Keller Williams The Trembley Group Real Estate Professionals are known for their mutual support. They are always asking each other for advice and sharing their experience and encouragement. The office coffee pot is still a great place to hear discussions of all things real estate.
Earlier this week, someone asked if there was an age that was too old to buy a house – if there was an age when the dream of homeownership has passed? The consensus was a unanimous and resounding, “Absolutely not!” However, when buying a home for retirement, there should be a few additional considerations so that the dream home doesn’t turn into a nightmare. The Professionals at Keller Williams The Trembley Group located in The Market Common of Myrtle Beach are experts at helping every homebuyer navigate the sometimes complicated choices associated with buying a home, whether it be a first-time buyer or a retiree buying their ultimate dream home.
Trends in Myrtle Beach
Many baby boomers and even older seniors are buying homes. Some are downsizing, some are moving up to their once in a lifetime dream home, and some are even becoming first-time homeowners. According to a recent National Association of Realtors Home-buying Report, nationwide, almost a quarter of first time home buyers were over 52 years old. Thirty percent of all home sales in 2016 were made by baby boomers age 52-70, and 8% of home purchases were made by seniors age 71-91.
So, older Myrtle Beach and Grand Strand home buyers are in good company. Frequently, making the right decision is a matter of asking the right questions. Keller Williams The Trembley Group Real Estate Professionals deal with Baby Boomer and senior home buyers daily and know the right questions to ask, and they have the patience to carefully listen and answer their clients’ questions. Here are a few important ones:
- Is buying a good financial move?
Recent statistics indicate that 68% of buyers aged 62-70 financed their home. But homebuyers in or about to enter retirement should carefully consider the financial impact of a mortgage and consider options other than a traditional mortgage.
Every senior should consider their financial situation to be sure they will be able to afford the mortgage payments throughout the life of the loan, even if their income drops after retirement or if a spouse passes away. When considering the decision to finance or pay cash, a review of any life insurance policies may be in order.
Even those Boomers who plan to keep working may retire sooner than they anticipated. According to the TransAmerica Center for Retirement Studies, more than half of retirees surveyed retired before they planned, mostly due to reasons other than being financially ready. If a home buyer needs to retire early, they need to be certain they be able to afford their house payment.
While the costs associated with a conventional mortgage remain constant, taxes, insurance, and homeowners’ association fees will likely climb. Senior homebuyers should be sure they will have funds to pay these fees as they increase over time. It is also wise to make extra payments on the mortgage if possible to pay it off faster.
The HECM Option
An option most homebuyers (and many Realtors) don’t understand is the HECM for Purchase (H4P). It is a Federal Housing Administration (FHA)-insured home financing program designed specifically for homebuyers who are age 62 and older. It’s specifically designed to help senior homebuyers get the funds they need to buy the home that they want – without the financial worries and limitations.
With H4P, homebuyers can purchase a home by combining a one-time investment of their funds (down payment) with loan proceeds from a Home Equity Conversion Mortgage (HECM) to complete the transaction. As with a traditional “forward” mortgage, the home being purchased secures the loan. The homebuyer never has to make another payment so long as they live in the house.
However, unlike a traditional mortgage, there are no monthly mortgage payments, which will boost a retiree’s cash flow. The senior owns the home as long as they live in it. The loan does not have to be repaid until it is sold or the homeowner doesn’t live in the home as their primary residence. For the loan to remain in good standing, the homeowner must meet the normal homeownership obligations, including property maintenance, and keeping property-related taxes and insurance payments current. When the homeowner no longer lives in the property, the house is then either sold by the lender or refinanced by a family member.
Keller Williams The Trembley Group Professionals are experts at financing homes with the HECM. Reverse mortgages have an unearned reputation. Some see it as a desperate last recourse for seniors who can’t keep up with medical bills or the upkeep of their homes. In fact, they are a lifesaver for many folks who fully understand what they are getting into, allowing them to upgrade to their dream home without ever having to make another mortgage payment.
“It’s a phenomenal vehicle for seniors,” says Jay Devlin a Trembley Group Real Estate Sales Professional. “Social security hasn’t seen a meaningful increase in years. Meanwhile, we’ve seen double-digit increases in property taxes and insurance. For a senior living on a fixed income, that isn’t even covering the cost of living. The HECM is the only product available to them that allows them to have the home that they want plus free up the cash to let them have dignity and independence.”
“We’ve had a lot of good stories of people who were able to stay in their home and not have to go into assisted living or a nursing home because they were able to afford an aide and get the medical attention that they needed. And it made them better – it gave them peace of mind. Honestly, we’ve all heard the horror stories and think the stories can’t be true, but they are real.”
“If you think about it, a home is a home, but it is also an investment,” says Brad Emond, Real Estate Professional at Keller Williams The Trembley Group. “The H4P allows a homeowner to borrow against that investment, which over time will still appreciate vs. renting. Renting is dead money. The H4P helps them unlock the equity in their home. A home is a home – a place to live – but it is also a financial tool – an investment that was made and which should pay back a return on investment.”
“The one bit of advice that I always offer senior homebuyers is to take advantage of the H4P mortgage while they’re still available,” says D’Ambrah King, a Trembley Group Real Estate Professional. “This mortgage product is available today. We don’t know what the government is going to do tomorrow. The United States has a trillion dollar deficit. Programs are being cut left and right. If a senior has the ability to do an H4P mortgage, they should take advantage of what is offered to them today. It’s essentially a no doc loan – a loan that anyone can theoretically get because it does not require you to document your employment, income, or assets. Where would you get that in today’s market? The average consumer can’t. Seniors should run and take advantage but not without the right advice.”
- Will a particular home fit a retirement lifestyle?
Anyone in or nearing retirement should consider why they want to buy a home and what sort of things they plan to do in retirement. Someone might dream of days spent volunteering for the church and with having the grandkids visit regularly. Others might be looking forward to world travel. Still others might be looking forward to a daily thirty-six holes of golf or of afternoons lounging on the beach. The type and location of the house in each case will likely be different.
There are important considerations if a homebuyer is buying and moving to a new location to enjoy their retirement. They should have spent ample time exploring the entire Grand Strand to be certain that they love a new community before choosing it for a permanent retirement home.
A senior who plans to do significant traveling in retirement should consider how much it will cost to pay for lawn care and other maintenance while away. Moving to a condo or retirement community that includes lawn care and some maintenance included in the association fee might be a better plan.
- What type of home maintenance is involved?
A new homeowner may be able to manage their yard work and repairs when they first move into a home. However, as they age, assistance may be needed with these tasks. New homeowners should consider the extra funds required for a lawn service and the cost of a handyman for minor home repairs. They Trembley Group Real Estate Professionals use and can recommend several trusted strategic business partners that reliably provide legal, mortgage, maintenance, lawn care, and any other real estate related services at a reasonable cost.
If a new homebuyer is moving to a community that takes care of these tasks, the homeowner needs to understand the fees. Since these fees will likely increase over time, a homebuyer should ask about the historical rate of increase to be sure they can continue to afford the payments.
- Will this home still be suitable if my health declines?
When moving to a house that will likely be a home for years to come, a homebuyer should keep in mind that health and fitness may change. Choosing a home design and location that will be suitable for years to come is prudent.
Climbing a flight of stairs to a master bedroom may not be an issue now. However, a first-floor master bedroom and first-floor laundry might be a wise choice. Look for a home with updated windows that tilt in for easier cleaning or consider updating the windows when you move.
Seniors need to remember that there may even come a time when they are not able to drive. If possible, they should choose a home located near public transportation or within walking distance of shops.
Finding the Right Help
Retirees or soon to be retirees should always find well-informed assistance before making any decisions. This may mean looking outside of their circle of friends and family for a trusted, impartial, experienced, and professional Real Estate Professional who understands the fine print and who knows the right questions to ask. Getting advice from a child or relative who has a financial stake in the outcome of a senior’s investments might become problematic and may not always produce the best results.
“Also, seniors need to understand that people will try to take advantage of them because of their age and because they don’t understand the market,” cautions Scott Trembley, the founder, CEO, and partner in Keller Williams The Trembley Group. “I insist that the Real Estate Professionals who work at the Keller Williams The Trembley Group treat every one of their clients with the respect and fairness that they expect to be treated themselves.”
Avoiding Scams and Predators
Finally, any discussion of seniors and real estate would not be complete without warning about scams and so-called predatory professionals. There are many people out there looking to take advantage of seniors who are either desperate, not thinking clearly, or just don’t understand the market.
To avoid being caught in their traps, seniors should always be sure their market knowledge is up to par. They should always hire a trusted real estate professional and should always consult them before making any decisions. They should make sure they fully understand any fine print.
At Keller Williams The Trembley Group, we pride ourselves on being the experts at more than just selling real estate. We are local residents, some of us have been here for a lifetime. The rest of us will be here until the end of time. We love living, working, and playing in the diverse backyard of Coastal Carolina, and look forward to helping you live and love your dreams soon too. Please reach out to us by phone or email for personalized service and one-on-one advice.