When retirement village units dont sell

As I outlined in my article HERE, one of the biggest traps with retirement villages is when you exit your unit, for whatever reason, and the village operator is unable to re-sell it. In this situation you are effectively trapped you have terminated your right to occupy, yet you cannot access the capital you have tied up in your unit because the operator cant sell it! For those of you who came in late, as I mentioned in this article HERE, you cannot receive the proceeds from the sale of your unit (known as your exit entitlement) until it has been on-sold to the next resident.

So what can you do?

Well, in the first instance, you need to pressure the village operator to get the unit refurbished and back onto the market as soon as possible. At the risk of stating the bleeding obvious, a unit cant sell if it isnt on the market. Some states legislate that this has to happen within a certain period of time, such as 90 days. A refurbishment only consists of repairs, gardening if required, new carpet and a paint. Sometimes the paperwork can be held up by the village operators staff or solicitors, for whatever reason.

Once a unit is on the market, if it isnt selling then it is usually due to one reason, and one reason only the price is too high. Operators are loath to drop prices and usually prefer to throw in special offers such as air conditioning, tiles instead of carpet, or funding the village fees for 12 months. This can be a huge barrier to a savvy buyer, who knows that the underlying price is too high. Operators believe (correctly) that if they drop the price on one unit, the next time they get a valuation on the village the valuer will apply that price to all similar units in the village, and thus decrease the overall valuation of the property. My frustration with this approach is that the DMF transaction model is built in such a way that prices can be dropped when the market is soft, because they can easily be increased again on the same property when the market turns around. But that is an article for another day

The other downside to dropping the price is that many contracts oblige the outgoing resident to make up the difference of any loss to the owner between their original purchase price and the re-sale price. Readers of my book will know that I recommend purchasers negotiate to allow a price reduction of up to 10% without any penalty, which I think is reasonable, and allows the price to be decreased to expedite a sale.

So once your unit is actually on the market, what can you do?

The principle here is that of the squeaky wheel gets the oil. You need to be all over the sales agent and village operator call weekly for updates on what marketing activity is occurring (after all, youre paying for it!), how many enquiries they are receiving, how many inspections of the property have been conducted and how many offers have been received. Where is it being advertised? What do the advertisement photos look like are they professionally done or has the sales agent taken them with an iPhone? Encourage the operator to take multiple contracts on your property the last thing you want is to have your unit off the market for 60-90 days while the potential buyer tries to sell their house, only to have the contract fall over because they couldnt execute a sale in time.

Drop in unannounced to look at the condition of the property is it presentable? Are they maintaining it and keeping it clean? Is it open for inspection? Is there display furniture inside? Does it smell pleasant? Are leaves swept every day and are the gutters clean? Is the gardens presentable and are the lawns mown?

Review your pricing regularly and dont hesitate to drop the price if needed. Do some comparison shopping of other villages nearby to get a feel for current market values.

Above all, be motivated and be involved. Dont assume that the operator is doing everything they can to sell your property. Some of the large operators may have a couple of hundred properties for sale at any one time, so it is hard for you to get their attention unless you are making regular calls, keeping them to the legislated deadlines for paperwork and refurbishment, threatening legal action, and above all, simply being in regular contact.