When downsizing, buying, or financing your home, consulting a trusted professional is essential for ensuring you and the seniors you love are able to achieve the end result desired while being treated fairly. A recent experience one family had – involving the downsizing of a grandparent’s home, and merging generations into one house – illustrates many of the concepts behind this complicated life transition. Among these are the importance of working with ethical, well-connected, and trusted professionals; planning for major changes; protecting ourselves while helping those we love; potential conflicts of interest; and, notably, the vulnerability of seniors.
In our current world, everything is highly complicated and requires a specialist. Knowing when a professional is required, and how to find one, is only half the battle – the real issue lies in finding a dedicated professional who helps you, and those you love, with your true best interests at heart.
A couple in their mid-to-late 40’s, whom we will call the boomers, contacted me to discuss the possibility of purchasing a new family home for themselves, their teenage children, and their elderly father in his late 70’s: the senior. These clients were off to a good start by choosing an unbiased professional whose credentials and operating style were known to them. We began working together to look at the feasibility and affordability of the new home purchase; this is where we realized that there were many critical underlying issues:
- Qualifying for finance would be a challenge.
- Both the boomers and the senior had damaged credit history. This stemmed from a previous serious life event, in which both boomers lost their jobs and then their home. The senior had tried to help by mortgaging his home to lend them money – but then he was unable to pay it back, so he now had a bigger mortgage on his own home.
- Down payment for a new house would come from the sale of the senior’s home. This posed some challenges.
- Firstly, since the death of his spouse, he was having trouble managing on his own – both finances and belongings and had thus become a hoarder, which meant the home would have to be cleared inside and out before it could be sold.
- Next, they were receiving unsatisfactory service from the senior’s realtor. The senior had hired a discount real estate brokerage to sell his home; now, the agent was not returning his calls, was refusing to talk to the boomer daughter, had not supplied a copy of the contract the senior had entered into to sell the home, and to top it off, he had signed the senior into a one-year contract (which the senior didn’t realize).
- Lastly, the senior was behind on mortgage payments due to the credit troubles mentioned above. Further to that, he was also unclear on the pre-payment penalty that the mortgage lender would charge to pay off the mortgage upon the impending sale of his home.
- The purchase of a new home would also be complicated
- The boomers had entered into a dual agency agreement to buy their new family home. This is an agreement in which the realtor selling the home, and representing the best interests of the seller, was now also representing the boomer buyers, and their best interests. This can easily lead to a potential conflict of interest.
- A deposit would be required upon acceptance of their offer to purchase – but they would not have the required money until the senior’s home sold.
- The new home would require some work, but since all their money would be used in the down payment, there would be none left for repairs, upgrades, or renovations.
All in all, they were facing a harsh reality, and up to that point they had gotten very little help professionally. We immediately set to work finding the proper solutions. Here is what we did about the:
- Damaged credit history: Having access to a multitude of lenders and lending solutions, we were able to secure two mortgage approvals – including one at best rates with no fee. For the clients, using a professional with well-established relationships meant that they received an approval that wouldn’t normally be granted, saving them money through smaller monthly payments and no fee.
After that, a recommendation to a trusted credit counselling organization paved the way for the boomers to improve their credit score, and set in motion a long-term plan for rebuilding their credit and reducing their debt.
- Hoarding: A recommendation was made to a fellow member of SBSA – Susan Borax, one of the founders of Good Riddance Professional Organizing – to assist with clearing the senior’s home, inside and out. The scope of the project was so large that a hoarding specialist was subsequently recommended by Susan, again drawing on established connections.
- Unsatisfactory service from the real estate brokerage: This was a major issue for everyone involved, and had several different aspects to address.
- I gave suggestions and support on how to terminate the senior’s contract with a professional they were clearly not happy with, and who was failing to provide the service the clients wanted. However, calls by the boomers to the agent, the manager of the real estate office, and even to the Real Estate Board were unsuccessful.
When the Board was advised that a 78-year-old senior had signed a year-long contract – of which he was not even given a copy – and that he was not receiving the communication and service he required, the Board’s disappointing answer was basically that “He is an adult, and he signed the contract”. This was an opportunity for the Board to educate their members, one which they did not use; with the growing number of seniors, we felt the Board should take the issue of senior abuse very seriously. Ultimately, it took a media investigation for the realtor and managing broker to finally release him from the contract.
- The clients were then able to secure the services of a realtor who specialized in the type of property being sold, and who was open to having a better relationship with the family, in order to help the senior through the process of selling his home. This realtor soon secured two potential sales on the senior’s home.
- The calculation for mortgage pre-payment penalties (the penalty to pay out early) was explained, and advice was provided on how to verify this figure in advance of the sale. This way, the senior would know how much money would be available from the sale of the home, after repaying the mortgage and penalty. We also advised checking the status of the senior’s mortgage as there were ways to avoid this penalty.
- Challenge of purchasing a new home: Once the other issues had been resolved, these problems became much easier to resolve.
- The boomers were so pleased with the new realtor that the senior had engaged to sell his home, that they asked him to represent them in the purchase of their new family home. This removed the potential for conflicts of interest due to the dual agency agreement.
- The new realtor representing the sale of the senior’s home had secured a relatively quick sale, for more money than anticipated. This meant that the boomers and the senior would be able to use the money from the sale as the deposit on the new family home purchase.
- We arranged for a Purchase Plus Improvements mortgage, in which the mortgage would be based on the purchase price of the home plus the necessary improvements. This would allow for the work to be done as needed, with the costs absorbed into the mortgage.
There are many moving parts to buying and selling real estate, which are increased when dealing with multiple generations and multiple properties. The best way to get ahead – and stay there – is to start by finding the quarterback who will help manage the entire process and introduce you to other trusted professionals. Consumers, especially vulnerable seniors, can unfortunately be taken advantage of in all industries, including real estate. That’s why it’s essential to work with someone who has YOUR best interest at heart.
ABOUT THE AUTHOR
Julie Issac, Accredited mortgage Professional at Custom Mortgages Real Estate Financing
Julie focuses on finding the best mortgage fit for her clients. As an Accredited Mortgage Professional (AMP) with over 13 years experience in banking and finance she is able to provide advice on all aspects of choosing a mortgage including rates, terms, payment options and pre-payment flexibility. By listening to her clients needs, she creates specific financing solutions and helps her clients save money over the life of their mortgage.
More about Julie: http://custommortgages.ca/julie-isaac