Questions about funding CCRC entrance fee with sale of house

[braumeister]

There’s real estate property taxes and some home insurance (more like a renter’s policy insuring the inside of your unit and contents) the owner is responsible for but everything else is taken care of by the CCRC, including utilities and cable.

That's interesting, and I think a bit unusual. Every place I looked at included property taxes in the monthly service fee.

 

[camfused]

You mean you’re tired of home maintenance, as am I. The CCRC we will likely transition is an equity business model — you own the residence, but maintenance, outside and inside the residence, is entirely done by the CCRC, including housekeeping and linen changing once a week. There’s real estate property taxes and some home insurance (more like a renter’s policy insuring the inside of your unit and contents) the owner is responsible for but everything else is taken care of by the CCRC, including utilities and cable.

How much is the “renters” insurance?

 

[Happyretired]

We

You mean you’re tired of home maintenance, as am I. The CCRC we will likely transition is an equity business model — you own the residence, but maintenance, outside and inside the residence, is entirely done by the CCRC, including housekeeping and linen changing once a week. There’s real estate property taxes and some home insurance (more like a renter’s policy insuring the inside of your unit and contents) the owner is responsible for but everything else is taken care of by the CCRC, including utilities and cable.

No, we're tired of home ownership, which includes maintenance. Not interested in an equity model. We have one in our area that has been trying to get off the ground for a number of years. My guess is they've had a hard time getting the number of units sold that the state requires. They say they have broken ground, but I don't see any evidence of construction from the road. I don't think the equity model is the way to go. I've seen this CCRC's disclosure statement and evidently, your heirs are on the hook for the monthly fees after your death, if the unit won't sell. Given the apparent challenge of initial selling, this might be a distinct possibility.

 

[ChrisC]

That's interesting, and I think a bit unusual. Every place I looked at included property taxes in the monthly service fee.

Not sure you're looking at CCRCs with equity ownership, where one is deeded in fee simple the residential unit you purchased at the CCRC. There is no entry fee for this particular business model although in our case there is a "membership fee" in the CCRC's equal to 10% of the purchase price of the residential unit, which enrolls the purchaser as a member of the 501 (c) (4) entity that own and controls all common amenities and property of the CCRC. The owner of the residential unit at this CCRC is listed on the county's property records as the owner so the owner is responsible for property taxes. Monthly maintenance fees don't include any real estate taxes, but they are very high!

To answer camfused question about "renters insurance" (I call it that as you're not insuring the outside of the buidling, roof, facade or structure), I haven’t priced the owners but bee told it’s a few hundred dollars per year.

 

[ChrisC]

No, we're tired of home ownership, which includes maintenance. Not interested in an equity model. We have one in our area that has been trying to get off the ground for a number of years. My guess is they've had a hard time getting the number of units sold that the state requires. They say they have broken ground, but I don't see any evidence of it from the road. I don't think the equity model is the way to go. I've seen this CCRC's disclosure statement and evidently, your heirs are on the hook for the monthly fees after your death, if the unit won't sell. Given the apparent challenge of initial selling, this might be a distinct possibility.

Equity models in NC, and only a few of them here, have deep waitlists, and 100% occupancy in independent living, so no problem here with getting another resident to buy your unit once you’ve left the campus. The occupancy rates in assisted living and skilled nursing are also very high but the CCRC manages the transition and flow into those spaces well. The appreciation for those units generally mirrors the general residential real estate market, and this CCRC opened in 1999, and has not had difficulty in maintaining high occupancy levels even during Covid.

I’m not sure what my heirs would be on the hook for if we’re in the ground. They’re not on the hook for maintenance fees since we’re no longer occupying a residential unit. If the CCRC went bankrupt, I think we’d be in much better shape than a CCRC resident that’s a general creditor in a Type A or B CCRC. The residents in our case have membership interests in a 501 (c) (4), non-profit that owns and controls all common property and amenities of the CCRC, and the this entry functions like a HOA.

I think start-up CCRCs have their own set of challenges far different from those established for many years, so not sure your experiences with this startup is useful to gauge equity models in general.

 

[Happyretired]

Equity models in NC, and only a few of them here, have deep waitlists, and 100% occupancy in independent living, so no problem here with getting another resident to buy your unit once you’ve left the campus. The occupancy rates in assisted living and skilled nursing are also very high but the CCRC manages the transition and flow into those spaces well. The appreciation for those units generally mirrors the general residential real estate market, and this CCRC opened in 1999, and has not had difficulty in maintaining high occupancy levels even during Covid.

I’m not sure what my heirs would be on the hook for if we’re in the ground. They’re not on the hook for maintenance fees since we’re no longer occupying a residential unit. If the CCRC went bankrupt, I think we’d be in much better shape than a CCRC resident that’s a general creditor in a Type A or B CCRC. The residents in our case have membership interests in a 501 (c) (4), non-profit that owns and controls all common property and amenities of the CCRC, and the this entry functions like a HOA.

I think start-up CCRCs have their own set of challenges far different from those established for many years, so not sure your experiences with this startup is useful to gauge equity models in general.

There are only a few full-equity models in NC and I seriously doubt they all have 100 occupancy in IL Very, very few CCRCs consistently achieve this. If your heirs accept the unit, according to the particular disclosure statement I saw, they are on the hook for the monthly fees until the unit is sold. Some non-equity model CCRCs are just as expensive as equity model CCRCs. Does this mean that the equity model CCRCs are more efficient at managing or are they inherently risker in terms of guaranteeing high quality future health care? I know some equity-model CCRCs charge an additional life-care fee, which may put them more on par with non-equity CCRCs. I think some good questions to consider are ‘why does the vast majority of CCRCs use the non-equity model? Why did some CCRCs consider it necessary to incorporate the equity-model concept? Why do some people find equity model CCRCs more desirable? Are they purchasing as an investment or as a life-care guarantee? Is it realistic to think both are possible? Many non-equity CCRCs have 50 and 75% refundable options upon death. As I indicated earlier, I’m not a fan of the equity model. IMO, if it was such a great thing, more CCRCs would have it, and depending on how the contract is worded, I think it can potentially be riskier. With this said, there are likely some solid equity model CCRCs. For most of us, we want a high probability that our CCRC will continue to exist and be able to provide high quality future health care should we need it.

 

[ChrisC]

There are only a few full-equity models in NC and I seriously doubt they all have 100 occupancy in IL Very, very few CCRCs consistently achieve this. If your heirs accept the unit, according to the particular disclosure statement I saw, they are on the hook for the monthly fees until the unit is sold. Some non-equity model CCRCs are just as expensive as equity model CCRCs. Does this mean that the equity model CCRCs are more efficient at managing or are they inherently risker in terms of guaranteeing high quality future health care? I know some equity-model CCRCs charge an additional life-care fee, which may put them more on par with non-equity CCRCs. I think some good questions to consider are ‘why does the vast majority of CCRCs use the non-equity model? Why did some CCRCs consider it necessary to incorporate the equity-model concept? Why do some people find equity model CCRCs more desirable? Are they purchasing as an investment or as a life-care guarantee? Is it realistic to think both are possible? Many non-equity CCRCs have 50 and 75% refundable options upon death. As I indicated earlier, I’m not a fan of the equity model. IMO, if it was such a great thing, more CCRCs would have it, and depending on how the contract is worded, I think it can potentially be riskier. With this said, there are likely some solid equity model CCRCs. For most of us, we want a high probability that our CCRC will continue to exist and be able to provide high quality future health care should we need it.

So, I'm only going to address your first two sentences in your post here because the rest of your post is just your interpretation of documents you've read (and I don't care to fact check you) as well as your opinion that life-care communities that are plaformed as non-equity models are much better than the equity model approach, which I disagree. It's pointless for us to debate that since we probably have entrenched views. As to the first two sentences in your post, I count 68 CCRCs regulated by the State of NC. I count 3 CCRCs in NC that are equity model types. I count only 3 CCRCs in NC with 100% occupancy levels in Independent Living. I count all 3 of the CCRCs in NC with 100% occupancy in Independent Living. If you find, I'm in error about these facts, please correct me. Here's the information from the NC Department of Insurance, which regulates CCRCs in NC: Occupancy:::::: Have at it to support your factual assertions.

 

[Happyretired]

So, I'm only going to address your first two sentnces in your post here because the rest of your post is just your interpretation of documents you've read (and I don't care to fact check you) as well as your opinion that life-care communities that are plaformed as non-equity models are much better than the equity model approach, which I disagree. It's pointless for us to debate that since we probably have entrenched views. As to the first two sentences in your post, I count 68 CCRCs regulated by the State of NC. I count 3 CCRCs in NC that are equity model types. I count only 3 CCRCs in NC with 100% occupancy levels in Independent Living. I count all 3 of the CCRCs in NC with 100% occupancy in Independent Living. If you find, I'm in error about these facts, please correct me. Here's the information from the NC Department of Insurance, which regulates CCRCs in NC: Occupancy:::::: Have at it to support your factual assertions.

I’m counting 4 CCRCs at 100%. Keep in mind these figures were reported at a particular point in time, likely at the annual disclosure statement report submission. While very good, they would have more significance if the statistics showed the same 100% percentage over a longer time period.

 

[ChrisC]

I’m counting 4 CCRCs at 100%. Keep in mind these figures were reported at a particular point in time, likely at the annual disclosure statement report submission. While very good, they would have more significance if the statistics showed the same 100% percentage over a longer time period. Planning to analyze the disclosure statements of these.

Err, your counting is a bit off. There are 3 CCRCs -- all equity models -- that have 100% occuoancy levels in Independent Living. One other CCRC, a non-equity model, has a 100% occupancy level in Assisted Living units (but it only has 18 of those units) and a 97% occupancy level in Independent Living. This non-equity CCRC has a much smaller footprint in size and residential population than the 3 equity model CCRCs in NC. The CCRC I'm waitlisted has been at 100% occupancy in Independent Living at least as far as I've been on their waitlist in 2019. I'm in no rush to transition into a CCRC, but we plan on transitioning in 18-24 months, if a unit meeting our specifications becomes available. We're starting our decluttering efforts now.

For your information, the NC equity model CCRCs were all developed in Charlotte and Raliegh-Durham by the same developer, who also has developed CCRCs in Hilton Head SC. Regarding any analysis of the landscape of equity vs. non-equity CCRCs you may do, in my neck of the woods, only one of the many CCRCs in the Charlotte metropolitan area now offer the Type A contract that provides life-care coverage in AL or Skilled Nursing Care at the cost of a very large entry fee. All others offer, AL or Skilled Nursing Care at their CCRCs on a per diem payment basis -- all shifting the risk of LTC actuarial gaps and risk primaily to the resident on a pay-as-you go basis, recognizing that the Type A contract poses fraught enterprise risk to the CCRC. I prefer the pay-as-you go system, since I have LTCi which dovetails with the life-care packages now offered at the CCRC I'm considering as well as the non-equity CCRC we're also waitlisted as a back-up to our first choice, the equity model one. The newest CCRC in my area, which opened during Covid, is a straight rental business model -- most new places, including older ones that once offered Type A contracts and that undergo residential expansion, don't want to take the risks of being on the wrong side of the actuarial scale. They do not offer Type A contracts. The only one here that does offer Type A contract is a large CCRC enterprise with CCRCs in a number of states beyond NC -- you might want to read its Disclosure Statement since it lays out the major actuarial risks of offering life-care contracts. And this particular CCRC also offers a menu of other contracts that leverage a resident's LTCi coverage. It can get complicated but even if you were in the industry before (as I think you might have mentioned in other posts), there is a lot to be learned in this day and age.

 

[Happyretired]

Err, your counting is a bit off. There are 3 CCRCs -- all equity models -- that have 100% occuoancy levels in Independent Living. One other CCRC, a non-equity model, has a 100% occupancy level in Assisted Living units (but it only has 18 of those units) and a 97% occupancy level in Independent Living. This non-equity CCRC has a much smaller footprint in size and residential population than the 3 equity model CCRCs in NC. The CCRC I'm waitlisted has been at 100% occupancy in Independent Living at least as far as I've been on their waitlist in 2019. I'm in no rush to transition into a CCRC, but we plan on transitioning in 18-24 months, if a unit meeting our specifications becomes available. We're starting our decluttering efforts now.

For your information, the NC equity model CCRCs were all developed in Charlotte and Raliegh-Durham by the same developer, who also has developed CCRCs in Hilton Head SC. Regarding any analysis of the landscape of equity vs. non-equity CCRCs you may do, in my neck of the woods, only one of the many CCRCs in the Charlotte metropolitan area now offer the Type A contract that provides life-care coverage in AL or Skilled Nursing Care at the cost of a very large entry fee. All others offer, AL or Skilled Nursing Care at their CCRCs on a per diem payment basis -- all shifting the risk of LTC actuarial gaps and risk primaily to the resident on a pay-as-you go basis, recognizing that the Type A contract poses fraught enterprise risk to the CCRC. I prefer the pay-as-you go system, since I have LTCi which dovetails with the life-care packages now offered at the CCRC I'm considering as well as the non-equity CCRC we're also waitlisted as a back-up to our first choice, the equity model one. The newest CCRC in my area, which opened during Covid, is a straight rental business model -- most new places, including older ones that once offered Type A contracts and that undergo residential expansion, don't want to take the risks of being on the wrong side of the actuarial scale. They do not offer Type A contracts. The only one here that does offer Type A contract is a large CCRC enterprise with CCRCs in a number of states beyond NC -- you might want to read its Disclosure Statement since it lays out the major actuarial risks of offering life-care contracts. And this particular CCRC also offers a menu of other contracts that leverage a resident's LTCi coverage. It can get complicated but even if you were in the industry before (as I think you might have mentioned in other posts), there is a lot to be learned in this day and age.

Not a fan of the Type C contract as it shifts the risk to the individual and away from the CCRC. I agree, from an actuarial standpoint, Type A CCRCs have to be very careful in their analysis and with their pricing.

 

[hesperus]

We have initiated research into transitioning into a CCRC. Our house is free and clear and its sale will allow us to fund the full entrance fee. How do you coordinate being on an entry list with the sale of your house once you get the call. Do you take a heloc, get a bridge loan? Homes in our neighborhood sell very quickly. Sometimes days to one week. Ideas please.

Most CCRCs deal with this situation often.
You usually get a short funding window after the call, often 30 to 90 days.
Many people line up a HELOC or bridge loan as a backup, then repay it once the house closes.
If homes sell in days in your area, listing immediately after the call often works without borrowing.

 

[Peter]

^^^ How would a HELOC work, if they are trying to sell their home (to generate the entrance fee)?

It all gets sorted out when the home sale closes. HELOC gets paid off with the proceeds, and the remainder goes to you. Then you have the cash to pay the entrance fee.

We did this. It worked smoothly, no stress.