The photo is somewhat amusing. Yet the reality behind it is not…
Too many seniors and/or their families have turned one of the most critical financial decisions they face regarding elder care into a game of Pin the Real Estate Tail on the Donkey.
For a number of homeowners thinking about selling their homes, choosing a real estate agent based on little more than a casual recommendation - "my cousin's best friend's son knows an agent" - might work out for them. However, homeowners would be well served to be cautious about relying solely on a casual recommendation from a friend, neighbor, relative, or co-worker. While such recommendations can be a useful starting point, they are often based on limited personal experience and may not reflect the agent's suitability for the seller's specific needs, property type, market conditions, or goals.
Home sales transactions involve significant financial consequences, and choosing an agent should be treated as an important business decision. In this regard, homeowners should interview multiple agents, check licensing and disciplinary histories, ask detailed questions, evaluate marketing plans and strategies, and understand compensation arrangements, among other things.
The Special Considerations Applicable to Homes of Seniors who are in Need Elder Care -
For millions of seniors in America, a home is no longer just a piece of property. Instead, it is the financial and lifestyle anchor holding their lives together. Yet, every single day, seniors and their families make irreversible, life-altering decisions to sell such homes in moments of crisis, rather than engaging in deep, strategic analysis and planning.
Because of this, It is time to stop playing Pin the Real Estate Tail on the Donkey. And this is especially so for the homes of seniors who are in need of a spectrum of “elder” care. The stakes are simply too high. It should be noted that senior protection in this area is not about stopping home sale transactions it is about ensuring that seniors and their families understand the life-altering consequences before any home sales contract is signed.
The current reality is that myriad older Americans find themselves "house-rich and cash-poor." Their property value is at an all-time high, but the ancillary costs of maintaining ownership are actively diminishing their liquid wealth.
When a health or elder care crisis hits - whether it is a medical care issue or the need for assisted living - too often the default, panicked response from families is: "We need to immediately sell the house."
They treat "selling the house" as the end of the discussion. In reality, that is precisely where a multidisciplinary, collaborative, and strategic discussion must begin.
The Vulnerability of the Real Estate Agent and Other Professional Silos -
A serious risk to seniors and their families is that too many approach elder care and housing in strict, isolated professional silos. For example, many…
● Real estate agents focus entirely on listing and selling homes.
● Senior care professionals focus on care plans and facility placement.
● Estate attorneys focus on trusts and probate.
● Financial advisors focus on liquidity and investment portfolios.
But seniors and their families do not experience aging in silos. They too often experience all of these financial, legal, and health care pressures simultaneously.
When a senior and/or his or her family relies solely on a traditional real estate agent to decide whether a senior should sell a home, they are putting a real estate transactional practitioner in charge of a complex healthcare and family estate ecosystem. The typical real estate agent's business model is designed to facilitate a sale. Most are not trained to evaluate long-term care expense rates, capital gains tax exemptions and tax liabilities, Medicare and Medicaid issues, or the financial security of the senior and/or his or her family.
None of this is to suggest that real estate agents are doing anything wrong in the above scenarios. But when the right questions are not being asked by the right people, including experts, and there is no multidisciplinary, collaborative, and strategic discussion, a disaster might occur with respect to the life of the senior.
Recently, we wrote an article which looked at a calamitous event where a senior homeowner hastily sold a highly appreciated property to fund elder care needs. Because the sale was executed as an isolated real estate transaction without cross-collaboration from a tax professional, it triggered an irreversible tax consequence. The senior was hit with a tax bill exceeding one million dollars - a devastating blow to the senior’s care fund that could have been significantly minimized or entirely avoided with proper and thoughtful cross-disciplinary planning.
The Remedy: Cross-Collaboration and "Aging Intelligence" -
A senior's home is rarely just a piece of real estate. It is multi-layered, and can and often does serve as a place for retirement living, a long-term care funding mechanism, an inheritance, and a primary source of liquidity.
Because the stakes are very high, a real estate practitioner should never be the sole gatekeeper or decisionmaker. As noted above, and reiterated here, true elder protection demands the cross-collaboration of different professionals. Before a for sale sign ever goes in the yard, a unified strategy should be developed at the intersection of housing, law, finances, and elder care.
The professionals who provide the greatest value in this area are those who urge caution, pre-planning, and who bring the necessary experts to the discussion and decisionmaking table. In this regard, before a decision is made to sell a home, a collaborative team must ask and answer the following questions, and possibly many more:
- Should the senior sell now, or wait until other things happen - such as a step-up in basis?
- Can alternative financing options, such as a strategic line of credit (or maybe a reverse mortgage) fund elder care while preserving the home as an asset?
- How would the sale of the home impact tax brackets and capital gains liabilities?
- What are the known and/or expected long-term care expenses, and how long will the home proceeds actually last?
The Need for Breaking out of Silos and for Transparency; and Concluding Thoughts -
In addition to the need for cross-collaboration and the need to break up and out of silos, the senior care, housing, and aging ecosystem needs transparency.. For decades, much of the elder care industry benefitted by consumers not fully understanding how the system worked. That era must end. Transparency is vital, and must become the new watchword. The businesses that add value are the ones which are willing and able to fully explain their models, and collaborate with other disciplines to best protect the seniors in need.
Sadly, too many seniors and/or their families do not know whom they can trust.
Transparency can help to generate and to build the necessary trust.
When a home represents the final shield protecting a senior's dignity and care, he or she (and his or her family) must not play Pin the Real Estate Tail on the Donkey. The latter could bem as discussed above, a recipe for catastrophic financial and care distress. A home’s equity should never be stripped in a moment of crisis. Blind marketing scenarios must be replaced with real elder care intelligence, collaborative/strategic planning, and absolute transparency.
