Special Approval Designation List for Miami-Dade Condo Developments
January 8, 2010 by Lucas Lechuga
- 360 Condominium
- Blue Condominium
- Cite on the Bay
- Gables Marquis
- Latitude on the River
- Mirador 1000
- Mirador 1200
- Porto Bellagio
- Roney Palace
- The Club at Brickell Bay
- The Grand
- Turnberry on the Green
There are some condos on this list that seem far from “stable,” as Fannie Mae terms them. Aren’t there 50 or more distressed sales at Blue right now?
From the previous article about Fannie Mae relaxing current guidelines, am I correct to assume this list is going to be expanded? Or is this the final list (for now)?
If it helps the developers get units sold, I’m all for it. Lobbyists did an excellent job. Everybody involved should get a bonus. Including me. Last thing I want to see is a builder listed on the stock exchange have problems selling inventory. Makes for a really depressing depression.
Chris,
The list will be expanded. These initial 51 condo developments were released along with the announcement made yesterday. I’ll keep an eye on the list and provide updates as new buildings are added.
Oh goodie. Another government bail out at taxpayer expense.
scriv
Oh, come on now, scrivener — Fannie and Freddie only lost $500,000,000,000 of taxpayer money on the most recent housing bust. You don’t have confidence in their ability to do due diligence?
Nice one Joe!
And no. I have no confidence in their ability to do due diligence with the requisite diligence that is due.
Happy Friday!
scriv
Having The Club on this list really makes me wonder how few requirements are needed for admission. The Club?! Foreclosure and short sale central! Seems to me there are many more qualified buildings out there that should be saved.
Again, who is going to qualify if unemployment is at all time high ? a big messsss!!!!
I DON’T want to sound like any JOE BLOW….but what does this really mean? Is there going to be a CONDO BOOM? are HOA’s going to go lower?Is this the be all end all?
The old location location rule must hold in a recession if an oldie at Seacoast 5151 facing the street with those wood pulls on cabinets sells for $610,000 and an even older classic at the Roney closes for $675,000 with a HOA of $1,100 mo.
Anyone know if government is working on investigating the funny money going through condo sales. A friend of mine used to live in a high end building in Miami. Half thee people 75 percent of the people did not work. 100 percent were from another country and many were wanted back home on “varios charges”. Must feel good to live next to a seezy money launderer driving a flashy Ferrari….
Cocaine Cowboys have been replaced by Real Estate Cowboys.
If you look at all condos around the world that are in close proximity to a tourist area (ex. beach) the majority of the owners are either foreign and/or use the condo as a vacation home. I’m also curious about how you know when, why, or how these people were working and moving back an forth between their condo and various countries.
If you don’t think a not insignificant number of units are owned and operated through illegal financial means, then you definitely have not lived in the Miami condo scene. Not the majority, mind you, but the number is not insignificant either. Enough to have an effect on miami condo prices since the units are used as comps for legal transactions.
Any one knows if there is a class action going on againts Related by the few condo owners that closed in Icon Brickell ?
I know for a fact that a couple of the best condos in SoBe are owned by people who have been deported from the U.S. If someone actually wanted to spend the time going through the property records, I’m sure stories would abound.
And let’s face it: Whatever the money-laundering rate is in SoBe, it’s probably 10 times higher in Miami and Hialeah and surrounding areas. I’ve met no shortage of Cubans and Colombians and other Latin Americans who tell you they “arrived six months ago” and then walk out of the restaurant and into a shiny new Mercedes.
lima:
http://www.realestatejournal.com/buysell/markettrends/20060516-ackman.html
All that I could find.
scriv
(YAWN!)
(rolls over and goes back to sleep)
scriv
my two cents…
1. real estate is generally a poor way to launder money. cash intensive businesses are the general rule of thumb if you want to launder.
2. mortgage fraud is not money laundering.
3. buying real estate with dirty funds is a horrible idea. buying real estate with laundered funds is not a bad idea (see south beach).
Icon Brickell will be turned into a rental. They need to rent the building out before they can offer settlements to the few purchasers. The rents won’t cover the high costs to maintain the building. They need to find another sucker to buy the entire building and operate it as a rental. It will then be sold again before the next sucker gets stuck with the ten year maintenance and repair bills. The cycle will go on and on.
jcrimes — You might be right if you were talking about some town in Middle America where everyone knows everything, or even in a larger, more “American” city than Miami, but I can assure you huge amounts of dirty money are tied up in Miami r.e, from the highest-end SoBe condos to little one-bedroom houses in Hialeah.
Look at all of the money brought to So. Fla. by corrupt pols from Latin America, Russia, and the like. Look at the hundreds of millions of dollars earned by drug dealers and human traffickers in Miami over the past 20-30 years. There are entire city blocks in Miami and Hialeah right now that are owned / controlled by smugglers. Every time they smuggle 20 Cubans over, they go buy another house. I’ve never understood why law enforcement and/or the IRS doesn’t go title by title to see how the buyers got the cash for their purchases, but I’m not aware of any big crackdowns in Miami that would scare people away from this activity.
Remember Somerset Maugham’s great line? “Sunny places attract shady people”.
Samson – – BRILLIANT!!!!!!
But jcrimes, my friend, I have to take issue with you on all three points.
1. Real estate is a not necessarily a bad way to launder money – – conceptually speaking of course — particularly if the real estate is acquired through a properly structured business entity like a partnership or an s-corporation. Cash in, capital accounts, cash out, capital accounts. Very nice. (Academically speaking of course!) Granted the launderer has to watch the basis of the assets acquired – – and not investing in ANYTHING in South Florida would be advisable.
While a cash intensive business is nice, an entity which is less cash intensive could be just as advantageous in that it could fly lower under radar. (ACADEMICALLY SPEAKING, of course.)
2. Mortgage fraud COULD BE tool for money laundering. Case in point: check cashing operations (dirty money invested and lent out to customers)
3. Buying real estate with laundered money IS A BAD IDEA. Money laundering is a crime. For this reason the seller could reasonably argue that the criminal aspect voids the contract (e.g. fraud in the inducement) Know what I mean?
scriv
scrivener – With respect to point number 3….why would the seller care? The seller doesn’t care where the money comes from (if in cash there may be reporting requirements) and have never heard of a “fraud in inducement” claim if the transaction goes through. Interesting idea but don’t know if it really is applicable. My two cents. Now if another buyer comes along and finds out that the bulk seller is conspiring to have false high comps knowingly (or should have known) using dirty money then that is another story…
It’s amazing how people try to comment with authority about things they know nothing about.
jcrimes is correct. To launder money you would need a cash intensive business and real estate would be a horrible option.
The purpose of laundering money is to try and conceal the source of the dirty money so that it can be freely spent anytime as clean money. Buying a condo does NOT do this. Most people with dirty money set up straw buyers to purchase real estate for the purpose to use the property, NOT launder money.
Ex. I have $1,000,000 in dirty money from drug trafficking. I obviously cannot purchase a $1,000,000 condo because I have no legitimate income. I have a straw buyer purchase the condo instead so that I can live there. If I were to sell the property the proceeds would go to the straw buyer who would then give the money back to me. At no time will I (the drug trafficker) ever be able to use the money as clean money, so it hasn’t been laundered.
If I were to purchase the condo in my name and then sell it that would create a clear paper trail that would lead directly to me.
Here is an example of real money laundering. You own a car wash that washes and deals primarily in cash. Typical car washses clean between 300 and 750 cars a day. You’re car wash cleans close to the low end at 400 per day at an average of $10 per car for revenues of about $4000 per day. You report that you’re washing 750 cars per day instead for revenues of about $7500 per day. Each month you can put an extra $105,000 in your account and it will look legit. Pay taxes on the added money and the balance can be withdrawn and spent freely as it is now legit income.
Joe Wrote:
“I’ve never understood why law enforcement and/or the IRS doesn’t go title by title to see how the buyers got the cash for their purchases, but I’m not aware of any big crackdowns in Miami that would scare people away from this activity.”
This is exactly why someone wouldn’t take their dirty money and directly purchase the property.
There are three main steps to money laundering. Placement, layering and integration. Placement requires several different people making small cash deposits (Smurfing).
Once all those separate small deposits add up the sum is moved around through different accounts, usually through different countries making it hard to trace. This is the layering step and real estate could be used at this point but it would mainly be used to change the form of the money. And these real estate investments would not be purchased by individuals but instead by shell companies registered in off shore havens as the money has already gone through the placement process. And they would only be bought and sold to as a step in layering to making the audit trail more difficult. Electronic funds transfers between multiple accounts would be the most popular form of layering.
The last step in integration where the money is made to appear clean. This usually involves investing in some type of company where over invoicing can easily occur. Once the money is clean the money could then be placed in investments (real estate included). But here it would be placed in real estate as an investment for additional profit or to simply store the value of the already laundered money.
That’s key to understand because real estate is not used to actually convert dirty money but instead to store the value of dirty money that has already been cleaned. Therefore the only real effect on the market is that there is one additional buyer. I would also note that after the layering process money laundering is extremely hard to catch. There would be no benefit to buying the property in Miami or anywhere else except that since its being used as an investment you would want to purchase property in the best market. So during the boom, Miami and LA would have been great, but now middle America where prices are stable would be better.
I’d also like to add that the majority of money laundering associated with real estate is to actually avoid paying taxes on legitimate money and NOT to convert dirty money into clean money.
This is where individuals engaging in such schemes often attempted to cash out checks payable to their businesses, pay cash for construction materials, and trade negotiable instruments with other business people to understate business receipts and actual business volumes as a way to avoid audit trails and evade taxes.
And if you don’t want to believe me. Here is an excerpt from the Financial Crimes Enforcement Network under the Department of the Treasury:
“This study may have been limited by the difficulty many financial institutions have identifying money laundering in the integration stage of a scheme. Notwithstanding the recent trend in property flipping addressed in the mortgage loan fraud assessment, real estate has historically been a relatively illiquid asset. Under normal market conditions, it generally takes several months to sell residential or commercial properties. Consequently, these conditions generally have not favored the money launderer seeking to layer his funds quickly, moving them from one account or investment to another. It is probable that real estate has been most useful to money launderers in the integration stage where it may serve as both an investment and vehicle to store the value of laundered funds.”
Here’s a pretty good description of money laundering if your interested. Real estate is mentioned on page 31:
http://www.piie.com/publications/chapters_preview/381/3iie3705.pdf
Renter Tom:
Great point.
Honestly I am not sure of a precise fact pattern – – criminal law is not my wheel house. But then again…..I’ll see your two cents and raise you a nickle. (But no more!)
What IF, for example, the property were seized by law enforcement, who also sought to disgorge the the sale proceeds from the seller? – – it could happen under the right circumstances.
I imagine that the seller in such a case, facing “total loss” v. “less than total loss”, would seek to argue that title never transferred/vested to the criminal buyer because the crime, arguably, voided the contract (equitas sequitur legem) – – seller regains title and has the opportunity to sell the property again, mitigating damages from the seizure, as opposed to the State selling the property at auction.
Under such a scenario, to answer your question: The seller cares because it avoids a total loss (proceeds and property itself v. sale proceeds alone). As to the seller’s knowledge of fraud in the inducement rule – – that’s what lawyers are for. (smile)
Eh?
Just a thought.
scriv
For those that still find Park West to be a lovely neighborhood:
http://www.nydailynews.com/news/national/2010/01/12/2010-01-12_tape_shows_playboy_model_leaving_miami_club_hours_before_shes_found_dead.html
Maybe some Marquis or Marina Blue residents were able to catch a glimpse of the perpetrator from their balconies at7am when the gal left Club Space. That nightclub, the bouncers, the crackheads outside and that entire neighborhood is fu*king disgusting. A tourist goes to a club to have a good time and ends up dead in a dumpster. Welcome to Miami.
Drew:
I agree.
Even with a haz-mat suit, Kevlar vest and full riot gear. I wouldn’t go near that neighborhood. Too sketchy.
scriv
Leaving Club Space at 7 am…
Cocaine is a helluva drug.
Are you implying that there were drugs involved with this incident…
Keep your powder dry on any $500K+ property. We’re #1 by a lonnnnnng margin
http://www.pr-inside.com/fitch-u-s-prime-jumbo-rmbs-delinquencies-r1663859.htm
jl – The Prime Jumbo defaults are indicative of both the unemployment levels and strategic defaults. Florida with 16% of Prime Jumbos in default is HUGE. If you have no equity in the game and are under water to boot, they are walking away. These were investments that went bad…… The high end has not recovered.
Gixxer 1000 — I agree with you in spirit, as evidenced by my comments above, but you seem to forget this is Miami we’re talking about. By So. Fla. law enforcement’s own admission, less than 5% of Medicare fraud and less than 5% of mortgage fraud in Miami has been prosecuted. I’m not convinced that people are afraid of getting caught committing any sort of financial crime in Miami.
Mortgage bankers in Miami don’t care where the money comes from that is the reality. 99 percent say it is not their job to enforce money laundering from abroad, particuarly when they are making a buck. Your looking at very high numbers of Russians, latins laundering money through large one off transactions. There has always been an unwritten rule among latins, don’t ask, don’t tell. If they go back to the go go years of real estate my guess is upwards of 50 percent of the deals in higher end buildings and bulk middle market deals are laundered proceeds on deals not reported and taxed back in their home country. If mortgages are examined there is going to be a lot of real estate they can claim, sieze and sell. Don’t u think the gov needs money?? Google a few of the higher end buildings and a few have been caught through illegal schemes. Not publized by real estate agents. Several have just plain stolen money and invested inthe high life real estate.
Post #36 is exactly right. I think some people in this thread have been wrongly assuming we’ve been talking only about money of U.S. origin here, which is wrong. If some guy steals $1 million from the Bolivian water authority, or from Pemex in Mexico, or from some agency in Venezuela, and plops it down on a condo in Miami, who’s asking questions?
I’ll tell you who: No one. Not the r.e. agents, not the seller, not the condo board, not the Miami Dade l.e. … no one.
In theory, there might be reporting requirements, but can anyone here name a single instance of some corrupt official having their So. Fla. condo seized so the owner’s home country could be repaid? I certainly can’t.
Joe –
You guys have convoluted a lot of different issues. First off mortgage fraud and money laundering are two different issues.
“I think some people in this thread have been wrongly assuming we’ve been talking only about money of U.S. origin here, which is wrong.”
No, the information in post #27 was assuming the money originated in overseas accounts.
Do you guys not realize their is a difference between using real estate to “launder” money and buying real estate with already “laundered” money????
Why would anyone in the US care if some Russians or Latins stole money, then laundered it, then used the already laundered money to buy condos in the US? As far as impact on our economy it is the same as if some rich person bought it legally. It only adds an additional buyer.
Mortgage fraud is an entirely different issue and involves colluding property appraisers, real-estate brokers and accountants willing to draw up fake income statements and tax returns and then recruit people with good credit histories to serve as a decoy or “straw buyer” in a real-estate deal.
The conspirators inflate the price of the property, to get the biggest loan possible, pay the sellers the original price and then pocket the excess loan money as “cash back” at the closing of the deal.
The decoy buyer is paid off — often with just $5,000 — and the property is quickly abandoned to foreclosure.
Mortgage fraud is a scheme that is done with LEGAL money. It is a way of using already legal money to generate more money, not taking illegal money and make it appear legal (money laundering).
Mortgage fraud does disrupt the market because the value of the property is inflated. That inflated property can then be used as a comp for the house next door.
“If some guy steals $1 million from the Bolivian water authority, or from Pemex in Mexico, or from some agency in Venezuela, and plops it down on a condo in Miami, who’s asking questions?”
As described earlier why would anyone in the US care where and how this person got their money. It has already gone through the laundering process. By the time they purchase the condo it has probably gone through countless EFT transfers and hundreds of people who deposited it into different accounts through small transactions. It only adds one additional buyer for a $1 million dollar condo in Miami. The only people who should be concerned where this money originally came from is the Bolivian water authority.
Ex. Steal $1 million from Bolivian water authority.
Step one: Have 100 separate people each deposit $10,000 in a person account and pay them each $100.
Step two: Transfer the $9,900 left in each of the the 100 accounts ($990,000) to several offshore accounts.
Step three: Move the money from the several offshore accounts to additional accounts around the world in countries that have privacy laws.
Step four: Invest in a cash US business and use the dirty money to inflate the profits. Pay taxes on the additional revenue and then legally withdraw the money form the business ($800,000).
Step five: Purchase a Miami condo for $800,000 as a means to either hold the value or to use it as an investment.
The problem with money laundering is not disruption to the market because everything is being bought and sold at market values. It is instead the fact that it helps to keep drug traffickers, terrorist, etc in business.
Gixxer 1000 — Do you really believe the average corrupt Latin government official, or human trafficker in Miami, is using your “Money Laundering By Numbers” approach? No way. I’ve heard of people showing up for closings with suitcases full of cash. Do you consider that money to have been “laundered already”?
My point is that next to no one fears getting in trouble for financial improprieties in Miami, so it’s easy to launder or stash money in ways that wouldn’t be available, or make sense, in a more “American” city like Boston or Dallas or wherever.
Joe – I’ll throw out the actual factual information and just take your anecdotal evidence as fact. Even still it has no real bearing on prices. Drug dealers purchasing condos is not going to have any significant effect on prices.
Mortgage fraud does because it involves price manipulation. And this isn’t done by Russians or Latins but good ‘ole greedy Americans.
If I sell a couple of kilos and then drop the proceeds on a condo all I’ve done is purchased and additional condo at market value. If I get arrested and go to jail the condo will go back onto the market and be sold again at market value.
“My point is that next to no one fears getting in trouble for financial improprieties in Miami, so it’s easy to launder or stash money in ways that wouldn’t be available, or make sense, in a more “American” city like Boston or Dallas or wherever.”
And here again you keep talking around in circles. First you say that no one in laundering money they are simply taking illegal money and buying condos. Then you say that because no one fears getting caught in Miami they launder and stash money here?
How does this have any bearing on condo prices??? Whether they are laundering the money or simply stashing illegal money they are buying properties at market value and they are not colluding to manipulate prices.
Gixxer 1000 – Drug dealers buying condos and others stashing money (dirty or clean) affects condo prices at the margin, maybe by not a lot, but it does add to demand that would not have probably existed before. But to not split hairs, it probably doesn’t affect price by much. HOWEVER, I have to strongly disagree with your statement “Mortgage fraud does because it involves price manipulation. And this isn’t done by Russians or Latins but good ‘ole greedy Americans.” …. au contraire…..foreigners have a ton more incentive to engage in mortgage fraud…they jump in the U.S., take the hundreds of thousands of $$$ or more….wire out the money….skip the country. The FBI isn’t gonna track them down because they stole $1M US….. I can not tell you how many foreigners who have told me that they just stopped paying their mortgages and taxes and will see how long they can bank the cash and live in their homes until they decide to leave the US……they DON’T care about their credit score one bit since they will just leave. It really is unreal what I have heard people say….basically, screw the U.S. since my home price went down…no wonder some of their countries are sh****t holes. I think we will find out that there were quite a few organized rings of Russians and South Americans that were robbing the U.S. blind. Of course we have enough criminals of our own but why add $500 Billion in foreigner thievery?
Welcome to Miami….(sad really):
“STS drivers accused of faking trips
More than a dozen Special Transportation Service workers were arrested on charges of billing taxpayers for phantom trips for the elderly and disabled.”
Renter Tom – I’m not going to disagree with all your points. But again they are besides the point. This discussion was about money laundering and its effects on condo sales. See post #13, 16 and 17. It was basically inferred that foreigners were laundering money and in the process disrupting condo prices.
My point about Americans committing mortgage fraud was not to say that no foreigners are doing it but instead to point out that Americans were as well so that their is no point in singling them out. They should have dropped the xenophobia and just said that lax enforcement in Miami encourages more mortgage fraud here. Not some complete BS about how 75% of buildings are filled with foreign drug dealers laundering money and disrupting prices.
I will also agree that if a drug dealer purchases a condo with illegal money he may not be as worried about the margin as well. But the same could be said when J-lo is buying units at ICON. No one argues that rich people affect the prices at the margin. But I also wont split hairs.
Gixxer 1000 — Except for exactly one sentence in gables’ post #16 above, this thread has *not* been a discussion about the adverse effects of money laundering on Miami condo prices. We’ve simply been discussing the huge amounts of dirty money present in the So. Fla. r.e market/scene.
As for whether money is being “laundered” or “stashed,” that’s most semantics in Miami. As we’ve discussed already, no one fears getting nabbed for a financial crime in Miami, so the usual methods and logic don’t apply like they might if this was NYC or Boston or Dallas we were talking about. 95% of those crimes aren’t even noticed by Miami law enforcement, and then, in the rare cases someone is arrested, some dipshit judge often lets them out on $100,000 bail and the defendant(s) simply flee the jurisdiction.
(Gixxer 1000 — Just out of curiosity, how long have you lived in Miami? You seem like a knowledgeable guy, but you don’t seem all that well-versed in how things operate *in Miami.*)
“Mortgage fraud does because it involves price manipulation. And this isn’t done by Russians or Latins but good ‘ole greedy Americans.”
Recent article was in the news about a large condo complex, near tampa i believe, which sold out during the RE collapse. turned out to be a bunch of mortgage fraud perpetrated through a systematic use of RE agents and brokers in conjunction with some real and fictitious straw buyers. Centered around people from either Brazil or Colombia-forget the details. Mortgage fraud may be best perpetrated by those who have no real incentive to stay in this country-no real threat if caught. thus this fraud sometimes is quite egregious.
gables
Please see my post #43. I’m not denying that foreigners are not involved in mortgage fraud. We probably could both post articles about foreigners and Americans commiting mortgage fraud. This however has nothing to do with money laundering or simply purchasing (at retail) a condo with illegal money.