Fraud Protection & Compliance
It’s June, a special month for honoring loved ones, especially parents and grandparents by raising Elder Abuse Awareness. World Elder Abuse Awareness Day is officially June 15th and it’s an ideal time to educate oneself on how to protect elders from becoming victims of financial abuse. All too often, elders today are the targets of residential real estate fraud and scams. In this post, I’ll explain why and how they fall victim as well as provide tips for financial caregivers and banks to combat this rapidly growing form of financial abuse.
Scammers capitalize on a hot real estate market
The COVID-19 pandemic hasn’t just gripped the world for the last year—it’s also ignited a residential real estate boom in the US, with home sales hitting peaks not seen since 2006. However, the hot real estate market has been a stark contrast to many seniors’ cooling personal finances. In January 2021, two million people over age 55 were unemployed, according to an analysis of federal data published by the AARP Public Policy Institute. They accounted for roughly one in five jobless Americans. Half of jobless workers over 55 had been out of a job at least six months at that point, compared with 35% of younger adults, according to AARP.
To out-of-work seniors looking to stay afloat, fast cash from selling their homes can be an attractive lifeline — and fraudsters know it. They are capitalizing on elders’ financial anxiety, and even sweet-talking vulnerable seniors who weren’t even considering selling their homes.
With a “get-rich-quick” siren song, scammers which may include unscrupulous “real estate agents” convince elders to sell their homes for less than market value, and then make a large profit on the sale. Here are two popular real estate scams targeting the elderly.
- Unsolicited offer to sell: The person who contacts you calls themselves a real estate agent or a broker in the real estate industry. They claim they already have a pre-existing buyer set up. The buyer is interested in buying the home right away. The "agent" has a contract. All the elder needs to do is sign the contract.
- Out-of-town purchaser: A “real estate agent” contacts the elder and says they have an out-of-town purchaser who wants to get a contract signed before they leave. If elders fall for this, they have no way of tracing that person; no way of knowing if they exist. This scam usually involves a spur-of-moment decision. He or she may say something like, "My out-of-town buyer is getting on a plane in 30 minutes. If I don't tell them before they leave, the deal is off."
Real estate scammers often rely on tricks from the con artist’s playbook to trick or goad the elder into selling.
- Ambiguity: An "agent" who doesn't answer questions directly may be a scammer. Being vague about the buyer, what real estate company they represent, or why the buyer doesn't want to look at the inside of the home are all red flags and means the deal is very likely a scam. This tactic is often coupled with fast talking on the agent’s part, throwing around industry lingo that confuses the elder. Sometimes elders require a bit more time to comprehend and process the information as well as decide on whether the offer makes sense. Fraudsters take advantage of this weakness.
- Pressure to decide: The "agent" has a valid-looking contract in hand – all it requires is the elder's signature, right away. The reason for an immediate decision is typically tied to the other red flag, the out-of-town buyer is ready to leave.
A family affair
Real estate can also be lost without a pressurized sales pitch from a “real estate agent”; it can be signed over to someone else who then records ownership at the County Recorder’s Office. Unfortunately, this is sometimes done by a member of the elder’s own family, typically a son or daughter strapped for cash who might even reside with a parent at the elder’s home.
As the parent’s cognition declines, the fraudster has the parent sign a quit claim deed or forges the parent’s signature on the document. The abuser may promise to provide care until end of life or make some other promise to induce the gift. This type of financial abuse may be discovered by a brother or sister who is busy raising their own families and not involved in the day-to-day activities of the parent.
Take steps to prevent elder real estate abuse
The best measures you can take to stop elder real estate abuse are preventive; importantly, these steps can help to avert financial tragedies of all kinds.
- Keep an open dialog: Do not let the elder become isolated. Have frequent conversations and be supportive; ask your elder to never sign anything or give any personal information, such as a Social Security number or credit card numbers, without calling a family member first. Oftentimes elders can hesitate to share information if they think they’ve made a mistake and are embarrassed.
- Put assets in a trust: Putting elders’ assets in trusts protects them from all manner of financial scams. An elder may agree to sign a contract as an individual to sell their home under duress, but if the property is in trust, the trustee must be the party to sign the contract for sale in order for it to be valid and binding.
- Plan a transition: Anticipate the elder’s incapacitation. If the real estate is not in trust, proactively appoint a trusted person as power of attorney and require a unanimous decision of two or more trusted people to sell or give away real estate.
Banks play an important role
In 2011, the Consumer Financial Protection Bureau (CFPB) created an Office of Financial Protection for Older Americans. Although the laws requiring reporting of financial abuse vary from state to state, the CFPB issued a report in 2016 identifying best practices to assist banks and credit unions with their efforts to prevent abuse. Any service provider who has concerns that the borrower or seller is being exploited can take steps to ascertain the real desire or motivation of the elder, for instance:
- Have borrower explain and confirm intent to go through with the transaction
- Ask borrower to confirm payee or destination of proceeds (“Are you sure you want me to send your money to this off-shore account?”)
- Request a one-on-one conversation (“Can we talk privately for a moment?”)
- Separate the elder from the third party
- If the third party objects, this may be evidence the older person lacks the capacity to conduct a transaction
For more information about how banks can thwart elder real estate abuse, this article by North American Title Company is an excellent resource.
Although June is Elder Abuse Awareness Month, we need to remain vigilant every day to protect our loved ones from financial abuse. If you haven’t already, I encourage you to make finances and real estate a frequent topic of your regular check-in conversations with the elders in your life. Learn more about keeping your loved ones safe by reading these posts:
6 Types of COVID-19 Scams to Watch Out For
The Galloping Growth of Merchandise Muling
Keep up with the latest on fighting fraud, scams and financial abuse by following this blog.