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Caveat Emptor! Eight Ways to Avoid Costly Mistakes
Buying a home for retirement is very different from buying a home at other times of your life. While many issues like access to schools no longer apply, there are many new ones to consider. Even the most knowledgeable home buyer can be perplexed. Our editors have compiled a comprehensive checklist to help you through this process.
1. Location. Where do I want to live?
Ask yourself: Do I really want to move away from my family and friends?
If yes, ask yourself:
a. What part of the country has a culture and lifestyle that I'm comfortable with?
b. Be sure to look at the neighborhood. Ask yourself where are the available hospital(s), senior centers, supermarkets, gourmet stores, coffee shops, cinemas, recreation centers or local college(s) to take a class, for example.
c. Think about other factors that are important to your lifestyle? For example, if you love to bike, do you want to live next to a steep hill. Try to think of everything that will affect your lifestyle as you grow older.
d. Would I like to be part of a community that does things together? If so, what kind of available community activities or condo amenities are now or will be of future interest?
2. How much can I afford for shelter in my retirement years?
a. Compare the initial purchase price with any expected on- going monthly expense contributions if you are purchasing a condominium.
b. Remember that condo fees, real estate taxes, energy costs and other expenses generally increase somewhat from year to year. Plan a budget based on predictable future income when in retirement.
c. You may choose to ask if a rental is available as a starter. You may even find a unit you are likely to buy available with a one year lease and an option to buy.
d. Check on any restrictions. Be sure there are none which could be problematic such as not allowing a pet, or the ages of any live-in children. But, also remember that most owners are more interested in a sale since they too are moving elsewhere.
e. Ask about current vacancies.
3. Management Fees
a. Is there a deferred management fee if you leave or sell the unit?
b. When you make a purchase, you may be required to pay a fee at the closing which often goes into a separate Capital Account to build new facilities in the community. Think of this fee as an investment that you will enjoy while you are living there. Also, think of any such fee as an added value to your own sale price if you choose to sell and move. For example, often after the death of a spouse, an owner may choose to move to a smaller unit.
c. What are the monthly fees?
d. Know what is and is not included in those fees.
e. Is there an entry fee? If yes, find out if your money will go to the General Account or a Special Capital Improvements Account?
4. Legal Advice - a cheap investment
a. It is essential to get legal advice before signing a contract to buy a Condo unit because different transactions can have different implications in terms of many items such as the contents of on-going fees, service charges, assessments, etc.
b. Before the closing, be sure to receive the equivalent of an up-to-date Public Information document from the Condo Association.
5. Necessary Documents to seal the deal
a. A Public Information Document is designed to assist prospective residents to compare different types of retirement village schemes. These are provided to prospective residents before they enter into a residence contract with the village scheme operator. The document provides information on residents' rights and obligations, fees and charges, resale process, dispute resolution and more.
b. NEVER, EVER RELY on any representations that are not in writing.
c. Be sure to understand what services are and are not provided to an owner. Generally speaking, the owner is fully responsible for maintaining the interior of the Unit and the adjacent grounds. But if you are held responsible for making extra payments for snow removal, garbage removal, periodic painting of your outside, etc , avoid future surprises and before you sign a contract, determine your liability, if any, for these and other annual expenses.
6. Understand the condo's By-laws. Pay now or pay later?
a. If you're moving into an Adult Retirement Community, study the By Laws that apply to the community. Avoid surprises. By taking a little time in advance, the By Laws will immediately flag anything you may not otherwise have been told by the selling broker.
b. Be sure to ask your own attorney BEFORE the closing to alert you to any significant items. And, if you take the time to ask to speak to a Condo trustee, they should be more than happy to answer any question you may have.
c. Ask why your unit is up for sale and find out how long it has been on the market?
d. Go to the community's Town Hall and check recent sales prices for comparable units for prior year(s). This public record is available � free of charge. A seller's unit ask price is always negotiable. Offer a far lower price; especially in a difficult market.
e. Check to see if the unit you want has been in Probate for some time (often many years); it's very likely that the children or trustee is eager to unload the unit at a distressed price and is not thinking like a typical seller. You can really get a bargain in such circumstances. Remember that the Condo fees and heating expense have been paid by the court or current owner with nothing to show for it. You are ridding them of that expense too which eats in to the probate funds which beneficiaries are eager to receive.
f. Find out what the annual operating budget is and the recent history and expected assessments that may be your responsibility. For example, is the Condo Association planning a new sewerage system that might be paid for with an assessment rather than from the association's Reserves Account? Ask and you will be told. Are there separate Capital Replacement Funds to which you will need to contribute?
7. Location-location-location 3 critical factors
a. Check out your unit's location. What are you looking at from each room and from your patio?
b. Think about all changes and improvements that you feel you would HAVE to make and get written estimates to find out what the approval process entails.
c. You usually can apply for a Variance which generally is approved but DO NOT ASSUME it will be. If, for example, all of your kitchen appliances are electric, you may not be allowed to replace them with gas. Never assume. If you have an idea of what you want to do, then visit the Maintenance Department Supervisor to vet these ideas first even BEFORE obtaining estimates and making the purchase. Talk to new future neighbors to see if they have any useful insights.
- Beware of nearby power lines which may bother you.
- Understand the heating and air conditioning system and review prior utility bills as part of developing an on-going budget.
- House inspection engineer - get a tough and rigorous one. Find someone who will document everything imaginable that could help to greatly reduce your purchase price since a purchase is always subject to an inspection.
8. Community and Lifestyle Questions to Ask Yourself
a. How involved do I want to be with my fellow residents?
b. Will I need to move again if I need more long-term medical care than a particular retirement community can give me? Or, is there a nearby facility I might like?
c. What types of units are available? Apartments? Houses? Condominiums? Large or smaller and less expensive.
d. Can you rent, or must you buy?
e. How many people live there? Does this scale work for you?
f. What is the occupancy rate -- that is, how full is it? (If a community is less than 85% full, that may mean it isn't financially healthy.) Check on the amount of Reserves. Knowing this also suggests there will be no or fewer future assessments to worry about.
g. Do you need to be a certain age to be eligible?
h. Do you need to have a minimum income or net worth?
i. Is the home or apartment big enough? Is there enough room for guests?
j. Do I like the way it's designed and decorated?
k. Can I remodel or redecorate?
l. Will I be able to get along here if I have any disabilities in the future?
m. Are the grounds attractive and well tended?
n. Am I responsible for home maintenance, or is management responsible?
o. Is complete information on costs and fees available in writing, specifying which services are included in the basic fee and which are offered at an extra charge?
p. Will fees for maintenance and recreation go up in the future? How often and how much have they gone up in the past?
r. Who pays the property taxes? What will they be? Will they increase?
s. What is the cost of living in this area - food, transportation, and insurance?
t. How long does it typically take to sell a unit if I decide to move?
u. What is the typical resident's profile? (Age, health, interests, and so on.)
v. Can my grandchildren visit? Can they stay overnight? Can guests stay for extended periods?
w. Is there adequate visitor parking?
x. Is there a residents - council and a homeowners' association? How well do they work? Does the management really pay attention to them?
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