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Preventing, detecting, and responding to abuse of elders or dependent adults in a real estate transaction

Authority and capacity issues in the typical real estate transaction must be carefully considered because most states permit rescission of a real estate transaction or mortgage involving undue influence, duress, incompetency, incapacity, or lack of authority and nearly every title insurance policy provides affirmative coverage against such defects. These issues are often present in instances of elder and dependent adult financial abuse, which continues to rise along with the proportion of older Americans relative to the general population. The United States Census Bureau projects that nearly 20% of the U.S. population will be over the age of 65 by the year 2030.

According to the National Adult Protective Services Association, financial exploitation of seniors and adults with disabilities is a fast-growing form of abuse. Such abuse is often carried out by those in a position of trust relative to the victim, such as: caretakers, family members, friends, attorneys, bank employees, pastors, and doctors or nurses. In addition to the risk of being taken advantage of by those closest to them, older Americans are also at risk of suffering from reduced cognitive ability as a result of Alzheimer's and other dementiarelated diseases.

To combat this form of exploitation, many states have enacted elder and dependent adult abuse legislation that provides a statutory cause of action for rescission or other damages, separate and apart from those available at common law. Some of these statutes also impose an affirmative duty on financial institutions to report instances of suspected abuse.

In light of these issues, it is critical for real estate agents, escrow and title companies to remain vigilant with respect to authority and capacity issues, particularly as they relate to elder and dependent adult abuse concerns.

If you suspect abuse of an elder or dependent adult in your transaction, inform your office manager and contact your escrow and title company.

Guidelines for preventing, detecting, and responding to abuse of elders or dependent adults in a real estate transaction.

Title companies look for the following red flags in a transaction:

  • Recent, uninsured deeds in the chain of title (these are a common element in most instances of fraud and forgery).
  • Use of powers of attorney (you should always inquire as to the reason why using a power of attorney is necessary).
  • Free and clear property (this is not a red flag by itself. Many seniors own property free and clear, but free and clear properties are targeted by fraudsters, or even family members willing to take advantage of the situation).
  • Documents signed outside of escrow or documents that are signed but not notarized. (these are always a red flag).
  • Sales or loan proceeds paid over to somebody other than the borrower or seller (also a red flag of fraud in general).

Real estate agents and escrow companies should also be alert for the following red flags in a transaction:

  • The person appears disoriented.
  • The person appears to be led or controlled by another person (a family member or friend does most of the talking).
  • The person seems unaware of dates and times.
  • The person seems to lack understanding of the transaction.
  • Client becomes agitated or angry upon requesting documentation.
  • Anything else that disagrees with your intuition.