VERY OLD sellers...good or bad?

Question

Hello BP,

I'm new to the site, and as a matter of fact this will be my introductory post! 
I'm very interested in RE, and wanted to start out by buying a duplex, so I could live in half and rent out the other. I'm currently under contract for a duplex at 175k, where the sellers have owned the home for a very long time, and are acutally selling the place for assisted living expenses. These people are 92! I guess I see this as an opportunity to do some repairs, and increase the rent amount. Maybe these people are just tired land lords, but I do know this was really the only rental they owned. I was just wondering if anyone on BP has had a similar experience with VERY OLD sellers, and what the outcome was?

thanks BP!

Bill Gulley · Answer

Dealing with elderly sellers is different, not from a contract or strategy side but from a socially acceptable side and that can become a big deal.

"For assisted living expenses" caught my eye. If medicare/state medical is involved the deals these older folks get into will be viewed to the market as market value. The state receives the proceeds and the heirs really have no interest as they don't receive much, if anything from exemptions. A residence is exempt from asset valuations. There is also a 7 year contemplation of death rule, in some states it's illegal to do estate planning in order to qualify for public benefits and transfer property to qualify.

If the state isn't involved I suggest (strongly) that you involve or at the very least inform heirs (one or more, play that by ear as to the most agreeable) otherwise you can have problems. I've mentioned this before, when a 60 year old kid learns that mom or dad is selling the home they get involved and will want what they think is the best price, better to head off issues at the beginning. They can sue, take you to court even when you don't do anything wrong. Judges take a very, very close look at transactions with elderly people and even if your deal is reasonable it can be overturned in the end. The law doesn't protect a 90 year old any more than a 30 year old, but judges will take greater care and oversight, claims of "she didn't really understand what she was doing" is pretty easy to push through as the elderly are understood to be unaware of "today's values". All the little old lady has to say is "I didn't realize that" and denounce the deal and it can well be a dead deal.

You also need to take care introducing the deal to heirs. The heirs can get upset, most know when and that mom really should sell. But mom can also get upset and highly ticked if they think you want to involve the kids thinking they are off their rocker. Best way is to explain that you know they are "in charge" of their family matters, they understand what is best for them, but that kids can cause trouble after a contract or even a sale as they expect to look out for mom as well as themselves. For that reason it's best to inform family so as to avoid family fights.

Need to give a little extra in dealing with the elderly, that they are fully informed, they agree, I have gotten statements from care givers that the subject is of sound mind (which is usually assumed and must be proven otherwise for younger folks). Don't be patronizing them, the elderly are probably wiser than you are, be business like, but be very polite, the best you can, keep the deal simple, straight up, no "creative guru junk" doesn't mean you can't seller finance or have a sub-2 so long as you can pay it off down the line if problems pop up. Good luck.   :)

Bill Gulley · Answer

Well, Steve, thanks, now that I know they don't like all CAPS, to emphasize something that needs to be said, I doubt we'll have such issues. @Steve Babiak

mention still works too! It's now more of a self imposed time off and I do have a life, LOL. :)

No, old doesn't mean they are not sharp. Yes, it takes more time, often they want to make coffee, have some pie, many are lonely and want conversation, an opportunity to tell stories, you better listen to them too. If you don't take an interest in them they won't be interested in your either.

Steve Babiak · Answer

Is that Bill Gulley I see posting here again?  Welcome back and behave do you don't have to go to "time out" again :)

Max Householder · Answer

Be sure to do your diligence regarding condition of the property, deferred maintenance, etc. If they were managing the property themselves, the energy it takes to keep it tip-top has likely declined a great deal over the years. If they're selling in order to pay medical bills, then it's doubtful they've been flush with cash to keep up with CapEx & maintenance costs. Just something to think about.

Jordan Archer · Answer

Thanks for the responses everyone. The legal aspect was not something I had considered so I will make sure to investigate further.

Rick H. · Answer

Bill Gulley - do the BP moderators have you on some sort restricted posters license, like you can't post late at night, must have an adult over 18 (but under 30) at your side when you post, etc.?

Glad to see you're posting again.

Like the old Pink Floyd song title suggests, 'Careful with that Axe, Eugene'

Bill Gulley · Answer

Like I said, see an attorney, sellers can't charge points on SF deals, it's an equity amount funded not cash. Dealing with elderly also means a higher probability of them passing on over the term of your deal, they will be going to probate, their deal will be looked at, I suggest you stay legal even if they like the idea, check state laws. Points are prepaid interest, see who can charge prepaid interest. :)

Colleen F. · Answer

One thing to keep in mind with older sellers is that  terms might include some points that are unusual or different. Some older sellers I know have picked offers because in addition to the right price they had another point that was important them either a prolonged  date for closing or a term that was critical  like something they did not want to remove.  Other ages do this but in the older population I have heard from sellers that it is a deciding point for them. I am sure this is not always true and maybe not so much for a rental but  I thought it worth mentioning.

Kathleen Leary · Answer

Just because your body is becoming a traitor does not mean your mind isn't functioning properly! Don't EVER assume that age means disability - it might turn out that way, but don't start out with that attitude. If you're lucky, someday you'll be old, too!

Lynn McGeein · Answer

@Bill Gulley  's post is spot on, but just wanted to add that you seem to be in a fairly good position, yourself, as it sounds like this will be your first home (congratulations!) and you are planning to owner occupy, which sounds much better to me (if not to a court -- don't know as I'm not a lawyer) than professional investor using extensive investor knowledge to possibly take advantage of an old couple needing money for care.   If they are seller financing, that would be much more concerning to me as you'll have to insure everything is properly recorded to protect yourself and keep very accurate records in case something pops up with the heirs or the State down the road.

VERY OLD sellers...good or bad?

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