I think this misses the forest for the trees; the handful of cases where they broke the law are nowhere near as deleterious as the rest where they didn't. I can't think of a better time for new regulation than a hedge fund extracting home equity from desperate people.
What legislation could you make that wouldn't be a case of the side effects being worse than the disease (bearing in mind how often we dont realize there are side effects or their severity)?
Require that cash sales be registered through a state agency that monitors sellers for patterns of fraud. Add a “cooling off period” of 7-30 days where the seller can cancel the transaction without going to court. Streamline the process by which family members can raise claims of mental incompetence. Upon a sale being registered, provide the seller with a computer-generated piece of paper containing an estimate based on recent comparable sales (with a clear warning that this number may be inaccurate) so that they are aware of how much of a discount they may be taking. None of this stuff seems terrible onerous, and better: it would significantly reduce the load on the court system.
a) a person needs money asap, can't wait for a cooling off period.
b) a person has greedy children who expect the house as inheritance, and don't like that mom/dad has decided to sell the house and spend the money cruising around the world so they decide to declare mom/dad mentally incompetent.
None of these are new issues. We've arrived where we are (and that place is different in different jurisdictions) as we lurch back and forth between the least bad solutions.
I'm not a policy analyst, but this doesn't seem very difficult. Market failures caused by information asymmetry can often be improved by mandatory disclosure of some kind. Even if you disagree, the inability of a bunch of programmers to describe an effective regulatory solution doesn't mean one doesn't exist.
