The U.S. Treasury’s efforts to uncover illicit funds being laundered through luxury New York and Miami real estate took effect this month. The order, which requires title companies to reveal the identity of buyers in deals over $3 million made through anonymous entities, is limited in geographical scope for the time being. But there is already concern in L.A. real estate circles that the measure will scare celebrity sellers and buyers if it reaches Southern California.
“I expect it will happen in every city,” said Timothy Lappen, the founder of the luxury home group at the law firm Jeffer Mangels Butler & Mitchell, while moderating a panel hosted by the magazine Haute Residence at the London Hotel West Hollywood’s Kensington Ballroom on Wednesday.
The brokers on the panel stressed that they were not too concerned about the impact on foreign buyers, claiming that most foreign money coming into Los Angeles is “clean.” The brokers also agreed that foreign buyers represent a small portion of L.A.’s high-end market.
“Sellers think there is a magic foreign buyer that will come in and pay the highest price, but they don’t realize that 80 percent (of the highest end of the market in LA) is bi-coastal people,” said Stan Richman of Compass’ Beverly Hills office.
However, several panelists agreed the measure could affect celebrity clients who wish to buy and sell homes anonymously.
“It may have an impact on celebrities and other high-net-worth individuals who are concerned about privacy,” said Billy Rose of the Agency.
Many celebrity buyers and sellers are already concerned about internet listing sites like Trulia, Realtor.com and Redfin, which expose their homes to more people than a traditional listing.
“We’ve had a buyer request (the listing) be removed from those sites,” said Stephen Kotler, the CRO of Douglas Elliman who is guiding the firm’s L.A. expansion.
An increasingly popular strategy is to pursue selling low-down properties off-market via pocket listings. Rayni Williams of Williams & Williams said she often will post celebrity properties on a password protected site that can only be viewed by select clients.
The Agency has also been using pocket listings.
“We do this for properties where the seller is private and the buyer doesn’t want every Tom, Dick and Harry to know what their bathroom setup looks like,” Rose said. “It also gives us an opportunity to get feedback on pricing without the days on market. The funny thing is that everyone is concerned about the privacy and then, when they buy the house, they have a dinner party and send the photos to Us Magazine.”