Moving an aging parent into a smaller home is one alternative to assisted living and senior living communities. Not everyone is ready to accept care at a facility, and that’s okay.
Sometimes aging parents prefer to stay in their home rather than move into an alternative living arrangement, even when their current home is unsafe, full of fall risks, and is too large to properly take care of.
The good news is that it’s possible for your aging parent to receive care from the comfort of a home. It just might need to be a different home, one that is smaller and safer for your aging parent.
Get An Understanding Of The Financial Picture
Before you start browsing all of the potential homes, take time to get an understanding of the overall financial picture.
The first step in understanding the financial picture starts with knowing how much equity is in your parent’s current home, if they need a mortgage, if they qualify for a mortgage, and if somebody else may need to buy the home.
By gaining a clear financial picture, you can better answer questions like:
- Can I buy a new home? Or do I need to sell the current home first?
- What repairs do I need to make, or can I sell it as-is for cash?
- How much of a mortgage is needed?
- Will I have enough for a down payment?
Let’s walk through some of the critical financial steps to help you find a solution for your situation.
Finding The Equity In Your Parent’s Home
Home equity is a two-part equation. Take the home’s value, then subtract the current mortgage amount. This gives you the potential equity, before any closing costs.
The formula looks like this:
Home Value – Mortgage Amount = Equity
For example, Mom’s home is worth $260,000 and her current mortgage is $35,000. Mom has an equity of $225,000.
Finding the mortgage amount on a home is generally pretty easy. Many adult children help their parents manage their finances, so they tend to know the mortgage balance.
If your parents manage their own finances, ask them where you can find their mortgage statement.
On the other hand, finding an accurate home’s value is a little bit harder. Get an accurate value of the home, not just a Zillow Zestimate. You can do this by contacting an appraiser (costs money) or a certified Pricing Strategy Advisor (PSA) real estate agent (free).
It’s important to contact a PSA real estate agent and not an average real estate agent. PSA agents are most qualified to provide accurate home valuations.
You can find these agents by visiting the PSA directory and searching in your area.
Plan For How To Buy The Smaller Home
With an idea of the potential equity in your parent’s home, it’s time to consider how to buy the home. Do you have enough equity to pay cash for the new home? Will you need a mortgage? How much will that mortgage be?
If you need a mortgage, the next best step is to talk to a mortgage lender to understand your options, how much a parent can qualify for, and under what conditions.
To qualify for a mortgage, your parents need an income and the debt must not exceed a certain percentage of their income.
Generally, there are three problems that occur when trying to move an aging parent into a smaller home:
- Not enough income or no income
- Not enough equity or savings for a down payment
- Too much debt
Many people in retirement live on a fixed, low income. As a result, even though they can pay their current mortgage, they might not qualify for a new mortgage or qualify only for a low amount.
In these cases, to move an aging parent, the home price may be lower than desired and the current home will need to be sold before you can purchase the new one.
Even if the income supports a mortgage, coming up with the down payment tends to be a problem.
Since many aging parents have one of these problems, their adult children step into help, and in some cases, buy the home under their name, but their parents will live there.
Should an adult child go this route, take extra effort to sit down with your parents to plan their estate and have a talk with your siblings. I have seen too many cases where families are torn apart because of disputes about the parent’s estate, inheritances, and differences in what people think is fair.
Get Authority To Sell The Home
Okay, enough money talk. When you’re selling a home on behalf of your aging parent, you need the proper authorization to do so.
Since elderly folks are the target of many scams, your real estate agents, title companies, attorneys, and lenders will all need to ensure proper authorization and competence.
If your parents are signing documents themselves and you’re mostly assisting, every party involved will make sure your parent is competent and isn’t being coerced into signing the documents.
On the other hand, if you’re making these decisions for your parents, then you need proper legal authorization. Generally, this means a Power of Attorney (POA), conservatorship, or guardianship.
You require authorization from the courts and a judge before you can sell your aging parent’s home. If you’re unsure what this looks like in your region, then seek legal counsel.
Understand that your parents have a lot of emotions attached to their current home. It’s more than a building with four walls and a roof over their head.
It’s their home. Not simply a house.
For many, their home represents their hopes, fears, dreams, and failures. It’s the place where they built their life, raised their kids, experienced joys, and went through bouts of sorrow.
Moving an aging parent into a smaller home still has many of the difficult emotions that are common with moving a parent into assisted living or a senior living community.
It’s an emotionally challenging process, so be prepared to navigate these emotions. Help your parents cope and find ways to channel their emotions. Don’t move too fast or you will face resistance or resentment.
You’re doing it because you care about your parents, and it’s a delicate balance between providing them with what they need (a smaller home) versus what they want (to stay in their current home).
Hire An Experienced Real Estate Agent
To successfully move an aging parent into a smaller home, you have to hire an experienced agent.
For the best outcome, look for a real estate agent that helps clients in similar situations to yours. You want a real estate agent who regularly deals with adult children and their parents.
The process is full of more legal and emotional needs than traditional real estate transactions. For example, the best real estate agent for you will have connections with junk hauling, estate sale, and storage companies: things you’re likely to need in the process of helping your parents move to a smaller home.
Years of experience, or number of homes sold, is less important than the right kind of experience. It’s far better to work with a real estate agent that has done a handful of similar transactions, rather than a general real estate agent that does hundreds of deals a year but has never dealt with a situation like yours.
The right real estate agent will walk alongside you throughout the process so that you don’t have to worry so much about all of it. You can relax and let your real estate agent do their job and achieve an outcome that is in your parent’s best interest.
Sometimes the best solution to care for your parents is moving them into a smaller home. For the best plan, start with getting a clear financial picture. Armed with the financial picture, you can pick the best option based on what’s possible. Prior to executing your plan, make sure you have proper authority or that competency is clearly proven.
Throughout the process, you will have to navigate the emotions of selling your parent’s home, but a reliable and experienced real estate agent makes the process better.
A good real estate agent is like a good pilot. While they can’t always avoid turbulence, the best pilots will get you from point A to point B with the least disturbance. The same is said about a good real estate agent. Problems and emotions can’t be avoided, but a good agent will navigate them better and get you from point A to point B in the best way.
Alex Craig is a Michigan real estate agent who has helped hundreds of adult children navigate real estate complexities for their parents—from probate, to assisted living, to alternative living arrangements for long-term care. His “compassion over commission” approach has made him a well-respected real estate agent in his community and a real estate thought-leader in the elder care industry.