September 30, 2014

What’s this “gap” that you keep talking about when encouraging seniors to act on their buying decision now rather than later?

By Dan Dolan
Dan
Dolan Homes

Those of you who may read this column on at least an occasional basis know that we devote a fair amount of copy to the senior housing purchase decision. And we point out the reasons for taking that action sooner rather than later. In most instances the rationale is financial, because the new home that will be bought in two years is likely to cost somewhat more than the corresponding home will cost today. It’s a fact of life that in today’s economic environment, prices tend to keep going higher. Like the price of land and lot improvements. And concrete, or lumber, or roofing. Or services like electrical and plumbing. What that means is that seniors will have to dig deeper into their savings or 401k two years hence, thereby reducing their available cash or other flexible funds. And in our view, the preservation of wealth that we refer to so often, means that it is generally preferable for seniors to hold on to their accumulated wealth for as long as possible–that they retain the flexibility to use their funds wherever they chose for as long as they want to.

But we believe there’s a practical advantage to moving to senior housing sooner rather than later, as well. In fact, we see that advantage manifest very often—sometimes to people whom we’ve been working with for one or two years or even longer. Not only are the buyers one or two years older, but in the intervening period, an event may occur that limits their ability to participate in the eventual move. Perhaps a hip or knee issue arises, or a heart or back incident. Often that results in putting most of the responsibility for the move on just one of the family members, and that can create a significant burden.

We sometimes hear the reason expressed for delaying the purchase decision another year or two as something like, “I enjoy working in my yard, and I don’t want to give that up just yet.” When someone tells me that, they marvel when I reply that they don’t have to give up working outdoors if they don’t want to. Yes, we maintain the lawn and shovel the snow, so whether they stay at home or travel, summer or winter, their yards are taken care of. However, at Stone Gate East, for instance, and at Northwest Circle as well, there’s an opportunity to volunteer and help maintain the ponds or open areas, both to enhance the property and provide an outdoor experience. But that becomes an option, rather than a necessity, so it removes the need to have to work outdoors when that becomes less attractive. We even have a few residents who mow their own lawns to remain active, even though that activity is covered by the HOA and is still performed for them when they so desire.

Again, in my view, the justification for acting now rather than later is very compelling. For one thing, the combination of helping preserve wealth while being able to enjoy the comforts and convenience of having a manageable home with everything on one floor is highly desirable. I will admit that in some instances, there may be a sound reason for delaying the purchase process, but I suspect those situations are relatively few. For most buyers their total needs could best be met by acting sooner rather than later.

As for the existing home as an asset, what that means is that the longer one waits to purchase the new home, the greater the “gap” between the sale proceeds of the current home and the cost of the new home. Evidence suggests that the resale values of existing homes simply do not appreciate as quickly as the rise in cost of new homes over time.

Selling the home where the family grew up can sometimes be difficult. We have actually seen families take the old broom closet door with them because it had recorded the annual growth pattern of their several offspring. We have also seen situations where accumulated “stuff” now seems to make the impending move close to “impossible.” But if it’s difficult today to decide what to do with “grandma’s piano,” that decision will not likely become easier over time. If anything, those matters tend to be more difficult “down the road.” I am happy to report, however, that we have assisted many families through those difficult periods, and we would be more than happy to assist your family in addressing those same (or different) issues.

The argument that I’m making here is simply that having worked with hundreds of families over the last decades, we have learned that all-too-often seniors may wait too long before making the relocation decision. Generally speaking, it costs more to wait, and in retrospect, so many families have told us that they should have acted on moving to their senior “dream home” far sooner than they did, for many reasons.

If you are among the many senior families contemplating that decision. we invite you to visit with us at any of our Dan Dolan Homes locations and allow our host Realtors show you how we can help you address any concerns you may have. If you prefer, call me directly, and I will be pleased to work with you in planning your senior move. Either way, we think your acting sooner rather than later will best serve your overall interests.

Filed Under: Finance