Is it ethical to buy an old persons home for 50% of its value in exchange for letting them stay until they die

Question

Say you are 85 and you have no more retirement money left. But I offer you 50% of the value of your home up front in cash. In exchange I now own your home, but you have the right to live in it till you die. Would you consider this to be an ethical, or predatory business?

If you died the next day, I would collect the home, but if you survived to 130, I would have to wait a long time...

Yes. This is similar to a reverse mortgage, but I would immediately own the home, and the elderly person would immediately get a check for 50% or so of the value of their home. I would not move into the home, this is just an investment strategy. If the elderly person ends up having to move to an old folks home, then they would be allowed to rent their home until they died, but the renter would get kicked out in 1 month after the person died, so the renter would not be able to do a long term lease.

chaseunchase, yes the elderly person could (and would probably be wise to invest the money). If they were to get a large gain on the money, they could end up ahead, but it would be high risk for them. So it would make sense if they invested in lower yield, low risk investments since once they are out of money, ... 'game over' so to speak.

Answer 1

There's a difference between legal and ethical here.
First, the legal: so long as the person is of sound mind, there should be nothing that prevents this sale. All of the time people convey property to another person and leave themselves a "life estate" (which is possession and technical ownership until they die), with a remainder to someone else.

The ethical question involves the desperation for the man for money and the fair market value of the life estate. If the man were not desperate, and an actuary told you that a man in this guy's condition was 80% likely to live 10 years or less, and, the fair rental value of the property was something like 2% of the home's value, then a fair price would be that you'd buy it for 80% of the home's value. Because the guy is desperate, you are taking advantage of that unequal bargaining power to get a home way below market value. In my opinion that's unethical.

Answer 2

It's somewhat ethical, as long as the company complies with the agreement. If the old person lived another 10 years, but invested the money, and made 8% annual returns, then they would end out ahead. 50% of value seems to be predatory, but value is relative, and it may make a lot of sense to make an agreement like this.

Answer 3

it would be predatory
as average life expectancy is 72 for a man
you stand a very good chance of collecting inside of 1 year for a better than average return on your dollar
i would think any good competent lawyer could have the contract null and voided on the basis that you made a predatory loan / purchase against an elderly person

Answer 4

Talking like reverse mortgages? It is somewhat questionable in ethics but not necessarily with law. Kind of a sticky one.

Answer 5

It's ethical so long as the 85 year old seller is rational and in full control of his/her mental faculties.

Answer 6

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That could be a really bad experience for everyone involved. I don't know if you have ever moved in with a stranger...one that you were not having a love relationship with. Veddy bad (finger wagging)...veddy bad.

Only people with experience in this kind of thing...people who have lived long enough to understand human nature...should even think about this sort of thing.

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