As the national housing slump deepens, developers are offering up a slew of services to help the elderly sell their existing homes so they can move into new projects. Professional home stagers, who make a dwelling look attractive to buyers, are being used to update and declutter old homes. Top-notch real estate agents are brought in to handle sales. Some developers will even purchase homes outright in order to make a move possible.
“Seniors get frustrated,” says Tom Neubauer, senior vice president of sales at Erickson Retirement Communities, a privately-held Baltimore-based company with 20 communities nationwide. “So we're helping them sell their houses.”
Seniors generally don't move to a new development until they've sold their existing house. Proceeds from the sale are needed to pay the upfront entry fee. In other cases, profits must be invested to pay the high monthly fees at rental buildings with services.
Despite the ongoing avalanche of news stories about the slow housing market, seniors still have unrealistic expectations, according to a recent study by Moving Station, a Chicago-based company that works with seniors housing operators in 26 states to help potential residents sell their homes.
Of the 79 seniors surveyed, 70% thought their homes would sell in three months, whereas the current inventory of existing homes for sale has been on the market for an average of 10.5 months. About half of respondents said they wouldn't spend more than $1,000 to fix up a home before putting it on the market, though many seniors live in older homes that need work.
Because homes aren't selling, contract cancellation rates at seniors-only buildings are on the upswing, building owners say. The cancellation rates among some projects are as high as 30%.
Two years ago, Erickson started an incentive program in Michigan because of its weak economy. Prospective residents work with a personal moving consultant, who helps the senior find a real estate agent, stage the house, fix it up, and get it sold in a timely manner. The senior pays for repairs, but Erickson provides the moving consultant who coordinates work. Last year, the Michigan program helped to sell 150 homes, Neubauer says. The program is now offered at all Erickson communities.
Though referrals to real estate agents and fix-up services are common, communities are now luring new residents with financial incentives, too.
Erickson is testing a flexible payment plan in Boston. Residents can move to the campus after putting down 10% of the entry fee. Until their house sells, they pay a $50 premium every month for every $10,000 owed until the house is sold. The payments are applied to the entry fee. "We try to put ourselves in the shoes of the customer," says Neubauer. “It's a no-brainer.”
Brookdale Senior Living, the nation's largest seniors housing company, offers a variety of market specific incentives. At some properties, a new resident can defer the entry fee without interest until the home is sold.
Ron Aylor, senior vice president of sales at Brookdale's Nashville office, says the company minimizes its risk by loaning the money for only a specific period of time. Also, the house must be priced to sell and actively marketed.
Home purchase programs are still another approach seniors housing developers are undertaking today. Here’s how it works at Moving Station, which recently launched a home sale program targeted at new communities that hope to accelerate sales. Developers pay a fee for each home to be sold, according to company President Rob Adams. The fee generally ranges from about $5,000 to $7,000 depending on local market conditions. The fees are used to create a kind of risk pool to cover unexpected marketing costs.The house is put on the market, and if it remains unsold, the price is reduced according to agreed upon benchmarks and re-evaluations. After 150 days, if the house has not sold, the home is purchased at 91% of the final appraised value. Upon sale, the developer or home seller pays a fee of $3,000. But an investment fund, not Moving Station, actually buys the house. If marketed and priced properly, Adams says, an outright purchase should be “rare.”