Gavin Newsom Prohibits Offering To Buy People's Property
The California governor is using state of emergency powers to make unsolicited offers to buy people's property in fire-affected areas "for an amount less than the fair market value."
Wildfires continue raging across southern California, so far killing more than two dozen people, displacing untold numbers of residents, and causing billions of dollars in damage. Gov. Gavin Newsom is contending with the fires as well as criticism over the state's preparedness. This week, Newsom took aim at the real villain of the story: opportunistic real estate investors.
On January 7, Newsom issued a state of emergency as fires spread in Los Angeles County. On Tuesday, Newsom signed Executive Order N-7-25, prohibiting buyers for three months from "making any unsolicited offer to an owner of real property" in fire-affected areas "for an amount less than the fair market value of the property or interest in the property on January 6, 2025."
"As families mourn, the last thing they need is greedy speculators taking advantage of their pain," Newsom said in a statement. "I have heard first-hand from community members and victims who have received unsolicited and predatory offers from speculators offering cash far below market value—some while their homes were burning. We will not allow greedy developers to rip off these working-class communities at a time when they need more support than ever before."
"Today's executive order gives homeowners breathing room and protection by prohibiting unsolicited, low-ball offers for their property in fire-affected areas," added California Attorney General Rob Bonta. "Let me be crystal clear: if you target vulnerable Californians who have not said they want to sell, we will investigate you and we will hold you accountable."
Newsom issued the order during a state of emergency, which under California law allows him to craft orders and regulations that take effect immediately; failure to comply with a governor's order constitutes a misdemeanor, punishable by up to a $5,000 fine, up to a year in prison, or both. Newsom used the same authority in March 2020 to issue the country's first stay-at-home orders at the outset of the COVID-19 pandemic.
To that end, developers would jump at the chance to scoop up parcels of land from owners suddenly willing to sell. And if owners suddenly displaced from their homes are willing to part with the land and are amenable to the terms on offer, who is harmed?
Granted, it's certainly distasteful to hit somebody up who has just lost their home to a wildfire, to ask whether they'd like to sell whatever's left—especially if it's a lowball offer. But shouldn't that be the property owner's decision to make?
Unsolicited offers to buy property are annoying, and increasingly common—any reader who owns property is likely no stranger to them. (I sold a home in 2022, and for months afterward, I continued receiving phone calls offering cash for the property.)
Some offers truly are scams designed to take advantage of elderly or credulous homeowners who will accept an offer well below market value.
But not every offer is a scam. Los Angeles is one of the most expensive places to live in the entire country, and it already faced a significant housing shortage—a deficit of 400,000 homes, prior to the pandemic. Buyers want property in high-demand areas that, by definition, see little turnover. If few properties are for sale, buyers are within their rights to make an unsolicited offer.
Sure, it seems uncouth to offer to buy people's property just days after their homes were taken by fire. But not every resident will want to stick around and rebuild in the same place.
"For those who lost their homes, much of the value of their properties is in the land they still own, but rebuilding on it will be a long and expensive process," The Wall Street Journal reported this week. "It's unclear how many homeowners in these areas lack insurance or are underinsured. A number of leading insurers have stopped selling new home-insurance policies in the state. State Farm said last year it would not renew 69% of its property policies in the Pacific Palisades."
Even if insurance would cover the full cost, it may not be worth the hassle: "Rebuilding could be a yearslong slog," the Journal authors added. "It's often a convoluted process winding through a web of insurance adjusters, contractors and local permitting agencies." A property owner may well just decide to take whatever payout they can get—if any—and sell the land to whoever wants it. Not only would that help them avoid a potentially yearslong rebuilding process, but it would let a buyer jump in and start building a new structure right away.
In that case, Newsom's order would limit the ability to field offers. Notably, the prohibition only applies to "unsolicited" offers for "less than the fair market value," but specifically the fair market value before the property was ever touched by fire. Any realistic offer—including solicited offers—would take into account the current state of the property, including the fact that it may, for example, no longer contain a house where one once stood.
Newsom cited a 2023 proclamation by Hawaii Gov. Josh Green as an inspiration for his own order. After devastating wildfires in Maui, Green "prohibited" anyone from "making any unsolicited offer to an owner of real property" in the affected areas. Unlike Newsom's, Green's order was not limited to below-market offers. And yet even after Green's order, offers flowed in.
In March 2022, the Wisconsin Antigo Daily Journal reported that local residents were receiving "unsolicited offers to buy unused property for cash." The article cautioned property owners to pay special attention to the terms being offered and seek legal guidance before signing anything, but that otherwise, "the offer made in the letters circulating now [is] certainly a fee-free and stress-free way to sell land. The property is purchased as-is, back taxes are paid for by the buyer, and closing is often handled within just a few weeks."
Indeed, property owners should be free to weigh any offers presented to them, and it should be their decision whether to accept, counter, or tell the caller to take a long walk off a short pier. Newsom's order is overtly paternalistic and could even hurt Los Angeles' ability to recover from both the fires and its preexisting housing shortage.
