Home ownership is part of the American Dream. We dream of buying a home as children. In fact, I remember writing a play as a child with a group of second-grade classmates in which we tried to figure out how we could come up with $100 to purchase a house. Once we make that purchase, we feel an emotional attachment to the walls we can paint in any color we choose and use real nails and not gummy putty to hang pictures. The dream of homeownership, and reckless greed to profit from this dream, led to one of the largest financial crises in world history, the 2008 Great Recession.
Although we have a strong emotional pull to own our homes, I have come to believe that home ownership at certain points in our lives can be more of a burden than a blessing. Recently, a Wall Street Journal headline proclaimed, “OK, Boomer, Who’s Going to Buy Your 21 Million Homes?” Laura Kusisto, Wall Street Journal, Section B, p. 1 (Saturday/Sunday, Nov. 23-24, 2019). In the article, the author questions the long-term financial viability of senior retirement community. She notes, among other items, that Generation X community is simply too small to absorb all of the housing that will become available as the current seniors pass or move to facilities to receive more care. Also, Generation X is more inclined to move to “Live, Work, Play” communities near large urban areas and not the suburban retirement communities.
Articles like this raise the question as to whether there a point at which purchasing a new home is a bad idea for a senior or someone with a disability. To answer this question, I sought responses from individuals with three different perspectives: Scott Cruce, who, in addition to being employed as a legal assistant with Hall Booth Smith, P.C., is an individual with a disability and a homeowner; attorney Jonathan Ginsberg of Ginsberg Law Offices, who focuses his practice on bankruptcy and Social Security Disability; and care manager Tracy Johnson, RN, CCM, Founder and CEO of Premier Care Management of Georgia, LLC. Each contributor provided unexpected insights into this issue.
Scott Cruce. Blind since birth, Scott provided his unique perspective about the factors an individual with disabilities may want to evaluate when purchasing a residence. Scott suggests that people with disabilities focus on how they will access the community services they need. “If buying a house/condo in an urban environment is possible, I advise that just for the much easier time of getting around, not only on foot but also getting ride services and/or public transportation…. I think it may also be prudent to live close enough to retail that you can get out and walk to if you need something suddenly.” He also highlights the importance of living near a good walking environment. “I think actually that sidewalks are probably the biggest key. If you look somewhere even in an urban area, with non-consistent or questionable sidewalks, it is going to make travel of any kind much more complicated.” Because of the need for proximity to stores and public transportation, Scott is hesitant to recommend that someone with a disability live outside of an urban area. “Sadly, for the most independence, I guess it all comes down to stay in the city; visit the country.”
Attorney Jonathan Ginsberg. Jonathan Ginsberg finds that retirees develop liquidity problems when they purchase houses on a fixed income. He gives the example of a retiree who purchases a new home in a retirement community. In making the down payment, the retiree pays cash or converts equity into the home. Unfortunately, because of that large purchase, the retiree has no access to cash in the event of a medical emergency or other crises. The retiree relies on credit to make payments and accumulates credit card debt. To escape the debt, the retiree may then turn to bankruptcy.
Unfortunately, bankruptcy usually does not provide the retiree with the necessary relief. In fact, the new residence becomes part of the bankruptcy estate. “In most states, the real estate exemption for a home will be around $20,000 to $25,000 per person (in Georgia it is $21,500 for an individual and $43,000 for a joint filing). Equity above this exemption is non-exempt and can be seized by a Chapter 7 trustee. If the retiree wants to protect his/her equity by filing a Chapter 13 (and pay back [unsecured creditors] to the extent of non-exempt equity in property) the monthly Chapter 13 payment would be too high.” In short, in bankruptcy, the house’s equity becomes part of the bankruptcy plan.
Ginsberg notes that some retired seniors will take out a reverse mortgage on the house or a Home Equity Line of Credit to make ends meet. He is not a fan of either option because of the high interest rates associated with a reverse mortgage and with HELOCs for individuals who are not working and live on fixed incomes.1
Finally, Ginsberg questions as to whether a home purchase makes sense once an individual reaches a certain age. “Many times, when a senior downsizes, the time horizon for home ownership may be only 3 to 5 years because medical issues may make independent living impossible. Here, too, it does not necessarily make sense to tie up one’s liquidity in illiquid real estate.”
Care Manager Tracy Johnson, RN, CCM. As a care manager, Tracy Johnson helps families develop comprehensive care plans designed to assist seniors and other individuals facing health challenges. When asked for her thoughts about retirees purchasing homes, Johnson emphasized quality of life that retiree would experience in the retiree’s new home.
Johnson pointed to an increasing number of studies showing that “where you live can determine how long you live.” She believes that finding appropriate housing is as important as obtaining appropriate healthcare. “When you are younger, you have tentacles keeping you tied to a community,” she observed. Individuals who move to a new residence after age 65 often lose that connection to the community and become isolated. Without regular socialization, individuals experience depression, increased dementia, decreased functional abilities, and an increased need for help to remain in the home. That having been said, it is equally as important to remain in a residence that allows an individual as much independence as possible. She advises people to “plan long term, but live where it is appropriate now.”
While each individual’s situation differs, Johnson recommends that seniors planning to move should look to downsize their residence instead of purchasing a larger home. Like attorney Ginsberg, Johnson cautions seniors to avoid taking on debt when purchasing a new residence.
Cruce, Greenberg and Johnson offer similar advice that revolves around the concept of live for now but plan for later. Retirees and individuals with disabilities have additional factors to consider in addition to all of the standard issues surrounding the purchase of a residence. They need to evaluate ease of access to resources and to a social life, liquidity, the independence afforded by the new residence, and how long the buyer realistically can expect to live in the new residence. With these factors, additional meaning is given to the time-honored warning “Caveat emptor” – Buyer beware!
1I actually disagree with Ginsberg with respect to his point relating to reverse mortgages. While expensive, a reverse mortgage can be a great tool to allow someone to remain at home who might otherwise have to move to an assisted living facility or skilled nursing home. When considering a reverse mortgage, I only recommend that a homeowner obtain a line of credit against the home’s equity; DO NOT take out the full value of the home as a lump sum. Also, only use the line of credit to pay expenses that allow the homeowner to remain in the house, such as paying for caregivers or making modifications to a bathroom. Reverse mortgages should never be used to make gifts to family members or finance a lifestyle, like a Caribbean cruise vacation or building a basement “man cave.”
Thank you to Scott Cruce, Jonathan Ginsberg, and Tracy Johnson for allowing me to interview them for this article.
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