Anonymity Can Be Hard To Come By
When high net worth individuals sell real estate, they often go the off-market route to maintain their privacy. But buyers seeking that same anonymity have to jump through more hoops—and spend extra time and money while doing it—to keep details about themselves and their property decisions out of the public eye, experts say.
Some buyers want to keep their identity private so it doesn’t impact price negotiations for a new property, while others want to ensure a massive purchase doesn’t negatively impact their larger business presence. But most just want to maintain their safety and security, said Jonathan Nash, a Los Angeles-based agent at Hilton & Hyland.
“We see high-profile people whose lives are invaded so much, that when it comes to their personal life, they want to keep some privacy,” he said. “They want their home to be a sanctuary.”
There are some universal ways buyers typically go about maintaining their anonymity, from making decisions about the team they put in place, to deciding which properties to pursue, and how to make a purchase.
Regarding the buyer’s real estate team, finding people that can keep quiet is key, said Thomas St. John, a Los Angeles-based international business manager for sports and entertainment. “Finding a good realtor is priority No. 1,” he said. “Without someone trustworthy, you won’t stand a chance.”
Even with a good realtor, some clients prefer to send scouts in their place, like an assistant, business associate or family member. “I’ve sold properties to people who I thought were named Mr. Jones, but turns out, the buyer was a celebrity,” said Gaby Rogers, associate director of sales at Colliers International in Sydney. Sometimes it’s not until the end of the process, Ms. Rogers continued, that the agents themselves realize who’s actually buying the property.
It’s also fairly customary that these buyers have real estate agents sign non-disclosure agreements, stipulating that they can’t share information about who their client is and how, when or for how much a deal was made. While in theory they’re enforceable, “non-disclosure agreements don’t work,” Mr. St. John said. That’s because it’s nearly impossible to figure out who leaked the story or the address to the press. “We just put them in place as a deterrent,” he said.
In terms of the properties, Mr. Nash said that buyers who want true anonymity should only search for pocket listings, with absolutely no marketing, social media or paper trail behind them, whose presence is only spread—"very hush hush"—through word of mouth.
If a buyer decides to purchase property with their name attached, their anonymity is pretty much gone, experts say, as everything becomes part of the public record in most countries, including Britain, the U.S. and Australia, where six weeks after a property is bought, details must be registered with the deed’s office, according to Ms. Rogers, who lives and works in Australia. “It’s very straightforward in this country,” she added. “There are no secrets.”
If a buyer wants to instead make the purchase through a company structure, there are a couple of options, all of them best handled by business managers, real estate attorneys, international tax attorneys, accountants and other professionals, who are there to make sure that everything is legal, and in the best financial interests of their client.
The first option is to buy through a Limited Liability Company, or LLC, and the second is to purchase through a revocable or living trust, said Gail V. Phillips, a real estate and business law attorney in Beverly Hills.
“Using one of these methods ensures that the buyer is not front and center when you’re looking at tax rolls and accessor rolls and such,” Ms. Phillips said. And if, for instance, the LLC is formed in Delaware, where both Ms. Phillips and Mr. St. John said they prefer to start companies, or another asset protection state, like Wyoming, the members’ names don’t go on the public record either.
Using these methods isn’t just about anonymity, though. “The goal most often is to provide a degree of asset protection,” Ms. Phillips said. That might mean limiting liability or making decisions for estate-planning purposes—sometimes both, in which a trust is a member of the LLC, which provides protections, plus anonymity. “You’re putting in layers, so that someone will have to sift through all of this before they get to the buyer.”
There’s no way to keep true anonymity anymore though, experts say, especially in the U.S., where since March 2015, the Treasury Department has required more transparency on all-cash purchases made by shell companies in Manhattan and Miami on properties that cost more than $3 million and $1 million, respectively. In August, they expanded the scope of this program to all of the New York City boroughs, as well as an larger region near Miami and counties in California and Texas.
The good news? “The government is looking for people living offshore, making huge all-cash purchases within the states, who are either laundering money or trying to evade paying their fair share of taxes,” said Seth Kaplowitz, a professor of finance and management at San Diego State University. “They’re not looking for someone who just wants to remain private.”