Straw Man | Propertylogy

Straw Man

By on October 6, 2018

A straw man is an individual or entity that operates like a middleman who purchases a property for the sole purpose of conveying it to the real actual buyer behind the scenes.

Thus, hiding the buyer’s real identity with a proxy at the point of purchase even though the source of funds originate from the eventual buyer in the first place.

Situations like this arise often because the actual buyer feels that revealing his identity to sellers would contribute to a losing position in negotiation for price as sellers would know how much buying power the buyer actually has and how much the transaction is coveted.

This can result in holdouts.

Developers of example might use the straw man practice to acquire many different parcels of land with the ultimate goal of combining them to make up a bigger plot somewhat like an assemblage.

However, strategies like these can require a prolonged period of time to fully execute because if sellers belong to a community, sellers might discover what is going on when word is spread around about abnormally high number of transactions happening within a small time frame.

Yet buyers might still go ahead because if they act quickly, by the time more owners find out about their intentions, most of the needed parcels have already changed hands and the buyer have already saved a lot of money from the stealthy operations.

While these buying practices are understandably loathed upon by the land owners, it is completely legal on the part of buyers.

Nevertheless, using straw men might not be economically advantageous at all when local tax laws require higher stamp duties for transfer of ownerships in a short time span.

Send this to a friend