying for cash is the new trap.
SEC regulations. Big time. No way to avoid this being “solicitation”.
Much much worse than the AML regulations you’re trying to avoid.
Looks like our regulators have at last acknowledged the threat that asset bubbles, combined with huge cash influxes from dubious sources, represent to the real economy and the 99%.
In order to reduce the appeal of real estate as a “safe haven” and the resulting asset bubble, it would seem reasonable to follow Vancouver’s lead and impose a tax on residential and commercial property, vacant or unoccupied for an extended period of time, for example more than 90 days. This could be “progressive” in that tax based on the assessed value, would increase the longer the property remains vacant or unoccupied.
I can appreciate the desire of people to move their assets to “safe havens,” but their “investment” in U. S. real estate is not only creating considerable danger to the U. S. economy by inflating the real estate bubble (which always explodes), but also causing considerable social problems for not only the domestic home buyers, but also the renters, who are unable to afford the rapidly increasing prices.
Yes, a major problem. The homeless numbers in Los Angeles proper is phenomial. People are living on the streets in tent like huts. Gentrification is a major cause along with exhuberant unaffordable rents, even in some of the least desired parts of the city.
The US government already maintains a list ( specially designated nationals) for whom it is illegal for banking institutions to do business with. This list includes individuals that for both political and criminal reasons the US has targeted. How you get on or off the list is not the banks concern but if you are on it and the bank does business with you they are in trouble.
While there maybe a few people on the list dumb enough to try and use a straw buyer or dummy corporation to buy property in the US not many banks are going to put their heads on the chopping block to facilitate such a transaction so I don’t think this new policy is going deter much.
I bet that more than half of the high end RE in both the US and Europe is owned by the biggest criminals in the world, including many people who are on those ‘lists’. I also know some people in Europe who are on such a US list for ridiculous reasons, having done nothing wrong. These lists are a joke and are 100% political in nature.
“not many banks are going to put their heads on the chopping block to facilitate such a transaction”
I think you haven’t followed the news about sanctions for US banks engaged in criminal activity over the last 10-15 years. Now if you are talking about European banks in the US, it might be another story …
I’m trying to recall the last time a banker was jailed for criminal activity, can you help me out?
I’m not referring to shareholders paying a monetary fine on behalf of the criminal activity they probably had no idea was occurring, the banker probably could care less about shareholders considering he’s robbing the bank from inside (he’s a criminal, we established that, right?).
Now you might run into some who have convinced themselves they’re actually doing God’s work, and they honestly believe this at least externally. That’s called HUBRIS but still doesn’t make it acceptable.
Hmmm…let’s s see – last banker actually sent to jail:
1989, Michael Milken. Sentenced to 10 years for felony racketeering & insider trading; reduced 2 years.
Oh yea, current net worth: $2.5B.
Uh, HSBC would beg to differ. And if you think they’re the only ones, I’ve got some ocean front property in Arizona to sell you.
Without requiring retinal scans or fingerprints (and having the originals on file and accessible to the banks for comparison) how hard would it be for most of the individuals on these lists to get alternative identity documents issued by their governments for bank transactions and travel?
so … was is the purpose of all this? It can’t be fighting money laundering, because all the big US banks that are fully engaged in this get at most a slap on the wrist. It can’t be killing the RE goose with the golden eggs either, politicians and their friends know what it best for them and will make sure the party continues.
Like MC says above, this smells like election propaganda. I also don’t understand why people hate foreign speculators but have no problem with domestic speculator. Smells like envy to me …
Maybe the idea of this new policy is to spread the ‘wealth effect’ (high end RE bubbles) to other parts of the US where there is no reporting? Or are they hoping that these criminals will now buy the $ 1-3 million homes (that’s probably the ones that ordinary government workers speculate in?) that are just below the reporting limit?
Or maybe the idea is to get new rules into place where – for some political contribution and lawyer involvement – anythings goes just like before, with the only change that now a bigger part of the money ends up directly with the US white collar criminals?
Cash purchasing of homes and the risk of whitewashing and criminal activity has been a problem in Europe as well. It is still common in some EU countries (so a safe way to store unreported income). Some companies like Belgium have cracked down on their very easy RE money laundering options, but my impression is that nothing has really changed – it only got more difficult for people who are not well-connected. If you know the right politicians and other white collar criminals, anything is possible. Of course this also means that ordinary people get fleeced by definition with RE transactions.
Possible answer to “so … was is the purpose of all this?”:
I’m guessing foreign criminals (a fuzzy term if there ever was one) aren’t the only buyers pumping untaxed cash into real estate in the USA.
God knows, I love my local barber/bartender/lawn guy/pole dancer, but those are cash businesses. Get my drift?
Who do you use? barber/bartender — debit or credit card. Lawn guy? They want monthly contracts. Pole-dancer? wireless money transfer via smartphone. Cash is old hat.
maybe small bills in dark alley
The government is jumping thru hoops in order to avoid the real problem which is that we need a national rent control policy. If we had national rent control, it would cap the value of all residential property by incomes. This is what they are trying to avoid, because they really don’t care about the average working person.
If rents were tied to median incomes in an area, properties would stabilize at some moderate price. The poor could be subsidized and the rich would own but the spread would be normalized.
The policy they are now instituting of is one of eventual confiscation. They will take any property they deem to be purchased with laundered money. No one who pays cash is immuned from being targeted.
You’re right, they really don’t care about the average working person. In fact, the average working person is viewed at best, a burden. “What have you done for us today?”
“Cause it’s the new mother nature taking over
It’s the new splendid lady come to call
It’s the new mother nature taking over
She’s gettin’ us all
She’s gettin’ us all”
Ah yes – rent control.
After all, it works so well in SF and NYC. Let’s bring the cancer to the entire country. Investors will fall all over themselves to build rent controlled units controlled by government fools the likes of Lois Learner (new scam: we only rent to registered Democrats…).
I grew up in a rent controlled apt in NYC as did most New Yorkers. It was affordable and it never stopped landlords from buying and selling buildings. Later I lived in a rent stabilized apt which was more expensive but still affordable. I don’t understand your point. Rent control never stopped anybody from building in NYC as you can see from the skyline. Most of the mogul builders and owners in NYC got rich building and owning rent controlled housing.
Rent control is great for the tiny portion of people (NYC = 2%) who get price restricted use of someone else property. But don’t believe me, here’s Paul Krugman in the Economist (http://www.economist.com/blogs/economist-explains/2015/08/economist-explains-19):
“…But economists, on both the left and the right, tend to disagree [with politicians that rent control works]. As Paul Krugman wrote in the New York Times in 2000, rent control is “among the best-understood issues in all of economics, and—among economists, anyway—one of the least controversial”. Economists reckon a restrictive price ceiling reduces the supply of properties on the market. When prices are capped, people have less incentive to fix up and rent out their basement flat, or to build rental property. Slower supply growth actually exacerbates the price crunch…”.
Further, in NYC the average income of those in rent controlled space is HIGHER than those paying market rates.
According to Google, “Less than 2% of NYC apartments are rent-controlled, which means they’re in a building built before 1947 and have been occupied by the same family since 1971”.
Google again for NYC rent stabilized: “There are no set requirements for an apartment to qualify as rent stabilized, but most are in 6+ unit buildings built before 1974 and were priced below $2,000 before 2011 or below $2,500 today.”.
With all due respect, that investment definitely is not the way to get rich; however, this does sound like the way for a politician to get re-elected (not to mention campaign contributions).
RE: “…But economists, on both the left and the right, tend to disagree [with politicians that rent control works]. As Paul Krugman wrote in the New York Times in 2000, rent control is “among the best-understood issues in all of economics, and—among economists, anyway—one of the least controversial”. Economists reckon a restrictive price ceiling reduces the supply of properties on the market. When prices are capped, people have less incentive to fix up and rent out their basement flat, or to build rental property. Slower supply growth actually exacerbates the price crunch…”.
Indeed, but this examines only the effect on housing, leading to micro-optimization. Uncontrolled rising (soaring?) housing prices, unconstrained by either the “free market” or by regulatory fiat, have the potential to destabilize society, and will lead inexorably to labor shortages and excessive labor costs. San Francisco is the current poster child, but the same phenomena is seen in Aspen, Vail, and Key West.
The increasingly wide divergence between the use value and the exchange value of housing/real estate is likely to lead to an increased demand for government owned housing, with rents based on income, in the same way that uncontrolled rises in the cost of medical care and pharmaceuticals resulted in the ACA.
As several posters have pointed out, taxes on foreign buyers will be easy to evade. The simpler solution appears to be a special tax or levy on vacant, unoccupied, abandoned and derelict buildings/apartments, based on the assessed valuation/last sale price, and the rate should increase the longer the unit is physically vacant. This would discourage speculation, force vacant housing back onto the market (e. g. bank “repos”), and discourage “spec” construction, especially commercial.
According to the searches & articles, 98% of New Yorkers (meaning the city) DO NOT grow up in rent controlled apartments
Please don’t quote Paul Krugman to me. My opinion of him is that aside for being a shill for Wall St. and not much of an economist, he is also a flaming globalist.
I don’t know how many rent controlled or stabilized apts there are now in NYC, but they were the back bone of the working class when I grew up there. My rent stabilized apt was in the Gramercy Park area, a nice area, where the apts all coops or stabilized. One of the biggest RE purchases, $5B, in the last few years were the rent stabilized buildings owned by Metlife (Stuyvesant Town) in my old neighborhood. Metlife owned these buildings for decades and made money holding on to them and later selling them. So much for your argument about rent control. There is also Tudor City in Midtown another rent stabilized jewel in Manhattan.
Paraphrasing Indiana Jones “don’t bring emotional claims & unfounded opinions to an analytical discussion”.
You undoubtedly have interesting and meaningful life experiences; when we get into macro discussions (rent control = cancer: yes or no) I’m only interested in facts, not childhood emotions.
You create materially incorrect numbers (most New Yorkers in rent control), I’ll research & correct (about 2% of New Yorkers). If you don’t like the numbers, don’t make the argument.
FYI Paul Krugman is a leftist Nobel prize winning economist. Your argument is with him.
I agree with Chip here. The Netherlands has (had) massive rent control (over 90% of the rental properties are covered by rent control policy) and it is a DISASTER. It leads to ridiculous ‘entitlements’ that can never be dialed back once they are established, to huge shortages of cheap rental homes and to huge price increases for those who don’t qualify for those rent controlled properties because they are not ‘disadvantaged’.
In my own city, people on social security pay 4x less for the exact same home as I would pay, even though I don’t have income at the moment (with over 5000 euros in cash you don’t qualify for social security and are forced to rent in the far more expensive ‘free’ sector). People with median income pay 2-2.5x more than those on social security.
In cities like Amsterdam we have people living in luxurious apartments on the most prestigious locations for 300 euros a month even though they are in the highest 1% income percentile; in the free market these apartments would cost 10x more. Much of this is caused because the rents are set based on the income when people apply, and nobody wants to know if your income increases later on. If people get a rent that is way below market rate they will never leave. They are now trying to force people with higher incomes out, but 5-10% rent increase per year is nothing given the huge size of the rental subsidies.
Another side effect is that many corporate landlords prefer those who have no income at all, because most of the rent will come as subsidy from the government. With people who have to pay out of their own pocket you always have the risk that they don’t pay at all (and in addition to rent control, Netherlands also has the most idiotic renter protections in the world where you can’t even evict someone if they haven’t paid rent for years).
Yet another effect is that the housing corporations who build for this market are building ever more expensive homes (and certainly not affordable homes) because they can make far more money by ‘upgrading’ the housing stock. Their clients will have to live somewhere which means that government has to provide more subsidies.
Result: luxurious housing for parasites and crap housing for those who have to work for it themselves :-(
“It is the first time the federal government has required real estate companies to disclose names behind cash transactions”
Typical best practices approach on behalf of the government, doesn’t this make it impossible for the IRS to seize assets for the purpose of collecting back-taxes?
I guess if there’s no income claimed, there are only property taxes due (this drives up property taxes, of course) but how are writeoffs/depreciations verified by tax authorities, given the owner is unidentified?
People laundering money have no relationship with taxing authorities. They only rent for cash, if that, and don’t care about depreciating the property. They are waiting to unload in a time frame that washes the cash. They may not even care about making a profit. They have a different agenda than normal property owners.
You seriously underestimate the ingenuity of property tax collectors.
I’m sure there are exceptions (Detroit?) but in most jurisdictions the obligation for past due taxes (and the requirement to pay them current) can be bought by investors WITHOUT THE PROPERTY BEING SOLD OR THE OWNERS PERMISSION.
The investor pays the past due taxes and accrues huge annual interest (in FL I think it’s 25%) for the limited time (in FL I think it’s 3 years) the property owner has to cure the deficiency (pay the investor the past due taxes and accrued interest).
Once the time clock runs out, if the property owner has not cured the deficiency, the property is sold and the investor collects the taxes paid and accrued interest.
Example: a home owner with $3500 unpaid taxes in year 1 would owe $3500 tax + $3335 interest = $6835 at the end of 3 years (sample calculation ignores potential additional tax problems in year 2 & 3 and/or any mortgage defaults).
In case you missed it, the unpaid taxes do not go unpaid for very long (I’d guess 2-6 months).
I rarely disagree with Petunia but rent control? Really? I was wondering if part of this doesn’t contribute to the war on cash. My other thought was who in the regulating authority isn’t getting their skim? But then I’m a curmudgeon;-)
It is part of the war on cash combined with the expansion of unlawful confiscation of property.
There is no other way to control price levels and make housing affordable without tying it to wages. If the spread gets too big it leads to political instability. We are seeing that right now with the voters rebelling. After that, the deluge.
See my rent control comment to Chip as well.
Your earlier rent control comment to me was materially incorrect (according to a leftist Nobel prize winner) and the Economist magazine.
Just because you are born in one of the most dynamic & desirable cities in the world does not mean you can easily afford to live there your entire life. It’s called life, and it isn’t always fair (especially if “fair” is determined by corrupt politicians).
NY rent control sounds like the situation in Amsterdam, a city that for ages has been controlled by the labor party (similar to the US Democrats) where everyone is ‘entitled’ to everything especially if they don’t contribute to society.
These labor politicians still maintain that everyone including e.g. migrants and people on social security, has the right to live in the most desirable areas of the city, so government has to subsidize those who cannot pay for that on their own. The result is a totally dysfunctional housing market with almost complete rent control and a huge housing shortage because politics also decides that for every private home that is build, several cheap rental homes have to be build as well. Which is great for the high level politicians too of course, because it means huge price increases especially for the more desirable properties.
And even nationwide it is crushing the rental market, because those who don’t qualify for rent controlled property (= if you make around median income or more, or have more than a little bit of cash) are paying the price; the small ‘free’ part of the rental market is compensating for the huge subsidies that the government is handing out in the rent controlled sector.
Of course politicians don’t care, why would anybody want to rent? If you can fog a mirror you can buy a home in the Netherlands. Of course those homes are severely overpriced as well thanks to sub-1% mortage rates, but that is only a (future) problem for those with cash available and not for the many who make sure they have no money left at the end of the month.
I really don’t see the problem here. Plunging luxury RE prices is practically a victim-less crime.
Don’t forget the trickle-down effect. When sellers need a buyer, they cut the price. Sellers beneath them lose those buyers and in return cut their price. And so on…
These are not the homes at the very top. The median home in San Francisco costs about $1.3 million (50% cost more, 50% less). So the $2 million trigger still affects a lot of homes!
But you’re right, we’re not really worried about “victims” and it’s certainly not a “crime” – we’re just indicating that this is going to impact housing market dynamics. There are plenty of people who want prices to go down…. It’s called the “Housing Crisis” in San Francisco for a reason.
If they expanded the list to Harris County (Houston Texas), you would probably see our luxury condo market fall off a cliff!