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Selling a House to Pay for Care: A Guide for Seniors and Families

Kara Lewis
By Kara LewisNovember 10, 2020

Selling a home is one of the most popular options for aging adults looking to finance senior living. In fact, people older than 55 accounted for more than half of all home sellers in 2019, according to a report from the National Association of Realtors.

“If an individual’s going to need to transition out of their home into some type of long-term care, then they may be moving anyway,” says Michelle Ash, a certified financial planner in Jacksonville, Florida. “Selling the house and freeing up those resources is a great way to help provide funds in order to pay for that.”

Debbie Beard, a senior real estate specialist in Melbourne, Florida, was inspired to work with older adults selling their homes after a career as a senior living executive director. In her position, it was “extremely common” to meet seniors who had sold their home to pay for care, she says. Nevertheless, the experience came with deeply personal challenges for each family. “Working with seniors is complex and emotional. Many seniors have lived in their homes for 25 or more years,” says Beard. “It’s the whole process of the unknown. They don’t know what it’s going to be like in assisted living, away from the home that carries their memories.”

Despite these intense feelings, selling a parent’s home to pay for care can easily be a positive and smooth experience. Whether you’re selling a house to pay for assisted livingmemory care, or a nursing home, learn must-have resources, what to expect financially, and crucial steps to take.

When to sell your parents’ home to pay for care

Whether you’re a senior or their family member, selling a house can be a complicated decision. In particular, those involved may wonder about planning and timing. Should they sell the house before or after a move to senior living?

“When I first meet a client, I look at their situation holistically,” says Beard. “How is their health? Why are they moving? It’s important to look at the whole picture.”

Questions like these can guide the process, as well as help establish a timeline. Beard recommends seniors and their families consider a few key factors, such as financial needs, stress, and timing.

The main reason to sell BEFORE moving to senior living:

  • Selling is the main way your family expects to pay for care. If a house doesn’t sell quickly, families accrue extra costs — like mortgage payments, utility bills, insurance, and upkeep —alongside senior living costs.

Reasons to sell AFTER moving to senior living include:

  • The situation is urgent. If you observe signs your parent is unable to live alone, or they’ve been hospitalized after a fall or health event and cannot return home safely, waiting may not be possible.
  • Your key concern is managing stress. Seniors who live in their home throughout the selling process must declutter daily. They also need somewhere to go during showings.
  • You aim for ideal home staging. An empty house gives a real estate agent a blank slate, which could potentially appeal to more buyers.

Though each of these factors plays a role in deciding when to sell, families must determine which to weigh most heavily.

Bridge loans can make selling a house to pay for care more manageable

Most commonly used for real estate purposes, bridge loans are a short-term financing option intended to “bridge the gap” between homes. They enable sellers to take advantage of their home equity before their house officially sells, freeing up funds to pay for assisted living in the meantime.

To apply for a bridge loan, seniors must have at least 20% equity in their home. While bridge loans are convenient, they have higher interest rates than other types of loans. Also, the loan period is short, generally six to 12 months. Seniors and families can consult their banker or financial adviser to find out if a bridge loan fits their needs.

How selling your house affects VA benefits and Medicaid eligibility

Seniors who receive financial assistance from the government — such as VA pensions, VA aid and attendance, or Medicaid — should carefully evaluate their options and the potential repercussions of selling their home. The programs have the following net worth and asset limits:

  • To qualify for VA benefits, including aid and attendance, veterans must have a net worth lower than $129,094. This doesn’t include the value of a veteran’s home. Selling a house to pay for care, however, would likely increase a veteran’s net worth and render them ineligible.
  • The requirements for Medicaid vary from state to state, but many states require a person hasless than$2,000 in assets. Selling your parents’ home to pay for care can disqualify them from Medicaid benefits.

Contact an elder law attorney in your state to learn more about selling your home and government benefits. Your local area agency on aging may offer free legal assistance. 

Selling your house: What taxes are owed?

Selling a house to pay for assisted living doesn’t have to result in a hefty tax bill. In fact, in many cases, the proceeds from a home sale are tax free. Specifically, an individual can exclude up to $250,000 in profit from the sale of a primary residence, while a married couple filing jointly can exclude up to $500,000, according to the IRS. Seniors must meet two conditions:

  • They must own the home.
  • They must have lived in the home for two of the last five years.

A checklist for selling a house to pay for care

After deciding to sell your family member’s house, define milestones and goals, suggests Beard. She notes that the process can often take four months.


When I first meet a client, I look at them holistically. How is their health? Why are they moving? It’s important to look at the whole picture.

Debbie Beard, senior real estate specialist

Before listing, seniors and their families should:

  • Decide on an ideal date to sell.
  • Find a trusted real estate agent.
  • Research and know what to expect. Determine a price estimate by looking at similar properties in your area. Though it’s typically not necessary, seniors can ask their real estate agent to coordinate a home appraisal. An appraisal is an outside, professional opinion of a home’s value, based on both a visual inspection and market trends. This consultation comes at a cost — typically several hundred dollars.
  • Declutter and consider home improvements. Beard recommends a pre-inspection so sellers can make needed changes and avoid unexpected problems. A pre-inspection identifies significant safety and mechanical issues that may jeopardize a sale.

Simplify the selling process by gathering necessary documents

Before putting a house on the market, seniors or their families should have access to:

  • The home’s sales contract. This confirms the owner of the home, when it was purchased, and what price the current owner paid. This also notes any terms and conditions that may have been communicated to the current owner before their purchase.
  • Maintenance records and capital improvement receipts. Diligent buyers will want to know how recently house repairs were made. In addition, proof of capital improvements — like a new roof, driveway, or flooring — can help sellers command higher profits.
  • Homeowner’s insurance documents. Review your policy to determine how long it will cover your house and belongings if you’re no longer living in the home. In many cases, insurance companies consider a home to be vacant after it’s been unoccupied for 60 days. If your parent moves before selling their house, this could result in a pricier policy. Due to increased risks of theft, vandalism, and fire, insurers charge up to three times more for vacant home insurance.
  • Utility bills. Past utility bills ensure a seller is not delinquent on payments. They also provide prospective buyers with an idea of estimated monthly costs.
  • Home appraisal. If you opt for a professional home appraisal, this can reassure buyers that a house’s listed price is fair and comparable to other properties in the area.
  • Homeowners Association (HOA) records. HOA documents show how frequently dues increased in the past, making buyers more aware of potential future costs.
  • Warranties. Simply put, warranties increase buyer confidence and act as a powerful marketing tool for real estate agents. If a buyer is considering multiple properties, a warranty or the lack thereof could influence the decision.

Selling your parents’ home to pay for care when they have dementia

Memory loss adds an extra challenge for seniors and families putting a house on the market. Unless valid paperwork states otherwise, only the home owner can transfer the home to a buyer. However, two legal designations — power of attorney and guardianship — can empower adult children to make decisions for their ailing parents.

Power of attorney and guardianship

Power of attorney (POA) can help a trusted adult child or other family member fulfill a senior’s wishes. Real estate decisions, like selling a house to pay for care, count among the main reasons families set up this legal designation.

To set up power of attorney, the senior — or “principal”— must sign a document granting a person permission to make decisions on their behalf. Though power of attorney is often simple to establish, there are a variety of types. An elder law attorney can answer specific questions and streamline the process.

It’s best to set up power of attorney in the early or middle stages of dementia. If deemed incompetent, a senior will be unable to execute power of attorney. In these cases, families can petition for guardianship to sell a house. They’ll have to prove their senior loved one has significant memory loss, requiring a legal guardian to manage any property. While petitioning for guardianship can be a crucial last resort, it’s a more extensive, lengthy, and expensive process than establishing power of attorney.

How to manage difficult emotions when selling a parent’s home to pay for care

Whether or not a family member has dementia, the selling process can awaken complex emotions and arguments.


It’s the whole process of the unknown. They don’t know what it’s going to be like in assisted living, away from the home that carries their memories.

Debbie Beard, senior real estate specialist

Nevertheless, Beard has several tips for lessening the stress and potential upheaval.

  • Make sure your real estate agent knows a network of professionals. A senior real estate agent should know how to coordinate an estate sale, hire packers, and/or work with a senior move manager, leaving fewer tasks for the family.
  • Keep the process transparent. Each person involved in the selling process should read any contract before a parent signs it. This minimizes confusion and ensures all family members are on the same page. “Adult children are often nervous, thinking, ‘What did Mom sign? Did she get scammed?’” Beard says. “It starts an argument out of love. When adult children can look at a contract and see what it contains, the conversation with their parents is calmer.”
  • Be proactive about organizing and downsizingFor Beard, painter’s tape and Post-it notes stand out as simple yet effective tools. To help seniors anticipate the size of their new home in a senior living community, she tapes out the size of each room. Her clients also mark items with different color Post-it notes, signifying which items to sell, pass down, and keep.
  • Emphasize senior living benefits. Seniors may feel stress about transitioning to a community, so talk about what they can expect — like a welcoming atmosphere, fun activities, new friends, and plenty of amenities. Ask the community representative for their best tips to smooth the transition as well.

Find a real estate agent and elder law attorney

An informed real estate agent can make all the difference when it comes to selling your parents’ home to pay for care. Above all, families should ask, “How many seniors have you helped?” says Beard. A realtor experienced in working with older adults may help families navigate the selling and downsizing process more smoothly.

To find a designated senior real estate specialist in your area, search the National Association of Realtors database.

An elder law attorney can answer questions about guardianship, power of attorney, and whether it’s financially beneficial for a senior to sell their home. The National Academy of Elder Law Attorneys maintains a list of member lawyers.

Learn more about senior living options

A Place for Mom’s Senior Living Advisors can help assess your family’s specific situation, send you information about different types of senior living, discuss various payment options, and connect you with local communities.


Sources:

Internal Revenue Service (IRS). “Topic No. 701 Sale of Your Home.” 
https://www.irs.gov/taxtopics/tc701

International Risk Management Institute. “Managing the Risks of a Vacant Home.” https://www.irmi.com/articles/expert-commentary/managing-the-risks-of-a-vacant-home

National Association of Realtors. “Home Buyer and Seller Generational Trends.” https://www.nar.realtor/research-and-statistics/research-reports/home-buyer-and-seller-generational-trends

Kara Lewis
Author
Kara Lewis

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