Housing market hindering retirement communities
A major component of many retirees’ net worth is their house or condo, and that fact triggered a lot of ongoing headaches for continuing care residential communities when real estate values plummeted in the onset of the Great Recession.
A lot of continuing care residential communities, or CCRCs — which are mainly nonprofit, faith-based entities — have had to adjust their pricing downward, and many also have gone to the root of the problem by promising to help new residents sell their former homes.
Holland Home has gone so far as to buy some of those properties as a last resort.
“People were telling us, ‘I want to move into a Holland Home community but I have got to sell my house first,’” said Chris Nicely, vice president of marketing at Holland Home.
That’s when Holland Home, a 118-year-old community that is the 39th largest CCRC in the U.S. with 723 residential units, introduced its Home Buy-Out Program.
Under the agreement, the owner of a house or condo puts it on the market and moves to Holland Home. If it has not sold within six months, Holland Home will buy the property for 91 percent of the final appraised value. The asking price is determined by averaging two appraisals, one arranged by the homeowner and the other by Holland Home.
Nicely said Holland Home has entered into 83 buy-out agreements and has had to buy 19 houses or condos that did not sell within six months. All 19 have since been “flipped” to new owners, with the help of Greenridge Realty.
About those 19 properties: “The bad news is, we take a loss. The good news is, we don’t take a bath,” joked Nicely, because the loss on the flip has turned out to be less than anticipated.
Nicely said more and more retirement communities are going to the buy-out program to keep new people moving in, although Holland Home was the first to do so in Grand Rapids.
Waterford Place in Jenison, which is part of Sunset Retirement Communities and Services, adopted a similar home purchase guarantee after it opened in late 2009. Executive director Nicole Swart said about 40 of its 84 independent living units now are occupied, and more than half are spoken for.
Ten years ago or more, she said, a new development like Waterford Place would typically have taken from six months to a year to fill up. Now the estimate is three to three and a half years. The much shorter time span to fill new units was back when “homes were selling in 30 days,” she noted.
“We saw what was happening to people, not being able to move in to the community because they need the proceeds from the sale of their home to purchase their lease,” said Swart.
Swart said five houses or condos are now in its Home Purchase Promise program and five more are pending. The program was launched in March 2010.
Recently, she said, the Sunset organization followed through on its guarantee and bought its first property “and it sold three weeks later,” she said.
Swart said the very soft real estate market was the main reason Sunset launched the guaranteed home purchase program to entice new residents. “People were very concerned” about the prospect of trying to sell their homes, she said. “They didn’t want to be in that situation where they just sat on it for months and months — if not years.”
The Home Purchase Promise “gives them certainty and a safety net” at the end of the six-month period, “knowing their home will be sold. So they can plan accordingly and not have to worry ‘is mine going to be one that sits on the market for two years and not sell?’”
Waterford Place partnered with two real estate brokerages to work with homeowners who enter into a Home Purchase Promise agreement. The brokers, Greenridge Realty and David Miedema Realty of Jenison, represent the owners and try to get the property sold within six months. If it doesn’t sell and Sunset buys it, then the agents represent Sunset.
Having an arrangement with two separate brokers “gives (the seller) an option,” said Swart. Some seniors prefer to work with a “local” broker who is known specifically in that community, such as Miedema.
When an individual makes a deposit on a residential unit and enters into a Home Purchase Promise agreement, they move in immediately. Their former home is then emptied of furniture and personal possessions, and prepared for sale. The goal is to get the house or condo sold so that the Sunset organization does not have to buy it.
“It’s great for the resident if Sunset does not end up having to buy it because they net more,” said Swart. “We do everything we can to help them make it look good — to make it sell quickly, but also to help them get the most money in their pocket, too.”
“Free moving services is another component of getting them here,” said Swart.
She is referring to Seniors Moving Smarter, a business started by Elizabeth McCulloch, who has worked with seniors for years as a social worker. Swart said Waterford Place partnered with Seniors Moving Smarter, which comes into a new resident’s home and helps them plan the move, providing packing supplies, arranging for and managing the movers, determining where the furniture goes in the new home at Waterford Place, unpacking and setting up there — even helping the owners decide which items they no longer need or want and how they can best be donated to charity.
While some other CCRCs “have gone into the real estate business,” said Doug Hale, Covenant Village of the Great Lakes does not buy property, but it does connect potential residents with a nationwide relocation company called Moving Station.
“This is another option with what they call a guaranteed buyout at the end” of a given period, said Hale, who is director of sales and marketing at Covenant Village, 2510 Lake Michigan Drive NW.
Moving Station is a global relocation company based in Chicago that serves corporations that are relocating employees, seniors moving to residential communities, homebuilders, and military personnel undergoing “change of station” — hence the company’s name. The deadline for sale of a property, under the Moving Station process, is up to 150 days.
Although Covenant Village is not involved in the sale process, according to Hale, he said if the property does not sell within the set time, the owner is “in line for a formal offer to purchase” by Moving Station.
Hale said there are a number of future residents who currently are involved with Moving Station, but he did not reveal how many have done so thus far or whether any homes have actually been bought by Moving Station.
“They act as an advocate,” he said. “They help you price it fairly, so it will sell. It has everything to do with where it’s priced.
“We do have a lot of people who would love to move here, but then they’re fearful of what their place is worth. They’re fearful of the process of selling it and of all the things that go with moving.”
The Covenant Village organization was founded in Chicago almost 125 years ago and has 13 CCRCs around the nation. The Covenant Village on Lake Michigan Drive is the first in Michigan and was built 10 years ago, so “we’re fairly new” here, said Hale. In addition to its 188 independent living apartments, the complex also includes assisted living units and a skilled nursing facility. The first residential units were opened in 2004, according to Hale; then, a few years ago, Covenant Village added another 84 units in a new wing of its independent living facility.
“I don’t have to tell you what happened from there,” said Hale, referring to the recession. “Things just changed.”
About 76 percent of Covenant Village independent living units on Lake Michigan Drive are occupied, while its assisted living is full and has a waiting list, and its skilled nursing units are “well over 90 percent” occupied.
“We have changed a lot of our pricing,” said Hale. “We’ve gone back to the basics in saying we need to be more affordable. If people are taking a loss on their home or condo and they need that money to come here, we definitely want to make sure that we are affordable, so we’ve adjusted a lot of what we’ve done pricewise.”
The recession “hurt in so many ways,” said Hale, adding that many CCRCs around the nation are changing their pricing in response to the drop in home values.
“We’re partnering up with people taking a 20 or 30 or 35 percent loss on what they’re selling,” he said.