Selling Your Parents Home To Pay For Care in Washington

Selling a home is a decision that senior citizens often make when they need to pay for the high expenses attributed to assisted living in Washington State. While you could use the home as a rental property and collect rent monthly, you might not get enough cash to cover the senior living expenses. The sale of a house provides a considerable sum of money that can be used to pay for the immediate costs that occur when a senior parent moves to a retirement community. Before you make this decision, there’s a lot to consider. This guide explores paying for assisted living with the proceeds from your parents’ home.

How to Sell Your Home to Pay for Assisted Living

Below is a description of the quick and easy process for offloading a home to pay for senior living.

Step 1: Get Authority to Sell

Before you decide to have someone buy your parents’ home, get their permission. It’s important that they’re interested in going through with the home-selling process to pay for their care. All parties must thoroughly read the contract to ensure everyone’s on the same page. Families have been torn apart because of rifts created when one party attempts to do something without consulting everyone.

Step 2: Find the Equity Value

You can identify the amount of equity your aging parents currently have access to by researching home values in your area. If you can find properties comparable to your parent’s home, you should be able to estimate how much it’s worth accurately. You can also request an appraisal to determine how valuable the home is, which might cost you a few hundred dollars. The equity is the difference between the value of the home and the amount that’s still owed on the mortgage.

Step 3: Determine How to Sell

Now, it’s time to decide how you want the home to be sold. There are several options at your disposal, all of which you should discuss with your retired parent or family member. The main selling solutions include the following:

• Listing it on the market, which often requires the help of an estate agent
• Seeking offers from investors
• Selling to a company that buys houses

When Should Seniors Sell Their Home in Washington?

If a family member or individual close to you requires senior care, you must choose the right time to offload the home. You can have it sold before or after they move to senior living.

Benefits of Selling Before

The primary advantage of having someone buy the home before your parent enters a senior care facility is that the funds can be used to pay for the high costs. If you’re unable to get rid of the home fast, your expenses will accumulate.

Benefits of Selling After

After moving into assisted living, many reasons exist to get rid of the home. Doing so beforehand is beneficial if you can gain quick access to funds for care. However, no one may make an offer on the home for months. You’ll still be expected to pay for senior living costs alongside tax payments, mortgage bills, maintenance, and insurance during this time. The main reasons to have the home sold after moving to a senior living community include the following:

• You want to manage your parents’ stress. Their stress could accumulate if they had to leave home during every show. Listing the home after your parents begin to receive personal care in a facility may be necessary to keep them calm and healthy.
• Empty homes are easier to stage. The real estate agent you hire will have a blank canvas to do anything.
• You must deal with your parent’s situation immediately and not have time to list their home.

Possible Financial Implications of Using a Parent’s House to Pay for Assisted Living Care

Before you navigate the home-selling process, there are several things you must consider. For example, older adults may have VA pensions or Medicaid. Getting rid of the home can lead to repercussions regarding these types of financial assistance. You must understand the importance of Medicaid and VA aid’s specific asset and net worth limits. Make sure your parent understands their rights before they choose to proceed.

Medicaid Eligibility

Getting rid of your senior parent’s home can impact their Medicaid eligibility. A person can’t own over $2,000 in assets in many states. In Washington, the governance laws are the same. If your parents’ home is sold to pay for the costs and administration fees associated with nursing and caring for them, they may be disqualified from Medicaid coverage. The same is true for VA benefits. If the proceeds from the transaction exceed $150,538, your dad or mom could become ineligible for benefits.

Taxes

You must consider several tax implications if you decide to have someone buy your parents’ home. In most situations, the proceeds will be tax-free. If your parents sell the home, they can exclude as much as $250,000 in total profit from being taxed. To take advantage of this tax break, seniors must own a home and have lived there for at least two out of the past five years.

Long-Term Capital Gains

Capital gains taxes can apply if you sell a home that isn’t your primary residence. Any profits you make from the home will be taxed once the sale goes through. The tax rate can be anywhere from 10%-37% for short-term capital gains. As for long-term capital gains, the tax rate can be 0%, 15%, or 20%.

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Selling a Parent’s Home After a Dementia Diagnosis in Washington

When a parent begins to lose their memory, selling their home can become more challenging. Unless you have paperwork that indicates otherwise, the homeowner is the only person who can transfer the home to someone else. It’s possible, however, to resolve this issue by seeking one of two legal designations, including guardianship and power of attorney. If the court accepts one of these designations, you should be able to make decisions for a parent.

Financial Power of Attorney

Obtaining a financial power of attorney (POA) is necessary before an adult child or family member can fulfill the senior’s wishes. This type of POA can make a wide range of financial decisions, including all real estate decisions.

To set up a financial power of attorney, your parent must sign a document that permits you to make decisions for them. Consider hiring a trusted elder law attorney to help you create the document. This service shouldn’t be too costly.

Legal Guardianship

If a parent has been diagnosed with dementia, you can choose to petition for guardianship to sell the home. However, you must prove that your loved one has experienced considerable memory loss. You may be designated as the legal guardian if you can, freeing you from dealing with the house. Remember that this is a costly endeavor that may require petitioning the court. Only use this as a last resort to avoid paying expense after expense.

Alternatives to Selling the Parent’s Home

If you’d rather avoid listing a parent’s home for sale, you can pursue several alternatives, which include everything from a reverse mortgage to a bridge loan.

Reverse Mortgage

If your aging parents are still paying off the mortgage, you could benefit from a reverse mortgage. This option is ideal if one parent will continue living in the home. If your parents obtain approval for a reverse mortgage, they could take cash from the equity they’ve built up over the years.

However, this option is only available if one parent continues living there. Remember that many documents and forms must be signed to complete the application. Once all homeowners vacate the premises, the reverse mortgage will be due.

Bridge Loan

If your aging parents are looking into senior housing and are in the process of offloading their home, consider applying for a bridge loan. This type of financing aims to obtain cash as quickly as possible. In this scenario, your parents can borrow money while they wait for their property to be sold. Alternatively, an investor can buy the property if you want cash quickly. Ensure your aging parents trust the investor they work with during home-selling.

Home Equity Line of Credit

A Home Equity Line of Credit (HELOC) allows you to borrow against the equity that’s currently available in your parents’ home. The property will be used as collateral for this loan. When you pay the loan’s outstanding balance, the credit made available to you will be replenished. Lines of credit are similar to credit cards.

If you can draw from the line of credit, you can borrow however much you need. Most of these loans come with 10-year draw periods. Once the draw period ends, the repayment period begins. While the repayment period depends on the loan size, it’s usually 20 years.

Calculate how much equity is available in the home to determine if you qualify for this type of finance. Your elderly parents’ mortgage balance must be less than the worth of their house. Most lenders allow homeowners to claim as much as 85% of the property value minus the amount still owed. Remember that the lender will likely review your monthly income and debts, employment history, and credit score before approving the loan.

If you apply for a HELOC, you can get a variable or fixed interest rate. When you select a variable rate, it could change from month to month. There’s always a risk that the interest rate will skyrocket during the repayment period.

Variable rates are adjusted based on the index and margin. An index is an indicator that banks use to set rates for their loan products. It can go up or down. The margin is added directly to the index. The margin never changes throughout the life of the HELOC.

The Emotional Impact of Selling a Parent’s Home

The emotional impact of offloading a parent’s home can be difficult for anyone. If you were set to receive it as an inherited property, it can be challenging to let it go. However, many seniors choose this option because they know it will allow them to pay for long-term care. According to the National Association of Realtors, people at least 55 make up over 50% of all home sellers.

However, elderly individuals often believe that their properties will be forever homes they can eventually provide to their children through an inheritance. You’ll need to contend with complex emotions and potentially decades of memories.

How to Pay for Assisted Living Care

There are several ways to pay for senior care for your parents. While health insurance doesn’t directly cover the costs, some of the related possible expenses can be funded by this policy. If you list your parents’ home or have it sold to an investor, you can still pay for senior living expenses by obtaining a bridge loan. This is a short-term financing solution that gives you access to funds before you’ve sold the property.

You can also seek private funds from friends or family members. The people you know may be able to give you money via:

• Stocks
• Retirement accounts
• Pension payments
• Savings
• Social Security benefits

If you decide to have someone make an offer for your parent’s home, you can either list it on the market or have an investor buy it from you. By choosing the second option, you can avoid the high fees of hiring a realtor.

Going through the home-selling process ensures you have the money to pay for senior care for your parents. It also means you don’t need to maintain the home when your parents no longer reside there. Some other options at your disposal include the following:

• Getting a long-term care insurance policy
• Seeking aid from the U.S. Department of Veterans Affairs
• Covering the expenses with life insurance, which is possible with some policies

Top Rated Assisted Living Communities in Washington for Senior Citizens

Washington is home to many highly-rated assisted living facilities that you can consider for your dad or mom after they retire. Here are five of the best communities that might interest your elderly parent.

• Washington Oakes – Everett, WA
• Sunrise of Redmond – Bellevue, WA
• Fairwinds, Spokane – Spokane, WA
• Timber Ridge at Talus – Issaquah, WA
• Hawthorne Court – Kennewick, WA

Selling Elderly Parent’s Home in Washington Frequently Asked Questions

Can I List My Senior Citizen Parents’ House If They Have Dementia?

If you have aging parents who have been diagnosed with dementia, you should be able to have their home listed and sold legally. Support them as their caregiver throughout the home-selling process to ensure you comply with their wishes. Even if your parent is in the hospital, they need to know how this situation aligns with their goals.

Even if one or both of your parents have dementia, you must make them aware of everything that happens during this process. Before signing any contract, communicate the terms and information to them. If they choose to read the document, wear their glasses. Regardless of your age, you’re responsible for giving them the guidance needed to navigate this personal situation.

Can I Buy My Elderly Parents’ House?

You have every right to buy your parents’ home. If you purchase the home below current market value, you could eventually be on the hook for a high capital gains tax in a few years. Some of the profits from the sale of the home could be taxable. Offloading a home below market value is considered a “gift of equity.”

Can My Senior Parents Sell Me Their House for Less than It’s Worth?

You can pay anything to buy your parents’ house. They can give it to you for free. However, ensure everyone involved in the home-selling process knows the tax implications.

Benefits of Selling Mom’s House to a Real Estate Investor

If you’re wondering how to pay for a term care solution, consider seeking offers from investment companies. Offloading the house to an investor home buyer in Washington State can be highly advantageous. For example, the closing process can be completed in five to seven days. You don’t need to market or repair the property before you seek offers from investors. Even if the home is in poor condition, an investor can buy and repair it.

Finding Help to Guide You Through the Sales Process of Senior’s Real Estate

Here at Kind House Buyers, we can help you secure a good deal for your parents’ home. Our goal is to guide you through the home-selling process swiftly and ensure you can focus on caring for your aging parents. We’ve worked with and helped clients in all cities across Washington, including Yakima, Everett, Tacoma, Vancouver, Spokane, Kirkland, Seattle, and more! If you have further questions, contact an honest professional like Kind House Buyers.

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