February 2, 2011

Two main objectives when buying their next home

Seniors look to fill two main objectives when buying their next home. We have some answers.

danBy Dan Dolan
Dan Dolan Homes

It’s been a little quiet at my Sunday open houses for the past couple of months—as expected. During the holidays, most seniors devote their attention to some of life’s greater priorities like family, friends, football, and New Year’s resolutions. Thoughts of housing get delayed into the New Year, typically until after Super Bowl Sunday. But that December-January respite is not all bad because during that time, those seniors who do come by generally represent serious buyers who really want to explore their available housing options.

That period likewise gives me the opportunity to do a little market research of my own and to better understand what seniors are thinking about and just maybe it lets me share the latest industry trends with those potential buyers as well.

When we visit, senior home buyers generally have two overall objectives they want to address:

1. To find “the best” all-on-one-floor accommodations to replace the current too large, older, stair-studded home with the large high-maintenance yard and,
2. To identify those options that will best help preserve the financial assets that have been accumulated over the years.

Other important considerations may include location, proximity to family, operating costs, taxes and perhaps selected personal preferences.

To address the primary issue, builders who target the senior housing market design homes that allow buyers to “age in place.” While most home buyers tend
to be mobile at the time of purchase, in the event of a possible future need for a walker or wheelchair to get around, it is desirable that the new home allow for that occurrence. For instance, all our new town homes at our latest development, Stone Gate East in East Davenport, feature no-step entry, wider doorways, main floor laundry, step-in showers, lever door handles, etc. Current owners of Dan Dolan town homes constantly remind us how vital these features are to their lifestyle.

Of course, freedom from lawn maintenance and snow removal are highly desirable benefits of all Dan Dolan town homes. Especially so this winter!

In the coming weeks, progress on our two model homes under construction at Stone Gate East will allow us to demonstrate those benefits along with the exclusive insulated concrete Dan Dolan Silent Wall that we use between all side-by-side town homes. And for the first time, we will be able to offer some 12 home sites where we can build unattached, freestanding town homes for those who prefer that option.

When it comes to preservation of wealth I have some ideas there, as well. And while I’m not an estate planner I can share the experiences of some of our buyers who have faced the same preservation of wealth issues. For instance, we have buyers who pay cash for their new home. They believe that their home represents their primary investment and that they prefer not to have to deal with a monthly mortgage payment. We respect that point of view, and we are certainly prepared to accept cash at a closing but I would remind any buyer that the home will appreciate at the same rate regardless of the amount of equity in the home. In essence, then the equity in the home is not earning any investment return though admittedly the homeowner is not incurring any mortgage interest expense.

A very popular home financing option since January of 2009 that does free up the excess equity in a home is the Reverse Mortgage for Purchase. Prior to 2009, reverse mortgages could not be used to buy a home. They were strictly a source for releasing the available equity in an existing home to either help make home repairs or to receive an income stream to supplement living expenses. A Reverse Mortgage for Purchase works differently.

Since Congress approved the use of a Reverse Mortgage for Purchase of a home, a home buyer makes a one-time down payment based on his/her age, takes title to the home and lives there as long as desired. Upon eventually vacating the home, the home is sold by the heirs and the proceeds are used to liquidate the mortgage balance. Any leftover proceeds go the homeowner or the estate. However, the liability never exceeds the value of the home so neither the homeowner nor the estate are ever left with a remaining “balance due.”

What homebuyers like about the Reverse Mortgage for purchase:

1. The down payment is based on the age of the younger borrower. The older the borrower, the lower the down payment. For instance, a 76-year-old buyer of a $220,000 home at Stone Gate East would pay about $76,000 down. There are no further mortgage payments ever. Owners pay their real estate taxes, homeowners insurance and the $100 monthly fee for lawn maintenance and snow removal. That’s it.

2. Because there are no monthly mortgage payments, housing expenses are fixed so income such as social security benefits or pension benefits can be used for living expenses generally without need for withdrawing from a 401K or other investment accounts.

3. Any funds from the sale of the existing home not used for the new home down payment can be invested as desired.

4. Should the husband or wife become incapacitated or pass, the remaining member needs not be concerned about the source of funds for mortgage expenses. There are none.

5. Upon the passing of both mom and dad, the estate need not worry about how to pay off the mortgage. In fact, there may be sale proceeds in excess of the mortgage payoff that would revert to the estate. Some buyers prefer the conventional mortgage option and elect to put down perhaps 20% of the purchase price and make a monthly mortgage payment. That’s certainly another possibility.

Making it happen

We encourage seniors looking to make the housing decision to visit one of our open houses to see and hear the Dan Dolan Homes story and to discuss the financing options available. In East Davenport, we are off Eastern Avenue just south of 53rd St. We have two models under construction with completion scheduled for April. Meanwhile, our Realtor host is located in the tower building at the far end of the property. My colleague, Don Gibeault is available there Sundays from 2 to 4 PM. Of course, I am always available by phone. We also have town homes at a number of price points in Blue Grass and Muscatine. Call me at 563-570-1460 for the open house hours there or for a private appointment at any of our locations. We hope to see you soon.

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