Breaking Into the Active-Adult Market

by Chicago Agent

As Baby Boomers near retirement age, more and more members of that generation are looking into purchasing a home in an active-adult community. In order to break into this growing facet of the market and reap its benefits, real estate agents need to understand what makes these communities appeal to Boomers.

By Meghan Boyer

A unique opportunity exists for developers and real estate agents as the Baby Boom generation nears retirement and considers where to live for the next phase of their lives. The generation is known for its size and spending power: There are roughly 75 million U.S. Baby Boomers, which are individuals born approximately between 1946 and 1964. Ranging between 45 and 63 years, Baby Boomers remain a largely active and self-sufficient group.

However, as they age, some Boomers may be ready to transition from their existing residences into a community tailored specifically for them and their needs: the active-adult community. Typically, an active-adult community features housing, amenities and community activities in an age-restricted environment.

The Baby Boomer generation “is a segment that has a lot of buying power. It’s very large,” says Chris Naatz, vice president of sales and marketing with Del Webb of Illinois and Pulte Homes. “There are a lot of people that want to live” in an active-adult community, he says.

Selling homes in an active-adult community differs from selling a house or condo in Chicago or its suburbs because older adults typically have different motivations for purchasing into such a community than the average homebuyer. Additionally, the communities themselves are unique in the benefits and atmosphere they offer. Agents that understand the Boomer demographic and what active-adult communities offer can benefit from this growing sales niche.

Independent Community Living
Residents of active-adult communities are self-sufficient, independent adults who want to live in a community of individuals who are at the same stage of their lives, agree industry members. “They want to live in a community where people are like them and are going through similar life experiences,” says Naatz.

While many community members are retired, some still retain jobs, says Laura Winter, a new homes specialist with Town & Country Homes by K Hovnanian. “They’re still very active,” she says.

The average age range is from the mid-50s to the high 60s depending on the community. Each community has its own age-restriction limits and rules regarding them.

The Steeplechase community in Oswego is restricted to adults 55 years and older, says Winter. Steeplechase differs from other communities because “some are age targeted instead of age restricted,” she says.

Del Webb communities have the same age limit of 55, but they allow some adults who are under the target age to live in the community. “The Housing for Older Persons Act [of 1995] provides for a certain percentage of the community to live there that is not over 55,” says Naatz, adding that in some situations a person who is older than 55 years may have a spouse who is not yet 55.

Some active-adult communities are rental properties, notes Mike Obloy, a partner with Peak Development, which is creating an age-restricted rental-apartment community in Bolingbrook.

Additionally, some active-adult communities mix independent living with assisted living, says Obloy. Independent living typically features full multiroom homes. There may be a community dining hall, but residents can choose when or if they want to eat there. With assisted living, homes may feature kitchenettes instead of full kitchens and residents eat all their meals in a dining hall. The level of care from staff members also is greater with assisted-living communities, he says.

Active-adult communities typically offer an array of amenities on the property, from fitness centers to social groups. Most of the communities “offer the same amenities for the most part,” says Kim Vales, a Realtor with Baird & Warner in Orland Park, who works with fellow Baird & Warner Realtor Tom Cunningham on seminars to help seniors overcome their concerns in today’s real estate market.

Del Webb features indoor and outdoor pools, a walking and running path, a fitness center and multipurpose rooms, says Naatz. Steeplechase likewise has an assortment of amenities for residents, says Winter. The community features a club house that includes a great room for parties, a fitness center and a pool.

The area surrounding a community also is important, says Obloy. The site he is working on developing is near an outdoor shopping center and a movie theater.

Living in an active-adult community, however, is not solely about having centralized amenities, notes Naatz. “I define it as living in a community that is about your social, emotional and physical well-being,” he says.

There are numerous social clubs at Del Webb, such as a travel club, that residents participate in, says Naatz. Residents at active-adult communities are “connecting with other people in an environment that facilitates connections,” he says. “They develop a strong sense of looking out for each other.”

Benefits For Agents
Industry insiders note that one of the main benefits of selling homes in active-adult communities is the size of the buying market. “Agents are going to be working with a segment of the population that is growing,” says Naatz. Agents who target the market segment will be filling a need while gaining professional sales and expanding their capabilities, he says.

Agents are able to educate and lead Boomer clients through the sales process, notes Cunningham. Some older adults may not be acquainted with the buying process. “For them, buying a house 30 years ago is different from how it is now,” he says. While some may be up-to-date on the market, others may not be computer-savvy enough to view online listings.

“It is important to be patient and very understanding,” says Vales. Agents have to let their active-adult community clients know that they’ll hold their hands through the buying process.

The decision process for someone who is moving into an active-adult community is longer overall, notes Winter. “The biggest difference between [an active-adult community] and a regular community is a much longer time before they make up their mind,” she says. It can take longer for older adults to make the decision because “it’s overwhelming to think about putting their houses up for sale,” especially if they’ve lived there for more than 30 years, says Winter.

The commissions that an agent can earn in the active-adult niche vary by community. At Steeplechase, an agent can earn 2.5 percent of the base or the sale price, whichever is lower, she says. If the agent sells a quick-delivery home (one that already has been constructed), the commission is 3.5 percent of the base or the sale price, whichever is lower.

Realtors earn a 3 percent commission when they sell a home in a Del Webb community, says Naatz. “We are consistent,” he says. “We don’t adjust based on market conditions. That’s important to us.”

Potential buyers into active-adult communities often receive financing easily for their home purchase. “Even in today’s market, half of our customers are paying cash for their homes,” says Naatz. “Even though housing values have changed over two to three years, these people have been accumulating their net worth over 20 to 30 years,” he says.

Those who do not pay cash may choose to finance their purchase. The financing options available to buyers differ by community, but typically the options mirror those available in all home-purchase situations.

“What’s nice about these buyers, a lot of them do qualify to do something without even selling their homes,” says Winter. “Sometimes they’re a lot more qualified than regular buyers. They tend to have good credit,” she says.

Vales agrees: “There’s not a lot of problems with credit or getting funds,” she says. Most buyers have their original homes paid off, and they use the money from the sale of their homes to purchase into an active-adult community.

Once an agent begins selling homes in the active-adult market, the “referrals will be phenomenal,” notes Naatz. “People entering these communities become strong spokespeople for the benefits for living in these,” he says. Many residents who have a positive experience buying into a community refer their family and friends not only to the community but also to the agent.

“There are some agents where the majority of their business is in active adults,” says Naatz. “The key message is: If it isn’t part of their business, it should be,” he says.

Getting Into The Niche
Becoming a successful sales agent in the active-adult market requires an understanding not only of the communities and their amenities but also of the motivations for why people want to live in them.

“It’s not about buying a home in a community with a lodge. It’s so much more,” says Naatz. People move into active-adult communities “to get a good home but also for very different reasons and motivations.” Agents need to understand how to convey to a client what their life will be like and how it will improve by moving into an active-adult community, he says.

Realtors should visit a community, take a tour and spend time with a sales associate there, recommends Naatz. “As an agent, it’s so important to understand the motivation behind wanting to live in a Del Webb community,” he says, adding that it has taken him five years to understand what it means to be an active adult. “I’m still learning every day,” says Naatz.

When Vales was preparing to enter the market, she began by visiting different communities and meeting with the marketing directors. She toured the communities and learned how they operated. Physically visiting the sites “gave us a good handle on how these things work,” says Vales.

In addition to visiting communities, agents should educate themselves about the Baby Boomer generation to better understand what types of factors are important to them, says Naatz.

Going online to the different community Web sites is another means of learning more about the market, says Cunningham. An additional education opportunity exists with local senior community groups, says Obloy.

Vales also recommends that agents consider earning a Senior Real Estate Specialist (SRES) designation. “It delves into how Medicare, Medicaid and Social Security come into play for these people,” she says. “It gets you familiar with the different terminology and what kind of financial situation these people are in and the needs they will have to do the transition.”

The active-adult market holds potential value for agents who choose to work in it. Though the sales process may take longer than agents may be used to with regular home sales, the benefits for agents are worth the effort. For residents of active-adult communities, “the lifestyle continues to grow and be robust,” says Naatz. Agents are not simply selling a house, they’re selling a community and all of its benefits to a client, he says. C.A.

Tom Cunningham
Realtor – Baird & Warner

Chris Naatz
VP Sales and Marketing
Del Webb of Illinois and Pulte Homes

Mike Obloy
Partner – Peak Development

Kim Vales
Realtor – Baird & Warner

Laura Winter
New Homes Specialist
Town & Country Homes by K Hovnanian

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