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Government changes rules on luxury real estate purchases

Real estate investors in Maryland may be interested in a new federal rule that will require the identification of real estate buyers who purchase luxury properties for cash in both Miami and Manhattan. The rule will require that those purchasing homes in Miami of $1 million or more and those purchasing Manhattan properties of $3 million or more be identified to the Treasury Department.

Many people purchasing such high-end residential properties do so while keeping their identities anonymous, using shell companies to complete the transactions. The government indicated that it is cracking down on this practice because it wants to prevent potential money laundering.

The rule will apply to all outright purchases made using cash in the two markets. The New York Times reported that 80 percent of such transactions made in 2014 in the Times Warner building were made using LLCs or similar shell entities. At the same time, real estate industry executives state that these purchases are often made by celebrities who simply want to remain anonymous so their identities won't be publicly tied to their addresses. This is reportedly done as a measure of protection and safety rather than as a money laundering purpose. The new rule is scheduled to be effective on March 1.

Real estate purchases can be complex, and frequent regulatory changes can be difficult to keep up with. People who are wanting to purchase high-end properties may want to consult with a real estate attorney who can help protect their interests by reviewing the terms of the transaction documents in order to identify potential problem areas.

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