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There are a lot of buzzworthy headlines about “the millennial consumer” — the largest generation who has recently begun to enter the real estate market. Most of these headlines are coupled with facts about how millennials are slow to come into the housing market due to student debt, high housing prices, lack of inventory and slower wage growth. All these phrases boil down to the fact that many millennials simply don’t have enough liquidity to purchase a home just yet.
While the millennials are “supposed” to be buying, there is another group who will soon need to sell: the baby boomer home owner. Over the course of my career, this group has been a very large portion of my clientele and I only see the trend increasing.
Baby boomers are real sellers and have some very sound market fundamentals in their favor. Many are ready to downsize because their children have left home; they’re ready to retire and are sitting on assets that have greatly appreciated. Not to mention many are being advised to prepare for retirement by selling their home that they have a lot of equity in.
Here in New York City, many home owners who bought 15-plus years ago have apartments that are worth two to three times what they originally purchased them for. It’s common for us to meet with a seller who paid $800,000 for their apartment in 2000, and now it’s worth somewhere around $2,400,000 and they’re being advised to sell it because they have too much money in it.
Different than other sellers, this is not a sale that needs to happen quickly, but rather requires strategic planning according to financial advisors to ensure a comfortable retirement. The baby boomer seller is a demographic that will only continue to increase as they look to unlock a large amount of equity from their homes.
That said, there is a distinct generational gap with these sellers. In many ways, baby boomers can be naïve to the market and current real estate practices as they have not been in the market in decades. The way in which property is now marketed and sold has changed a lot. When boomers bought their homes, they may have found it in the newspaper, whereas now it’s a more digitized and visual process with professional photography, staging, etc. These modern practices often require a lot of handholding to educate boomers and guide them through the process.
The generational gap also extends to the younger buyer who is looking to buy those boomers’ homes. The millennial buyer and baby boomer seller is often not a good combination. We notice this a lot when touring properties with buyers who have young families and feel like they are walking into their parent’s homes. In this situation, it’s tough for them to get excited about something that looks like their parent’s style and may not feel “cool.”
Boomers’ properties that will be coming to the market in the next few years are likely very lived in, have not been upgraded in a while and are not up to the aesthetics of the new buyer. Again, buyers today are highly visual, with images constantly being transmitted through social media of how a home should look, what the latest decor is, etc.
Herein lies the gap — and the opportunity. If the younger buyer can see past buying something that isn’t “insta-worthy,” then there is potential for a good deal. The boomers are real sellers who bought low, have a lower basis than other properties that are newer and have a real opportunity as sellers to extract maximum value.
When meeting with baby boomer sellers, it’s usually a very emotional process because they feel a deep connection to the home they raised their family in with fond memories. It is a different approach than someone who has lived in their home for seven years and has outgrown it and is now looking to buy something larger. These heightened emotions, coupled with entering the real estate market for the first time in a few decades, can feel foreign, confusing and overwhelming.
My advice to these sellers is to hire a real estate advisor who you trust, who understands the market and has managed these types of sales before. Let them run the show — it will take a lot of stress out of the process when they filter through all the advice based on their experience and expertise.
Money spent wisely to prepare a home and freshen it up can pay back in multiples and greatly reduce the time and stress of being on the market. This is not renovation work, but rather what can be done with the least amount of money and time to create the biggest impact — like staging, repairs and cosmetic upgrades. A home may be dated and in need of updates, but that doesn’t mean it can’t look sharp and appealing to potential buyers.
If the potential sale price of a property is around $2 million and a seller invests $20,000 into preparing the home, that equates to just 1% of the sale price. That 1% may very well translate into 1.5% more for the home in 90 days, which amounts to a 200% annual return on the $20,000 invested. Not to mention the home is likely sold faster, which saves a lot of emotional stress. Seek out a brokerage that understands this need and can help prepare the home.
A baby boomer’s home is likely the accumulation of a lifetime of hard work, and the sale should be treated and handled this way. A broker should guide their sellers through the meticulous and thorough preparation of the space so it presents well to the new demographic of buyers who are looking for their first home. When it comes to an investment as significant as a home, it’s not the time nor the place to just come to market and see what happens.