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Want to know how money laundering priced you out of a home? 
One thing I hear often is launderers aren’t buying enough homes to influence prices. Not true.
It only seems that way if you don’t understand how asset prices are created.
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#VanRe #ToRe
One thing I hear often is launderers aren’t buying enough homes to influence prices. Not true.
It only seems that way if you don’t understand how asset prices are created.
Thread
#VanRe #ToRe
2/ Prices aren’t just a function of input and output like people learned in Econ 101. It’s often influenced by a marginal buyer.
The marginal buyer is the one paying the most, that actually gets an asset. Competition between marginal buyers is what drives prices higher.
The marginal buyer is the one paying the most, that actually gets an asset. Competition between marginal buyers is what drives prices higher.
3/ usually a marginal buyer is trying to get the best value for their money, while still buying.
In regular market, two people go back and forth. Self-interest helps contain prices from rising too quickly.
In regular market, two people go back and forth. Self-interest helps contain prices from rising too quickly.
4/ That’s not the objective of money laundering. You want to move as much cash as possible.
Now, when you have a marginal buyer that wants to spend the most - you break the market. One person *wants* to pay as much as possible.
Now, when you have a marginal buyer that wants to spend the most - you break the market. One person *wants* to pay as much as possible.
5/ Now real estate prices are born in a comp system. A house down the street sold for 20% over ask?
Now the next seller wants 20% over ask too. They may only get 10% or whatever, but prices launched based on a launderer is still a comp. Even if next house is isn’t laundered.
Now the next seller wants 20% over ask too. They may only get 10% or whatever, but prices launched based on a launderer is still a comp. Even if next house is isn’t laundered.
6/ No comps in your neighborhood? The next neighborhood with rapid prices will do.
This goes on over and over, with launderers buying and selling throughout the process. Regular people validate transactions in between, and people have no idea why a market is “hot.”
This goes on over and over, with launderers buying and selling throughout the process. Regular people validate transactions in between, and people have no idea why a market is “hot.”
7/ Now, a small amount of money influencing a whole asset isn’t new.
CNBC’s Jim Cramer once boasted that using just $5 million, he could influence stock prices.
CNBC’s Jim Cramer once boasted that using just $5 million, he could influence stock prices.
8/ Nav Singh Sarao, is my favorite example.
Spoofing just $170 million worth of orders, set off events that led to the DJIA losing $1 trillion in just a few minutes.
He didn’t have the money for the buy. He would cancel and place orders, over and over using “dynamic layering.”
Spoofing just $170 million worth of orders, set off events that led to the DJIA losing $1 trillion in just a few minutes.
He didn’t have the money for the buy. He would cancel and place orders, over and over using “dynamic layering.”
9/ Basically, people can’t tell if comps are legitimate transactions, or fraudulent movements.
Every time an overenthusiastic buyer pays, and someone follows with a comp, they validate that buyer - whether a launderer or not.
Every time an overenthusiastic buyer pays, and someone follows with a comp, they validate that buyer - whether a launderer or not.
10/ Just a few launderers can influence prices. It doesn’t take a lot. Unfortunately, Canada has a *lot.*
Basically, prices move not because of complicated factors. But because we’re chimps in pants, who mimic each other.
~Fin~
My full explanation https://betterdwelling.com/how-a-little-money-laundering-can-have-a-big-impact-on-real-estate-prices/
Basically, prices move not because of complicated factors. But because we’re chimps in pants, who mimic each other.
~Fin~
My full explanation
https://betterdwelling.com/how-a-little-money-laundering-can-have-a-big-impact-on-real-estate-prices/
Also, in case you’re wondering two foreign governments, and numerous US politicians asked questions about this piece, and how to identify these kinds of transactions.
In Canada, two prairie politicians and reps from BC asked about it. That’s it.
In Canada, two prairie politicians and reps from BC asked about it. That’s it.
