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> 3. If the asset being purchased is a home, incentives between buyer and seller are aligned and prices are higher than the non-laundering market would support
by three14 6y ago
> 3. If the asset being purchased is a home, incentives between buyer and seller are aligned and prices are higher than the non-laundering market would support (esp if there's another launderer who's interested).
This is true but misleading. The money launderer doesn't want to throw away money. They want to launder money as cheaply as possible. That said, they are willing to pay far more than an asset is "worth" if they expect to be able to resell it for a price equal to or even slightly lower than they paid. The loss is the "price" of laundering. This supports higher prices for real estate, but not arbitrarily high prices, because if the launderer pays too much, they will simply have to resell for less, leaving money on the table that they could have kept.
- kareemm 6y agoThat’s true but not super relevant. The important point is that prices become dissociated from local incomes if a laundering buyer agrees to a price that’s much higher than what a local would pay.
- three14 6y agoPrices are still associated with the prices that a local will pay. Money launderers don't want to lose dirty money any more than anyone else wants to lose clean money. They depend on there being a buyer at a price near what they paid. I suppose you could have a market that was so full of money launderers that they simply depend on flipping it to the next money launderer, but ordinarily, they depend on there being at least some proportion of locals who will pay the new, higher price, or they aren't guaranteed a buyer.
- jbay808 6y agoA local who sold a home at an inflated price can often afford to buy another one at an inflated price. And it also attracts other generally wealthy investors looking to get in on a hot market.