Thursday, 1 October 2015

Last Time Sellers: The Planned and the Unplanned

First time buyers get the lion's share of media attention. Not terribly surprising as our culture does tend to obsess over the young and what they'll do next, and a great number of first time buyers are young or at least 10-15 years away from retiring. The term first time buyers comes off as a bit exciting. They're getting on the train. They have a full life ahead of them. They're growing and saving for the future. What will they do next?

Today's blog, however, is all about the last time seller, a person who's  deciding to get off this property train. Perhaps this may not be where you are just yet. In fact, it may not even be crossing your mind, but it will. If not for you, then maybe a parent or a grandparent whose property you will have some stake in.

Often last time sellers have owned a property for a long time instead of changing it up every five to ten years. They are likely retired or retiring or can no longer take care of their current property. I find many Torontonians over 70 have owned their house for their entire lives. They have not moved around as much as the under 70 crowd. When last time sellers bought a home, they grew roots there. It was not just an investment. In general, this generation is a trustworthy and loyal bunch as long as they feel respected.

Like first time buyers, there is a certain way to handle this last transaction to benefit you or your parents the most. In my real estate experience, and my own personal experience, last time sellers fall into two categories. The planned and the unplanned.

The unplanned do not look at the future as something to be organized, but it is something that will happen to them. However, this can be a stressful approach when a crisis hits and there is no game plan. Some last time buyers can no longer take care of their home and their health requires that they move. Even then, I often hear: "The only way I'm leaving this house is if I'm carried out in a box."  If something happens where an owner can no longer manage their lives on the property, then families are left scrambling to find appropriate housing and trying to figure out what to do with the family house.

Then there are those who decide to be last time sellers, the planned last time sellers. Some decide to get out of the market and enjoy the money they have built up in the equity of their home. They often rent instead of owning, freeing up their money for cruises, their kids, their debts, their enhanced lifestyle, their rental unit,  Shady Pines or whatever they like. It's their money.  The difference is that the fist unplanned group waits for a crisis to occur before making the move. The second prepares for the sale accordingly. It would not be hard to figure out that the planned group does much better than the unplanned group financially when it comes to the sale of their homes.

In some ways, last time sellers are like first time buyers.  Ideally, you want to enter the market at a low point and sell at a high point. Of course, life doesn't happen that way. You can't wait around for twenty years for a correction to occur. As always, it's very tricky to predict the top.

The big difference between first time buyers and last time buyers - first time buyers can wait it out. So, let's say a first time buyer bought his or her first property in 1989 at $500,000 in Toronto's Cabbagetown neighbourhood.  Because that was the height of the market, the first time buyer would have lost money if he or she tried to sell it in say 1995 where values where much lower. By around 2001, the prices have come back to 1989 levels. By 2015, they would have surpassed those 1989 selling prices significantly. So, if the first time buyer, even in the unluckiest 1989 market, does have time on their side. This past example is the most extreme one of the past fifty years, but it does make the point that waiting will bring the prices back. Even if the market corrects, most first time buyers, if they hold their property long enough, will experience a strong real estate market again, hopefully sooner rather than later.

Now last time buyers don't often have time on their side as much. If you are near the retirement age or are planning on using the value of your home to fund your retirement, you have a tough decision to make. You may not want to wait around for twenty years if their is a market correction. You will want top dollar for your property now or at least soon. You don't want to sell too soon. You may miss out on a lot of appreciation, but you don't want to wait too long so that you will have to accept your property value at less if there is a change in the market.

I'm not going to offer timing advice here. The timing has to be right for you . Make sure it's the right time for you or your parent on a personal level first. If you are tired of shovelling and cutting grass or all your friends or your Mom's friend have moved into the retirement community down the street, then it may be time.

For last time sellers, I would make the following suggestions though:

1. Staging Matters. When it comes time to sell you home or condo, or your parent's property, know your buying demographic. You may have to appeal to them for top price.

2. Have a Clear Will - Make sure you have every thing in writing in a will. Know who will look after your affairs if you our your parent cannot.

3. Kids - If you are helping your parents move to the next step or if you have kids of your own, lean on them. They owe you! You have supported them your entire life. They can help you organize and prepare your home along with your agent.

4. Know where you are going. Make sure the next place is the right fit for you or your parent, whether you are renting an apartment down the street, moving to an assisted living organization or sailing off in a yacht around the world. Make sure you put the time into research and testing.

5. The Long Good-Bye - For some people it can too tough to leave a place they have been a long time. Some people have built a lot of memories in their home whether it's a parent you're helping or it's you. I say let yourself be sad. Mourn the loss of your condo or house, but allow yourself to be a little excited about the next chapter. I find with a fresh start and an easier and pared back lifestyle, many last time sellers have the freedom to do more and be more social.  With that said, you have to be ruthless with all of the stuff that has accumulated over decades. Chances are, you won't be using 90% of it again. Know what's important and know that you will never use that fondue set again from 1983, even though it still works.

No comments:

Post a Comment