Elder Abuse or Exploitation

Tax & Legal
1

It can be considered exploitation to purchase real estate from the elderly (60 or 65+) or mentally incapacitated at prices below market value.

Are there any steps you take to avoid even the appearance of elder abuse or exploitation when working with the elderly?

2

Great questions @Brian_Formosa, I’ve occasionally wondered about this, too.

I’m not a lawyer and this is not legal advice, but I just did some research on this with Claude, and here’s what I found.

You’re likely crossing into exploitation territory if you’re targeting elderly people who don’t understand their property’s true value, using pressure tactics, taking advantage of someone with dementia or cognitive issues, or deliberately hiding important information about the deal.

The law doesn’t care if you pay below market value. What matters is how you got that deal.

If you’re approaching vulnerable seniors, rushing them into decisions, or they don’t have independent legal advice, you’re probably breaking elder abuse laws that can land you with both criminal charges and massive civil penalties.

But if an elderly person with full mental capacity, their own lawyer, and plenty of time to think it over decides to sell cheap because they like you or want to help family, that’s generally okay. The key question courts ask is: did this person make a truly free choice with full information, or did someone take advantage of their age, confusion, or desperation?

“Vulnerable” typically means: Anyone 65+ (varies by state from 60-65) with dementia, Alzheimer’s, or cognitive impairment, those on medications affecting judgment, people who are socially isolated or recently widowed, or anyone with physical/mental disabilities that impair their ability to make sound financial decisions.

For example, Florida law defines elderly as 60+ “suffering from the infirmities of aging as manifested by advanced age or organic brain damage or other physical, mental, or emotional dysfunction, to the extent that the ability of the person to provide adequately for the person’s own care or protection is impaired.”

“Rushing them into decisions” includes: Same-day signings, high-pressure tactics like “this offer expires today,” not allowing time to consult family or lawyers, repeated visits or calls pressuring for a quick answer, or taking advantage of emergency situations (like needing money for medical bills). Some proposed laws require a 72-hour cooling-off period specifically because rushed decisions are a hallmark of exploitation.

To protect yourself legally, document everything in writing:

  • Include language in your purchase agreement requiring the seller to acknowledge they were advised to seek independent legal representation.
  • Keep records showing you gave them reasonable time (ideally weeks, not days) to consider the offer.
  • Document that they initiated contact or expressed interest in selling. This is easier to do with direct mail, where the seller has to go out of their way to respond, as opposed to other marketing channels, where you’re interrupting their day to strike up the conversation.
  • Have witnesses present during key conversations.
  • Get a letter from their physician if there are any concerns about mental capacity

The courts look for a pattern of predatory behavior, so thorough documentation showing you acted ethically and transparently is your best defense.

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3

Excellent response, thank you so much Charlotte! These are all great things to think about how to work into my process when dealing with elderly sellers. I never want to inadvertently exploit an elderly person.

A few deals back, I think I almost got into a situation like that. The seller had closed with another investor a few days before our scheduled close date, and at first I was upset that he had done that, but in hindsight, I think he was just a confused senior.

It can be tough trying to determine a person’s mental capacity when we only talk over the phone, but these extra precautions you mentioned could help avoid an exploitative situation. Thank you!

4

If you suspect anything, I would just ask them if anything you have said has made them uncomfortable and if there is anyone else that needs to be involved in this decision.

In my opinion the land investing community is much more honest and transparent compared to the house wholesaling world. Way less bad actors.

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5

I’m one of those “elderly” at the age of 67 and find it somewhat laughable that reaching an age of 60 or 65 would cause someone to be considered significantly at risk of being mentally incompetent or of diminished mental capacity. I have seen such in increasing frequency at higher ages, particularly 80’s and older. At any age there are individuals of significantly diminished judgement if not mental capacity. To be frank even in the dementia experiencing community like with my parents, there are businesses that make it their model to take advantage and commonly do. Typically they advertise all day long on local television networks and drive shiny graphic vans with catchy business names, with trained sales people to fix your problem or sell that home improvement. I just say this to point out that the legal risk of such activity is minimal, its the conscience that must control the unscrupulous activity. One such company cost my parents tens of thousands in unnecessary repairs to a new house, both before and after the dementia set in. After investigating legal remedies it became clear that the transactions would need to be in the hundreds of thousands to warrant the involvement of an attorney. This is an unfortunate situation but never the less the case.

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@brentwasham that’s an interesting point. You could make an argument that anyone who sells anything to someone with a mental health issue is exploiting them. Are the elderly simply not allowed to make any decisions, period? Where do we draw the line?

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Personally, my 2 primary concerns would be:

  1. Inadvertently taking advantage of someone who I didn’t realize did not have the mental capacity to be making financial decisions for themselves.
  2. Having someone fake mental diminishment to establish a retaliatory case against me for what they see as unjust profit on my part.

This is certainly an area where ethical practices are important, and there are legal boundaries in place to try to protect the vulnerable sellers from the unethical buyers in our line of business.

@brentwasham in my state (NC), I think the DA would prosecute the case, at least for the criminal charges. That wouldn’t cost anything to you or your family, if your state has criminal penalties for elder abuse and exploitation. If criminal charges stuck, the civil case might be a lot easier to get reimbursed for what was stolen from them.

@charlotteirwin I don’t think anyone would ever want to take away decision making ability for all of the elderly. Heck, half of our elected officials would no longer be eligible to vote anymore. Maybe that’s not such a bad thing though… :thinking::laughing: The problem with this topic is that there’s no clearly definable line in generality and many specific cases. I am no expert in determining a person’s mental capacity for making financial decisions which is why I’m trying to find ways to insulate myself from the 2 primary concerns I mentioned above. The consequences of getting this wrong in my state could result in felony convictions, so it’s no light matter! :flushed_face:

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8

If someone doesn’t seem all there (regardless of age) I’d probably just ask to speak to a family member that can help - I haven’t come across the situation yet but I have heard stories from other investors. In my personal experience most of the 65+ I’ve spoken to are pretty sharp and some are even down right rude hah - most are typically friendly or neutral though :slight_smile:

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