For any real estate transaction to be legally binding the buyer and seller must be legally capable. If you are legally capable it means you understand all the details of the documents you are signing. It is possible that a person with dementia does not understand all the details.
This is a protection mechanism because a person that is not legally capable may be taken advantage of. Selling a house is a prime example of when someone with dementia can be taken advantage of.
HOW IS LEGAL CAPACITY DETERMINED?
If a person with dementia understands the meaning of a document they have legal capacity. It is up to a lawyer to determine if the person with dementia is legally capable. They may need the assistance of specialized doctors to make sure they come to the right conclusion.
DEMENTIA/LEGAL CAPACITY AND REAL ESTATE TRANSACTIONS
A contract to buy and sell real estate is a document that lays out the terms and conditions of a home sale. This document is roughly 20 pages long. It contains a lot of jargon. It is hard to understand even for me! AND I AM A REAL ESTATE EXPERT!
A person with dementia may not understand everything in this document. A simple example of this might be understanding the sales price of the house.
Let me give you an example.
Imagine a person bought a house for $65,000. Over the years the value has gone up and the neighborhood is now very desirable. In today’s housing market the house is now worth $650,000. It is possible that a person with dementia still thinks the house is worth $65,000.
I have seen examples when a person with dementia that was selling a house didn’t understand what the house was currently worth. In these cases, it is very possible they sell their home for pennies on the dollar. They would lose a lot of their hard-earned equity. This would not be fair.
