One of the most common ways for Americans to pay for senior living is to use the proceeds from the sale of their primary home. For many seniors, selling their home makes sense not only because of their large store of equity in the home, but also because it becomes more difficult to maintain a large house as you age. And given the high monthly cost of senior living community rent, for many Americans a home sale is one of the most effective ways to fund senior living retirement care. But while selling a home to pay for senior living may be the most sensible option for your parents to pay for their senior living, it can still be a difficult and emotional journey parting with a home that your parents built their life in. Along with the emotional side of your parents selling their home, there can often be complications that arise from helping a parent simultaneously sell a home and move into senior living. Making sure you balance all of these competing factors will help ensure your parents have a smooth transition from home ownership into senior living.‍

Set a budget and make a plan‍

Before setting out to help your parents sell their home, be sure to sit down with them and consider their retirement budget to make sure that selling a home is truly worth it. While there’s a reason so many people use the ready store of equity in their home to fund their senior living, some people are able to fund their retirement living through their savings or other means. In addition, some people enjoy keeping their parents’ home in the family as it can be put to use, such as using it as a rental unit. Alternatively, even if you or your parents have enough money to fund their senior living, you and your parents may still choose to sell their home due to the necessary work and upkeep required to maintain a home (even one you don’t live in full time).

‍Discuss Power of Attorney‍

Once it’s been decided to sell your parents’ home, the next question can sometimes be overlooked - who is actually going to be the person to sell the home, you or your parents? If your parents are still handling their own affairs then this might be an easy question as they’ll probably want, or at least be very capable of, handling the real estate transaction on their own behalf. For older adults who either do not want to handle all that comes with a real estate transaction, or for health or other reasons are unable to do so on their own behalf, another person can handle the transaction after being granted what is known as Power of Attorney. The process of being granted Power of Attorney is relatively straightforward, and generally requires signing and filing documents (sometimes with a notary present). While the paperwork involved with signing a Power of Attorney is relatively straightforward, it can often be a complicated or difficult family decision as some older adults may feel that they are losing some autonomy by allowing another individual the power to run such a large transaction. It is therefore incredibly important to discuss these questions as a family to make sure that all family members are comfortable with the resulting split of responsibility. It is also wise to consult an attorney or other professional to make sure that everyone understands the implications and benefits of a Power of Attorney designation. 

‍Check your parents’ mortgage details‍

Like most Americans, it is likely that your parents got a mortgage of some form to pay for or help finance their home acquisition or a past renovation. It is important to learn not only whether your parents have a mortgage, but also the details of any mortgage before either helping them sell their home or selling their home as their designated Power of Attorney. If your parents have a standard mortgage on their home, then the process of selling their home will be familiar to anyone who has sold a home with a mortgage before. First, the proceeds of the sale will go to pay off the balance of the mortgage, as well as any taxes or liens on the property or any bills that are past due, with the remainder going to the seller (in this case your parents). 

If your parents have a reverse mortgage on their home (a type of mortgage designed for senior homeowners to access equity in their home), then the process may have some added complexities. When you sell a home with a reverse mortgage the reverse mortgage will come due, meaning that you will owe the full balance including any interest and fees. This is easy where your parent’s home has appreciated in value and the amount of the sale exceeds the amount of the reverse mortgage. If your parent’s home has declined in value, however, things may be more complicated if the balance of the mortgage exceeds the appraised value of the home. In this situation, the full amount of the sale would go to your reverse mortgage lender, with the difference being paid by mortgage insurance.

‍Decluttering your parent’s home‍

While decluttering a home is going to be a part of almost any home sale, decluttering your parents’ home that they’ve lived in for years can pose its own challenges and is worth its own conversation. For many older adults, beginning to go through a life’s worth of possessions and narrow them down to what they want to bring to their new home can feel like an almost insurmountable burden. Nevertheless, it’s incredibly important for older adults to downsize and make sure that their surroundings are as geared towards aging as possible. We have found that one really helpful way to frame the conversation with your parents is to focus on their exciting new life and thinking about what things will most enhance their new surroundings. If your parents love their old wooden furniture, for example, but are moving somewhere with an island or desert feel, it can help to focus on how nice it would be to have new furniture that will fit the new locale, as opposed to focusing on the loss of a familiar item of furniture.

‍Handling sale proceeds‍

Much like the question of whether to sign a Power of Attorney in the first place, what to do with the proceeds of the sale from your parents’ home can depend on the degree to which your parents are handling their own financial affairs both before and after the sale. One thing to keep in mind is that even if you are granted Power of Attorney and organize the sale yourself, the proceeds from the sale may still end up in your parent’s account. In some instances, however, it may make sense for the proceeds to go to another individual like the Power of Attorney themself or a trust. This question may turn, for example, on whether you and your parents plan on using the proceeds from the sale of their home to pay for their senior living care. Whatever your family’s plans, make sure to speak to a financial or legal professional for the best ways to care for the proceeds from the sale of your parent’s home. 

Sunbound is the best way to pay for senior living. If you want to learn more about how Sunbound can help make senior living more affordable for residents and easier to manage for communities, email us at info@sunboundhomes.com or request a demo here. Sunbound is on a mission to make senior living more affordable for everyone.