A married couple in their late 60s -- a pharmacist married to a high school teacher -- never imagined they’d be house hunting as they approached retirement. But that’s exactly what this San Diego couple is doing: plotting a move to a Washington, D.C., suburb to live close to their three preschool grandkids.
“At this stage of our lives, the kids mean everything to us. They’re still in strollers, and we’re happy to help their parents in any way possible, including childcare. Then we hope one day their parents will help us out if our health turns bad,” the pharmacist says.
For many years, the older couple have been careful to save as much as possible for their retirement. Saving proved a lot easier after they prepaid the mortgage on their San Diego property more than a decade ago. Their Spanish-style house has quadrupled in value, and they expect to soon sell, pocketing a handsome profit.
Contrary to many in their age group, the couple is expecting to upsize to an even larger property within the same neighborhood where their three grandkids live.
“Nearly all of our friends are downsizing, but we’re traveling a different road. We want a bigger house where all three kids can have their own rooms and stay over with us anytime they want. They won’t be young forever, and we cherish these early years. Nothing means more to us,” the pharmacist says.
Right now, they’re considering a brand-new house with five bedrooms and seven bathrooms. The two-story luxury property, with 6,349 square foot of living space, is elevator-ready in case they should have difficulty scaling the stairs as they grow elderly. Best of all, it’s located just two blocks from the grandkids’ house.
“We love that this beautiful community has neighborhood schools and a big regional park where the children can play basketball and soccer. It also has great trails where the kids can bike safely,” the teacher says.
Moving up to a larger residence is uncommon for seniors because of affordability issues. But it’s not necessarily an imprudent idea, according to Eric Tyson, coauthor of “Personal Finance for Seniors for Dummies.”
“The exciting reality for some seniors is that appreciation on their real estate, coupled with strong 401(k) savings, have actually given them a net worth in excess of one million dollars. That allows them a range of dream-home options,” Tyson says.
Still, Tyson cautions seniors against making any trade-up decision without considerable forethought.
“The catch for people planning for their later years is that they don’t know how long they will actually live or whether they’ll need home health care or assisted living in their later years. Health care of all kinds is getting terribly expensive,” he says.
Here are a few pointers for those planning to upsize in retirement:
-- Seek out a mortgage lender for advice.
Sid Davis, author of “A Survival Guide for Buying a Home, recommends you fact check your financial concerns with an established mortgage lender.
Even if you’re confident you can qualify for a mortgage on a bigger home, it’s good to gain preapproval to enhance your chances of acquiring your dream house. This is especially important for retirees who must prove they have the assets and income despite no longer receiving W-2 statements.
“It’s true that lenders are a little less stringent than they were during the financial crisis of 2008. But you still need to have all your paperwork in order. To make the lender happy, I recommend that even before you start shopping for homes, you pull together the key documents you’ll need to show you’re worthy of a bigger mortgage,” Davis says.
-- Reconsider your reasons for planning to move.
Anxiety can prevent people from moving ahead, even when it’s against their interest. But those convinced that now is a good time to buy a bigger home shouldn’t let unwarranted fears constrain them.
One way retirees can put their fears about real estate in perspective is to reexamine their original reasons for trading up.
“Remember that waiting to acquire that larger house means that your intentions are delayed, which would postpone improvement to your quality of life. Anyway, there’s no guarantee you’d get a better deal a year or two from now,” Davis says.
-- Make sure you fully research the target market where you hope to buy.
In many areas, inventories of unsold homes are still very tight or shrinking, making multiple bids commonplace. But in other neighborhoods, the inventory balance is gradually getting better for those seeking to move up. And in still other areas, the picture is mixed. It all depends on your target market.
Suppose, for instance, that you’re selling a property in a starter-home community in great demand by millennials trying to break into homeownership. Meanwhile, you’re intending to buy in a luxury-home neighborhood where there’s an ample supply of properties and buyers don’t outnumber sellers. In that case, you could do well on your dual transactions.
If you live in an area with many available housing options, you can afford to take somewhat more time to make your selection and seal a deal. But Davis cautions against waiting indefinitely to buy in any area that remains red hot -- perhaps because it’s an extremely popular community with little new construction.
“Assuming this is really the right time for you to buy and your numbers work, don’t let past disappointments with real estate, like losing out in a multiple bidding situation, haunt you,” he says.
(To contact Ellen James Martin, email her at email@example.com.)