KGCI: Real Estate on Air - How To Help Your Senior Clients

Episode Date: June 12, 2024

This week, we are joined by a very special guest who's going to share some insight on how you can be a better advocate for your senior clients. Please welcome Michael Standard. Michael, welcome to the show. Hey, thank you, Stephanie. Glad to be here. So I always love starting our episodes, learning a little bit more about our guests. So talk to me about where you fit into this wild world of real estate and a little bit about what brought you to this place. Yeah, it's an interesting story.

So I used, I was born and raised in Oregon. And Oregon is basically a lumber state and a lot of timber there. And all my family was, we're in the logging industry. And growing up, that's what I wanted to do as well. I love the outdoors. And my mom and dad said, no, you're not doing that. So I went off to the big state, this big city of Portland to go to Oregon Health Sciences University and become a physician.

Oh, okay. I work through school and part of med school working at the Sisters of Providence Hospital, where I did, I had the illustrious job of doing autopsies for a living. Oh my gosh. Yeah, a lot of fun, huh? But all my friends thought it was cool, right, at the time. And I worked in cancer research. It makes for good stories, I'm sure. Yeah, and I worked in cancer research, too.

And they all thought that was glamorous as well, but I really just cleaned the machinery. Yeah. So I went from there to become a stockbroker in the bank channel. And I loved it. I did very well at it. I was with Bank of America. I learned with Wells Fargo. I was not good at politics.

I moved on. But my favorite thing about the industry and being a stockbroker in those communities was I got to help a lot of seniors with their retirement with their income. And my favorite part was when we, after we had done the trades and built a little relationship, they'd stop by the desk if I was there and we sit down and chat and find out how to raise kids and, you know, how to where the best fishing holes at today and berry pies, how to fix those correctly. And that was a lot of fun. And that's where I found that that was my passion in life. I was helping seniors. Then I went off into the software industry and sold software

to big insurance companies played in the sea level a lot and dealt with those folks. and as that industry continued to buy itself over and over again and shrink in size, I needed and wanted to go into something where I could run my own show, have my own people, and help seniors. And I could have become a stockbroker again, but I didn't have the passion for it anymore. So I had a couple of coaches who referred me on to their friends, and one of them was her brother-in-law who used to do the old review. reverse mortgage. Okay. And I'm listening to him telling me about how it works and being a financial

advisor, I thought, this is one of the smartest tools I've ever heard of. Why can't we use this more? Because I would have clients walk in with their $40,000 401k rollover from retirement and they own their home outright on the beach, which is worth a million dollars, but their cash flow was horrible. Right. So, and back then there was no Airbnb's. Right. Worker to Airbnb that for the weekend. They make money. So I, gosh, I just saw this tool and thought, what a great opportunity. And so the rules changed in 2017. In fact, the entire loan was revamped. Okay. Okay. So the person who became head of HUD was Ben Carson. and Bill Carson was a presidential candidate,

but he worked at HUD. Trump brought him in, and he made some really strategic changes to this. And I'll explain them to you why it was strategic. First, he kicked all the banks out. No banks allowed to do these anymore. So it's only FHA. It's an FHA loan.

He also forced insurance on it. So that makes it a non-recourse loan. Now, you're a real estate agent, so you're going to understand what a non-recourse loan means. which is very simply, if the house ever goes upside down and you sell it when it's upside down, the government eats the loss, not the family member. Right. That's huge because in 2008 to 2012, when Obamonomics hit, the U.S., basically,

it's caused a lot of bankruptcies on kids who had mom's house in California. It used to be worth a million dollars. now it's for 350. Right. And she took out $500,000 with a debt. So that kid filed a bankruptcy and walked away. So that was the first strategic change. Now it's an insured loan.

No one loses. The other is it's now based on age. So it used to be you take out as 80%. Not anymore. It's 62 and you can do these in the state of Texas. It's 62. You can only get about 40% of your. Okay. At 95, you can have about 75% of your equity. Why is that important? Well, because you're not going to go upside down.

And FHA is not going to have to bail you out with that insurance. So they're making money. FHA. Yeah. The other key is, it's always been there. But the other key is they keep title to their home, the senior does, and they never have to make a payment unless they want to. Now they can make a payment if they want to. but they have no mortgage payment now. And what Ben Carson said was this. We want seniors to use their equity to age in place and not lose their home to Medicaid. Yeah. So when you get forced, if you're 65 or 70 and you're buying your last home, you're second to last home, and the realtor introduces you to the mortgage broker

who doesn't know how to do these loans because they're very specialized. Then you live in the house. You have a mortgage for 30 more years, right? Or 20 more years. And you're making those payments and maybe your cash flow gets tight. Maybe you don't have enough money to repair the roof correctly. Maybe you run out of money, which is what most seniors do. Then the terrible statistic, Stephanie is 7 out of 10 seniors go to a retirement.

Center. Nursing care. Yeah. Five of them lose their homes to Medicaid. Okay, because they had a mortgage partly because there's no shelter. The bank, they owe the bank money. The kids have to sell it to pay for mom and dad's care. When they run out of money, let's say in that example, let's say they still had the home

and mom was living in it, but dad was in the care home. When they run out of money, they go on Medicaid. When they go on Medicaid, Medicaid attaches the home and takes it when they die. the kids don't get it. So this is a really smart financial tool for seniors, and this is the loan that the majority of them should be using because if you don't have long-term care insurance in place or $200,000 or more in assets,

when you leave the hospital to go to rehab or a nursing care facility, if you can't prove you have those two things, you get to sign your household to Medicaid. Yeah. Right? Yeah. So that's why it's really important, and that's why they made the changes because there's $12.48 trillion of equity in seniors homes.

Wow. And five out of ten lose their homes. That's wild. Yep. That state says it. Here in Texas, only about 28 percent lose their homes. Because we have a lady heard of us and a few other odds it ends we can get around that. Yeah.

And, you know, knowing that this option is out there, you know, I think of someone like my dad. You know, my dad is just turned 76 in February. You know, he's doing well. He's alive and kicking, you know, even against my better judgment. He's, you know, he pushes himself. He goes out to his friend's cattle ranch and helps inoculate, you know, cows and bulls once a month. And, you know, not too shabby for a 76-year-old man, but, you know, realizing that. At the house that he's in right now, he bought four years ago because he was looking to downsize. And, you know, and, you know, he might not beat this active forever. And, you know, who knows, you know, what, what options we may have to look into. So, you know, if we have maybe an agent who's listening to this or someone like me who is an agent, but also has a family member that, you know, we're thinking ahead or is currently in some sort of situation where we don't know what to do, what sort of question. What sort of questions should that homeowner be asking or the family members or power of attorney for that homeowner be asking before they decide, is this a good option? And am I going with the right person? Sure.

Well, that's a good. Let me start with the right person there. Do you know that there's a difference between a retail mortgage person and a wholesale mortgage person? Yes. I'm aware of that. Yeah. I'm wholesale. Okay.

That means I have the least amount of fees and give the most amount of money. money to my clients because I don't have 25 staff members of pay. I use the lender's staff. Okay, they process loans for us. So we go directly to the lender. They process a loan. I eat the fee. I don't pass it on my clients. And but FHA also sets everything behind the scenes. There's no money. Of course, yeah. Right. Here's the question you want to ask. And it's a really important question. I asked my in-laws this question too. And then I made a statement to my in-laws, but I'll tell you what I asked. I said, okay. Isn't that lawn just getting too? big for you? I mean, you got a new tractor, but every time you do it, your wife says, my mother-law

says, boy, he has to sit down for like a half a day to recover from it. He's in his 80s. Yeah. And he's mowing a half of an acre, weeding the lawn, you know, and do it staying busy, which is good for him. Of course, yeah. And they do have a single level else. But I ask those questions, this are questions you should ask is, is the house getting too big? How about the maintenance on the house? Do you feel comfortable and safe? I can tell you where they live now. You should be a nice neighborhood. It is not anymore. You know, these are the $400,500,000 homes. You're not the million homes in the gated community. So, right. So ask that question. And you know, how you can ask your friends the same question. How are your parents doing? Yeah. Do they like the house? Is a house comfortable

for them, are they going to be able to age in place? And what that means is this. Do they have that grab bars, right? Do they have the things that help them get around because eventually they are going to start tottering and they will fall? Yeah. And are they in a place that's safe for that?

Is it set up correctly? And we have the in-laws here, and they live in Oregon. I'm in actually Mansfield, Texas here in Dallas, Florida. And we had them come down for a birthday party and then we took them to 255 and over communities. Okay.

And my mother-in-law was in heaven. I bet. The lights were great. Everything was perfect. She could put her painting studio in that room. He could put his guitars in that room away from her. And it's clean. It's uncluttered.

It's done up nice. It's not beat up by the grandkids, right? Right. And she was in heaven. And he looked at me and said, I'm too tired to move. And I said, write a check. Just write a check.

Because the scary part is, if they stay where they're at, if your dad stays where he's at, when he does fall, when something does happen, there's a lot of mess that's going to take place. And we don't want to clean up their mess. We want them to plan ahead. We want to give them good advice and direct them in the right direction. Now, this loan isn't for everybody,

but what if you are living on a fixed income and your budget set? What if you, you know, like a lot of people, they do have somewhere with all, but that's taxable. So you start pulling out of brokerage, you're going to start paying extra taxes. That's no fun. So we need the researches. We need to help our parents and our friends' parents researchers because it's really simple. You go to hud.gov, hud, g-o-v. And you search the word in the toolbar, Hecum, H-E-C-M, home equity conversion mortgage.

That pulls up how it works, walks you through all the laws, all the loopholes. And once you see that, and I send all my clients there who have a computer, now some of my clients don't have computers, they call me back the next day. We usually have an appointment schedule the next day and they say, this sounds too good to be true, Michael. I said it's not it's a fact did you read it they said yep I said well it's not too good to be true remember FHA and the government do not want you to go on Medicaid because when you go on Medicaid look at it from a realtor standpoint they go on Medicaid HUD gets the house

HUD sells at auction there's no realtors involved right and it goes for pennies on the dollar because I've been on those houses. I've had clients who do as well. Yeah, $100,000. It's long in a dance. Right? It goes $100,000 under. So FHA would rather have the home go to the children.

And the children go sell it at market through a realtor who can get it appropriately priced. And that way FHA is not going to lose money. And in the state, the government is not going to lose money. So it's really important because once you have this heckum wrapper, home equity conversion mortgage wrapper over the home, then it by law has to go to the heirs, kids, whoever, right? The heirs have 12 months to sell the home or refinance and keep it. Okay. You just have to pay off the lien.

FHA lien and the rates for FHA loans are about 1% to half a percent lower than regular traditional loans. So it's advantageous. But now the kids keep all the equity. Right. Well, if you go into a 30-year mortgage at 70 years of age and you fall and break your hip or get sick or run out of money because you did get sick. Right. And then that slippery slope, then Medicaid leaves you $118 a month from your Social Security check.

That's what you get. I don't know what you're going to do with that. I can't buy half a week's of groceries for $118 in today's day and age. A lot of my clients say, well, I'll get my hair done. So you really have to remember a couple of these points I've walked you through. Medicaid will take your house. Okay. Old age, we'll leave you with nothing unless you planned very well because there's a lot of expenses.

I mean, my dad, $120,000 in medical bills over and above what Medicare covered for his triple bypass. He's a very large lien on his home. because he can't pay it. I thought it was fixed in them, right? So it's important that they know that they keep title of their home. Their kids inherit the home. And they also don't have mortgage agreements unless they want to make them. And if a simple home appreciates over time, it will outpace the loan amount.

So the kids will have, I mean, I can show you example after example. There's usually 40 to 60% equity left in the home, which is more than there would have been if they would have had a regular mortgage and ran out of money. Right, correct. Because home goes to state. So that's kind of my spiel on how it's changed. They made it so much safer, so much easier to use. But Stephanie, a lot of people still believe in Sasquatch, I guess.

Yeah. You know, well, you know, like I love that you mentioned that client who said, you know, it's too good to be true. You know, what's the catch? And I think we're always a little dubious of, okay, what's the catch? But I love that this, if anything, just presents another option. You know, it kind of puts that control back into that homeowner. It gives them a little bit of say into, you know, what happens.

Because, you know, as our family members and as we get older, sometimes it feels like there is less and less say than, you know, what we have. My father-in-law is currently in an assisted living facility. and they take very good care of him, but, you know, he is kind of at the mercy of what that facility can offer and the cost. And, you know, you fall and, like you say, you fall and break a hip. It's, you know, this is how I'm going to have to slow down or how my life adjust. And so sometimes I think for our family members that are aging, it feels like life is happening to them. And so when we can give them something that goes, hey, here's a way that you can maintain this financial headway into what this looks like. and it gives you options for when life is just kind of thrown at you or when life happens to you,

you know that you have the safety net in place. And I think that that's the wonderful thing is that it's one less thing that they are, you know, kind of at the mercy of it. You know, they can, something that they can depend on. I work with a lot of in-home care providers because I help them when their client doesn't have long-term care insurance or does not have a lot of cash available to pay for in-home care. because 88% of seniors, heck even me, I want to age in place. I want to stay in my own home until I crook.

I don't want to be. I don't want to go anywhere either. I don't want to be in a care center. Those are yuck. So why would you want to do that to our parents? Because a lot of them, it's easy. So if they live in their own home and they have enough equity, the heck them could work for them to have the resource to use the equity out to pay for

their in-home care. That's what this thing was designed for. That's why they changed it. Well, from your side as a realtor, or realtor, you have to realize that the majority of the homes today in the $300 to $500,000 range are $275 to $500,000 range are owned by seniors who don't want to move because they think they'll have to have a mortgage. That's it. Yeah. I poll them all the time. Well, why don't you want to move?

Well, because I can't afford a mortgage. I live on Social Security and a little pension. And we have a small brokerage account. You're right. You can't, can you? But did you know that the home equity conversion mortgage will allow you to qualify for a new home that you can pick out your lights, your colors, your drawer pools and everything and make it the way you want to. And it's going to be safer. And it's going to be set up for you now, not your kids, for you.

And then it's going to have more equity in the end. Because it's going to be in a nicer community. It's going to have nicer things. It'll sell for more for your kids. They'll have more equity to use. Michael, that doesn't make sense. I said, no, it does make sense. You put 55 to 60% down from your old home and you sell it.

You keep the rest of the bank. It's yours to keep. That's tax-free, in fact. And then you buy this new home with a Hacom loan, home equity conversion mortgage loan. You don't have a payment for life. You can sell it anytime you want with no penalty and your kids get the house.

there's no catch. Yeah. There's no catch. That's amazing. The fact that and the fact that there is those safety units in there now to make sure that, you know, what we're propositioning and what they're looking forward to is something that is actually going to be there at the end of the day. So if one of our listeners, you know, one of our real estate agent listeners has questions

or maybe has a client or like I said, a family member who they suspect, this might be a really good option for them. I know you're here in Texas. Do you only work in the Great Loan Star State? And if so, do you have partners across the U.S. for our agents who are outside of Texas? So I do. So I own hero loans, which stands for Home Equity, Retirement Option Loans, LLC. And I'm licensed in Oregon and Washington in Texas. Other states are coming to as I find more partners who want to become wonderful. We want to come on wholesale as a wholesale lender. And we have a lot of ads.

But the easiest way for them to get a hold of me is one of my old, my office number is 817809, 2776. Or they can get me at Michael at heroloanslc.com. Or they can call me on my old phone number, which I pick up often 360-690-5278. wonderful well that's the easiest way to get a little bit or you can pay me on Facebook

we run a lot of Facebook ads for downsizing and we're actually getting a lot of hits not from the senior it's from the kids yeah because we are managing these opportunities or managing these questions you know we are often managing

our parents care my husband is power of attorney for my father-in-law you know, just for, not that he is mentally or physically incapable, but he's at a stage where it makes sense for for someone who has the time and the energy to look into this and can look forward a little bit to have some of that control. So, you know, it doesn't surprise me that it's often the kids or the family members versus the actual homeowners or senior clients that are reaching out to you because it just makes sense to have someone who can, you know, kind of take a little bit of a step back,

take some of the emotion out of it and look at it in a black and white on a factual. Let's look at the numbers. Let's look if we do this and we don't do this and present those options. So is it hero loans on Facebook as well? Yes, it is. Yep. Beautiful. And the other thing, I just want to close with, I appreciate your time so much, but I want to close

with a quick story. I'll tell you a story about two EXP agents I work with. So one had, he was a pastor and he had retired. And he had some dear friends who were in his church who had gotten scammed out of $100,000. Oh my gosh. And so they had to go get a mortgage. He lock. Actually, they had to do a cash out refinance, smart, huh?

Okay. They didn't talk with me back then. Yeah. And so they had to do that. They had payments and they weren't surviving. It just was too much. Couldn't take care of the house. Because if you're making a mortgage payment and you only make $1,900 a month and you have a $700 mortgage payment plus, right?

There's not a lot of money left over. So we referred them to me and I sat down and talked with them. And basically they said, well, our option we're looking into is our friend referred us to you. We want to talk with you about this. But our other option is we're going to sell the house and move into an apartment. We found one for $1,100 a month. And I said, okay, how long will. that money last.

Yeah. And they said, oh, we think about three years if there's no medical expenses, right? That's nothing. Yeah. So we did the heckham purchase for them. There was an nice lady who gave them a discount on the purchase of the new home. They sold their old home. And he calls me on occasion, the gentleman who did the loan and says, hey, Michael,

should I make a mortgage payment or not in joking? And he's joking with it. said, you know, Mr. Fox, you don't have to make a mortgage payment. You can if you want to. Here's the phone number. Call them. But that was one. And then we were doing another one.

Another EXP agent sent me a client of theirs. She needed to downsize as well because her son who she'd been caretaker for for years. She couldn't do it anymore. She was just getting too easy for. Yeah. And so he was looking, the realtor was looking for a home. that she could afford price wise even with the heckham purchase because she didn't have a lot of money to put down so he said well heck we we can't find her home that's going to work for her in her price point so we just did the heckham on her existing home okay so now she has a huge line of credit yeah she's using to supplement her income because you know her son left and his a little bit of Social Security income left with him.

So I love the XP agents. They take care of their clients. And I just want to present this idea that should open everyone's mind to how safe this product is. And the purpose is to make sure that your parents can age in place and have in-home care or take care of themselves without having a mortgage payment or being stuck in a house because they can't afford a mortgage payment. It doesn't work. Yeah.

Yeah. Because they went down to the bank and the bank said, no. Right? Yeah. And the last thing we want is anybody feeling stuck in a situation when when there's options. And that's why I was excited to have you on is just being able to go that there are options out there. There's options worth exploring and knowing that just the traditional, well, let's sell this house. Let's find something else. Let's see if you qualify. Let's figure out how this diminishing income in relation to our inflation rate, you know, how. How does the math, math, you know, and this just presents one other opportunity to go, hey, we don't have to just do this narrow focus of let's sell, let's downsize and hope that it works out in the long run. That's right. That's right, Stephanie.

And with real inflation, it's 17.8%. And seven out of 10 seniors going to assisted living and five of them losing their homes, we should be asking these questions to our friends about their parents, asking our parents, what are you going to do? we'd really like you to move into something smaller that you can maintain or move in with us. Let's do an ADU in the back, right? Something to help because that wealth will be lost to the state. And that's a sad thing.

And we have the answers now. We're educated now. We should know what to do. And this is the only loan I do. I think when I started, I did maybe four traditional loans. But this is all I do because I find it very simple. satisfying to help, and I think it's the best thing for seniors to have, even if they're Uber wealthy. And I have clients who are who were wealthy. I did one. He had two condominiums

in two different states, both worth $5 million apiece. Wow. He just wanted to set aside money through the escrow account, which allows to pay his property taxes, which were $28,000 a year. I believe it. Because he was depleting his cash. So, you know, you don't have to be poor to do this. wealthy people do this too. And if you're smart, you see this. This is tax-free money. Yeah. This is tax-free money you get to use.

And it's debt equity that's sitting in your house, kind of like a bad employee, not doing anything. I'll put them to work. Pursue this. Yeah. Look up the website. Give me a call. I love to help people understand this. And the best part is, I can't sell it to them.

They can't have it if they want it. They have to go through. heckham counseling with an FHA advisor to counsel them make sure they know what they're doing, that they're not getting pushed, and that they don't have dementia or other medical issues. Yeah. They would knock them out alone. So it makes it very safe because if they can't qualify, I'm sorry, I can't help them. Right.

And, you know, there is power in having information, and I love that you're willing to share this information. Again, not only for our realtors who are listening in, but the folks who may be in a situation where this directly applies. Michael Sandor, thanks so much for joining us today on the enter praising agent. You bet. You're the best. Have a great one.