Don't Want To Move? Now You Don't Have To! Just Sell 'n STAY....
Tuesday Oct 25th, 2016Share
Living Life On Your Terms
A Sell ‘n STAY™ White Paper
There were 5,780,900 Canadians 65 and older on July 1, 2015. By 2051 1 in 4 Canadians will be 65 or older. (http: well-being.esdc.gc.ca/mismin-iwob/.3ndic.1T.4r@-eng.jsp?Iid=33.) According to a report by CBC news on our aging population of people 65 and over, it isn’t just large; there numbers are growing fast, representing 15.6 of Canada’s population. The population growth rate for the over 64 year old is set to increase by 3.5 per cent during the year, four times faster than the population at large. Improved Medical technology and public health measures have provided Canadians with a longer life expectancy and a better quality of life than in the past. Combined, the increasing aging population, increased life expectancy and the changing attitudes of our seniors, shows that this demographic are demanding more of life and reversing the trend of moving to retirement living facilities and choosing to “Age in Place”. Aging in place can have several meanings. For some seniors, it means staying in the same house they have occupied for years or decades, or any alternative to moving to a long-term care facility. Sell ‘n STAY™ defines “aging in place” as having the finances, health, social supports and services you need to stay in your home for as long as you wish and are able to. For the first time, aging seniors are being offered a complete “age in place” program by professional Licensed Trained REALTORS® - the Sell ‘n STAY™ Program. Sell ‘n STAY™ is a program that helps keep this ever-growing market segment in their homes by leveraging their desire to “age in Place”. The Sell ‘n STAY™ is aiming at the 85% of the aged population that do not want to move from their homes.
Current Equity Financing Options.
The time is now – an average of 70,000 Canadians per month are entering their 65’s what are the different options available to this segment of the population. Reverse Mortgage is a special type of home loan for older homeowners (62 years or older) that requires no monthly mortgage payments. Borrowers are still responsible for property taxes and homeowner’s insurance and must ensure repairs are done in order to comply with the contract. Reverse mortgages allow elders to access the home’s equity which they have built up and defer payment of the loan until they die, sell, or move out of the home. There are no required mortgage payments on a reverse mortgage, interest accumulates at a rate normally 3% higher than prime lending rates compounded twice a year. This interest is added to the loan balance each month. The rising loan balance can eventually grow to exceed the value of the home, particularly in times of declining home values or if the borrower continues to live in the home for many years. In Canada, the loan balance cannot exceed the fair market value of the home by law. The home however, can’t be sold until probate clears. This probate process can take up to 6 months in some cases. After probate has been paid the home will be sold to satisfy the reverse mortgage debt. From the moment the owner dies to the time that the debt is satisfied the estate must cover the probate, maintenance (heating, lighting, air-conditioning, insurance) plus the property taxes, Legal closing costs and real estate fees. With zero value left in the home, the estate must now cover these costs plus there is a penalty charged per month for not satisfying the loan in the first 30 days after death. Home Equity Line of Credit – A “HELOC“, or is a type of load that allows a borrower to open up a line of credit using their home as collateral. First, when you draw on a HELOC, it has to be paid back—with interest compounded like a credit card. So, while it can help with an emergency in the short-term, using a HELOC could become a long-term expense that actually adds to your monthly cash needs. Second, a HELOC typically has a life of 10 years, after which it becomes a regular home equity loan with amortized payments unless you renew it. Renewing means you have to qualify all over again, which isn't as easy to do once you're retired and don't have a regular paycheck. Sell ‘n STAY™ - A new concept designed specifically for the senior in mind by a senior advocate with a focus on designing a program that is fair and beneficial to all parties concerned and also creates a positive social and financial impact. This thought-out and beneficial solution for both the senior (tenant) and investor (landlord), provides an equitable solution that unlocks the equity in the homeowner’s residence to finance their retirement while continuing to enjoy all the benefits of remaining in their home. The estate benefits from retaining an inheritance while ensuring that their parents are well cared for in the style they were accustomed to. Sell ‘n STAY™ eliminates any emotional bombs that selling the family home normally cause. There is no question of what mom would have wanted because this has already been predetermined. A further benefit is that the property is now being professional managed so that children who live a far distance no longer worry about maintaining their parent’s home. Unlike the reverse mortgage, Sell ‘n STAY™ unique program is easy to implement, with less fees that are paid up front and accesses 100% of the seniors equity not the 25-50% that the reverse mortgage offers. In 2013, I was introduced to Jean by a financial wealth advisor because of my background as a Rotarian, and senior advocate. The financial advisor knew she could trust me to find the right solution. Upon meeting Jean I realized that she was my next door neighbour when I was 4. Jean’s husband had even taught me how to ride a bike. She explained that she had enough funds to last for 2 more years and wanted to look for a solution now. I applauded her for being proactive to seek out a solution now. I asked her why she wasn’t involving her children. She indicated that she wanted to retain her independence and not be a burden to her kids. We went through the options: Reverse mortgage, retirement community, Downsizing. Finally when we had exhausted all traditional solutions she said come and see my place and you will understand why I can’t move into a 400 square foot condo. Her beautiful condo was in a high demand area, 1200 square feet of luxury living. I suggested that we could sell her unit and she could rent in a unit in the building. She said “maybe I could sell to an investor and rent from them”. “Perfect let’s do that”, I replied. With that sale became the beginning of the Sell ‘n STAY™ program.
How does it work?
Through the Sell ‘n STAY™ program, seniors sell their home to a vetted, pre-qualified investor buyer who is a part of the Sell ‘n STAY™ program. The senior then enters into a lease agreement with the new owner. Although created with seniors in mind, the program is a valuable option for a variety of circumstances, for homeowners of all ages.
Top Benefits for seniors (Safe, Simple, Private) 1. Stay in your home, 2. No moving costs or costs just to sell 3. Provides 100% of value of home, with no payback of debt. 4. Private – no signs, no open houses, no nosey neighbours. 5. Takes advantage of financial trends and tax incentives. 6. Ability to redeploy funds into your core focus. 7. The Landlord and Tenant’s act is written in favor of Tenants. 8. Less fees and legal costs. Plus fee are paid up front. 9. Pride of ownership continues without liability of owning. 10. Empowers you – control what happens . Top Benefits for Estate 1. Parents remain independent. 2. Homecare can be brought in ad hoc. 3. Landlord ensures property is maintained. 4. Focus is on family relationship not finances. 5. Parents lifestyle remains the same, while inheritance is protected . 6. No Probate costs, Legal closing fees or real estate fees. 7. No Maintenance costs while property is being sold. 8. No emotional bomb, decisions have been finalized. 9. Your Children can still visit grandmother at home. 10. Just hand the key back to Landlord.
The Sell ‘n STAY™ Network
With a unique combination of network partners, Sell ‘n STAY™ delivers a full slate of services to facilitate the ‘aging in place” program. The agents licensed to deliver this program are trained, insured, experienced but most important are vetted to ensure that they have the right attitude going in.
Sell ‘n STAY™ Case Studies
Case Studies Case 1. Craig and Sharon own a Town house in Oakville. They called me on Dec 27, 2015 to list their house on the program. We did a complete CMA and the last property that sold, that was similar to theirs sold for $530,000. However, it had hard wood floors and theirs was carpet. I indicated the price I was comfortable listing it for was $550,000. Craig said $589,000. We put it on the exclusive listing. A great way to test the market. I contacted our investors, but it was Christmas so we had no real interest until February. Finally in March three things happened. 1. A house similar to their came up on the market for $640,000.00 2. Then a rental came up for $2200. 3. In the same week we got an offer for $590,000 and when it was discovered the other house was sold the investors bumped their price up to 600,000. $10,000 more then what he was looking for. The owners refused the offer and told us to put it on MLS Sell ‘n STAY™ . When we put it on MLS within 24 hours we had many agents competing for the property. One agent put in a bully offer because he didn’t want to miss the opportunity (apparently he had bid on the previous house) and offered 630,000. They had planned to come in lower but when they found out another offer was coming in they came in full asking price. We use 5% as the rental amount so the rent for the additional 40,000 increased the rental amount from 2454.00 to 2625. This case demonstrates why we can get more in a MLS situation because people come up higher with the fear of losing out on the deal. Fear + supply and demand equals increased pricing.
Jack had a 4 bedroom townhouse with 1 dog and 3 cats. He is 80 years old and could not find a retirement community that would accept all 4 pets. So he decided to go on the Sell ‘n STAY™ program. We listed his house for $400,000 on MLS. An offer came in on the same day for $380,000 for $1500 in rental payments. As I was the agent that brought this offer in I could reduce the commission which ended up making the difference. Jack wanted to wait for more offers and we soon had 6. The highest price was $419,000 but they wanted 6 % rental. Jack ended up taking the $40,000 lower because rental amount was lower + the commission rate was lower too. The net result was more money in the end. Even though he like the investor better in the highest amount offer. Case 3 Jean, the first Sell ‘n STAY™ invested her money with a TD investment bank. That year her advisor and her looked at historical averages on the TSX for the last 8o years. No fund advisor can guarantee great returns. No real estate agent can guarantee double digit increases in value. But history tends to give us a great indicator. Therefore, paying 5% rent and investing the money with a competent prudent investor will generate returns over time. House prices dropped in 1990 by 50% and it took 10 years to recover. That 50% would equal 10 years of rent at 5% per year. However during the same period of time the stock market delivered its best 10 year results. We are not saying that is always the case but history has indicated this to be true. We endeavor to create a program that is fair to all parties concerned. That is why we have long term contracts.
Sale and Leaseback programs.
During our Real Estate training we were taught that “Sale and Leaseback” programs were common in Commercial Investment in Real Estate. Canadian Tire for instance has sold its holding and is now leasing them back changing their profit margin. However, in residential trading this has seldom been used. A few years back (2008-2009) in England there were companies that would buy properties at a lower rate, sign contract for 6 to 12 months and then the tenants after this time were kicked out. In Canada, the situation is different. This program has been designed by Saskia Wijngaard, a senior advocate and Rotarian, and is protected by the Landlord and Tenants Act. An extremely strong piece of legislation that is designed to favour tenants. The purchase of the property is not held in a company but an individual investor. Finally, we have built in clauses written for your protection. We sell at market value, and the rental rate is calculated to be fair as well. It has been rated by Canadian Lawyers as “excellent”. It is a win-win-win program that hopes to tap into the senior market and meet the needs of this segment. In Conclusion, when looking at the three options. Reverse mortgage, Line of Credit and Sell ‘n STAY™ as an Equity Financing Option Sell ‘n STAY™ delivers a safe, simple, private alternative.