A Swell of Rightsizing Carries a Wave of Opportunity
Friday, June 15, 2012
By Theodora Uniken Venema
There is a new opportunity for REALTORS®, and it comes in the form of a wave of downsizing or, alternatively, "rightsizing.” When ridden successfully, this wave can result in three (maybe even four) related transactions.
With the economic downturn, many homeowners have found that they have to rightsize their homes. For most owners, this means downsizing. Baby boomers are now empty nesters ready to get away from the expense of a big family home. Active-lifestyle adults are seeking freedom and gated communities that cater to the 55-plus crowd.
But with all this desire to rightsize, there comes a major problem: Many homeowners can’t just sell and move. They are locked into their mortgage and/or have no equity, so they can’t move without defaulting or going into foreclosure, or worse, bankruptcy.
As real estate licensees we can assist homeowners in these situations, but it takes some thinking "outside the box.” (To this end, ORRA offers tons of educational classes on short sales and foreclosures.)
In the good old days we could find our customers a smaller home and at the same time find renters for their current home to cover the mortgage amount. But in many cases today, owners have to sell their current residence in a short sale because the home is underwater.
With the bursting of the "housing bubble,” foreclosures and short sales have become the standard and many homeowners’ credit scores have become tarnished. The burst and the economic downturn have especially hurt middle-age families, who were counting their home’s value to helping them be "set for life.” Perhaps they’ve also lost their savings, are retooling for a new position in the labor market, or even going back to school! To add to their complications, many young-adult children have to live at home with Mom and Dad. And there can be another complication as well: elderly parents who can no longer care for themselves in their own home and need move to an assisted-living facility.
As a result real estate licensees are challenged to solve housing issues for the homeowners, their children, and their parents. In addition, we have to work within today’s very stringent mortgage requirements. But therein lies the opportunity to sell the homeowner’s current home, sell the elderly parents’ home (one of which will hopefully result in cash to apply toward the new home); and purchase a rightsize home.
Then, in time, the owners’ children will be ready for their first home. If we have succeeded in making their parents and grandparents happy, we’re in line to become their agent.
Getting It Done
For the real estate licensee, the situation described above means we’re looking at very complicated transactions that truly require additional education. We will have to deal with banks in the short-sale process. We will have to either assist in a modification of the original loan or negotiate a short sale with a lender, while at the same time selling the homeowner’s’ parents’ home. And while we’re working the sale, homeowners tend to make changes to the listed home that accommodate their lifestyle changes but diminishes the property’s appeal to buyers (a back bedroom is turned into a cluttered home office or another child comes home and adds his or her pet to the menagerie).
The bursting of the housing bubble has also added many new tasks to the traditional duties of a real estate licensee. We now become much more involved in solving housing issues for our customers before we get down to the traditional duties. The transaction process is much more involved than it once was. Right-sizing is on everybody’s mind these days, because our customers often tightly bound by economic limitations. However if we do our assignment right, we can be the listing agent for both the homeowner’s and the homeowner’s parents’ properties and be the buyer’s agent for the new rightsize home.
Theodora Uniken Venema, Downtown Brokers LLC, is a member of the ORRA Market Diversity Committee. She can be reached at firstname.lastname@example.org.