[person22]

I think this is missing something. Lets say I have 200 dollars of illegal money. How much value does that actually have? I would say 0 because it is illegal. Now lets say I buy a widget that is worth 100 dollars for 200 dollars. Then I sell it for 100 dollars. I now have converted 200 dollars of worthless illegal money into 100 dollars of legal money.

This happens all of the time for EBT and food stamps. Buy a case of pepsi for 30 dollars and sell it back for 15 (sometimes to the same seller). 30 electronic dollars that can only be spent on a limited set of goods is converted to 15 dollars cash that can be spent on anything.

My point is that the definition of "value" may actually align. It's ok if they new owner sells at a monetary loss because they are still making a gain.

[crazygringo]

No, that's the myth that keeps getting repeated.

The real situation is this: you have $200 of illegal money. Now you have the choice between using that $200 to buy a widget that's worth $100, or a widget that's worth $200.

Obviously you'll buy the widget that's worth $200.

EBT/food stamps are a bad analogy because the missing $15 in your example goes to transaction costs -- a middleman needs to buy, market, sell.

In real estate, that simply corresponds to the real estate broker's fee -- 5% or 6%. Not 50%.

The point remains: it doesn't matter if you're laundering or not, you never want to lose money you don't have to. Just because it was illegal in the first place doesn't make you magically charitable. Everyone always wants the best bang for their buck. Period.

[drdec]

> The real situation is this: you have $200 of illegal money. Now you have the choice between using that $200 to buy a widget that's worth $100, or a widget that's worth $200.

> Obviously you'll buy the widget that's worth $200.

Sure, but what if we are talking about $200M instead? Now you want to go for the most expensive assets because you want to reduce the number of transactions (each transaction has a time overhead that is probably more significant than the dollar cost overhead). You know you aren't getting it done in one transaction because that $200M widget isn't out there.

Now assume you know that there are plenty of other money launderers operating in the same market. And you know logic behind the article. Now you aren't so worried about overvaluing an asset by 5 or 10%.

Just a thought experiment, I don't have any evidence or even anecdata to back it up.

[ookblah]

okay, now what if the $100 widget is purposely set up to obfuscate the transaction/trail and the actors involve help you (like say a new developer that is wink wink) and the $200 increases your chances of getting caught?

i think nobody is arguing that you want the best bang for your buck, but there's a reason why someone will just flat out offer 20% over asking or letting these properties sit unrented. that's a terrible return on investment...

i duno, makes sense to me. when laundering the priority is always don't get caught > profits. housing seems to be at the moment the most unregulated and harder for authorities to pin and hold those accountable.

[crazygringo]

> i think nobody is arguing that you want the best bang for your buck

Bizarrely, the article and several commenters here are saying precisely that money launders don't want the best bang for their buck.

> but there's a reason why someone will just flat out offer 20% over asking

But nobody is doing that. The article seems to be assuming that, commenters are assuming that, but where's a single piece of evidence? If offering the asking price guarantees you the deal, offering 20% more is insanity. Nobody would do that.

You seem to be claiming that, somehow, overpaying for real estate... diminishes your chances of getting caught? (And several commenters here are assuming that too.) But it doesn't. Why would it? What would the mechanism even be?

I swear I don't understand where this idea is coming from, that overpaying for real estate does a better job at laundering money or something than simply paying market rate. It doesn't make any sense.

[ookblah]

i mean i don't think they might be flat out offering 20% or over, but i have realtor friends that quite commonly do the whole "closed in X days, 15% over asking cash!". so obviously people are coming in with high bids intending to just push out other people quickly.

and i wasn't claiming that paying more prevented you from getting caught purely from a price perspective. i meant more that maybe there are mechanisms at play where this premium is somehow built in. like say you have a shady developer that caters exclusively to this type of clientele. why buy 10 units in a normal complex and invite scrutiny, when you buy this multimillion dollar unit in a boutique building and everything is setup to help you and all parties get the benefit.

manhattan real estate at the top end (i'm talking like 10M+ price units) are absolutely "tanking" during this pandemic. those prices are not subject to the typical market force. i'm just speculating of course, but i see it like how people speculate on art as laundering. the value is completely just whatever the heck these rich people say it is as it changes hands.

[raincom]

> Now lets say I buy a widget that is worth 100 dollars for 200 dollars. Then I sell it for 100 dollars. I now have converted 200 dollars of worthless illegal money into 100 dollars of legal money.

You washed the dirty $200 for clean $100. However, the seller of that widget has made $100 additional profit; to the seller, $200 is clean.