Spectrum Marketing Shares New Study Findings And Helpful Tips
May 1, 2008

Last month, Spectrum Marketing, Inc. surveyed prospective CCRC residents to gauge the impact of the current economic climate on retirement living plans — and 70% of respondents said that it would have little or no impact on their future plans.
And when respondents were asked whether changes in their home value or investment portfolio would impact their future retirement living plans, 69% reported that it would have minimal to no impact.
“One reason why we did this survey was to be able to use this information in the sales process,” said David Ratchford, president. “The other reason was that the sponsors or owners of the communities that we work with were asking these questions.” Spectrum Marketing, which is based in Gastonia, North Carolina, provides consulting services — research, strategic planning, marketing and sales management, product development, project management, and training — to not-for-profit retirement communities that are expanding, repositioning, or just beginning the planning process.
“It’s just taking people longer to make a decision to move to a retirement community because of the housing sales cycle,” he continued. “But one of the bottom-line impacts was that of the 200 respondents to our survey, only 2.3% reported that they would not move because of the current economy, and only 6.3% reported that they would delay their move because of the economy. So those are significant statistics and a lot more favorable than we thought they would be.”
Spectrum’s survey was conducted April 1-12, 2008, through telephone interviews of 200 seniors who had either put down a 10% downpayment on a home in a retirement community or were considered “hot prospects.” The respondents were drawn from four communities in different regions of the country. “The importance of this study is that they were not just general prospects,” Ratchford stressed. “They were either really good prospects or people who made a decision by putting down a deposit.”
Most respondents (83%) do feel that the economy is worse than it was 12 months ago but don’t feel that their personal financial security has diminished very much. In fact, very few felt that their income had changed: 90% of the people said that their income was either the same or had increased over the last 12 months (84% said it was the same, and 6% said it had increased).
The issue for prospective residents, then, is how the economy will affect them. They are concerned about whether their home will hold its value; if not, will the value come back and when? Do they need to readjust their portfolio to make it more secure and less subject to market variations? And how financially secure is the CCRC in terms of the refundable entrance fee?
“What we found through this survey,” said Mike Wallace, vice president of sales and marketing, “is that about one-third of the country is reeling as a result of the real estate bubble, and the other two-thirds have not been adversely affected by it. So if an area recently experienced an extreme spike in home values, those homeowners are now riding that same trend downward. But people living in much of the country don’t seem to be feeling the crunch.
“On the whole, the sales pace has slowed a bit,” he continued. “I wouldn’t say that there has been a drastic change. If I had to give an educated guess, I would say sales have slowed 5-10%.”
Typically, Spectrum sees a 25% attrition rate in the communities that it markets. About 25% of the people who sign up and put down a 10% deposit don’t move in for one reason or another — death, health-related concerns, moving to a different community…all kinds of reasons. Given that days on the market for home sales have increased — and seniors are expressing concern over the economy — sales counselors should be equipped with tools to allay the concerns of residents and to prepare to accommodate a lengthier move-in period.
Strategies for addressing the uncertain economy
Michael Starke, director of planning and research at Spectrum, suggested a number of strategies that CCRCs and their sales counselors can employ to help alleviate the concerns of prospective residents who may be delaying either their decision to move into a retirement community or the timing of their move-in date.
• Provide access to objective information about the local housing market. The housing market varies considerably from region to region. Some markets are still increasing in value, while others are experiencing a downturn. Prospects may inaccurately apply national trends to the local market. That results in a wait-and-see attitude, with the hope that home values will return to the levels that they were before the housing bubble burst.
“We’re big advocates of relocation services,” said Starke. “We suggest that providers partner with a third-party specialist who can inform the consumer as to their position in the current market, provide area-specific real estate data, and help with the actual move. The partner should be an established, knowledgeable, and credible spokesperson for the real estate industry in the particular area — perhaps the president of the local real estate board, a local homebuilder, or a relocation specialist — who can support the seniors in a trusting manner. These services take much of the stress off moving to a new residence, both for the senior and for out-of-town family members who can’t always be there to help with the downsizing of the home environment, the consigning or storing of household belongings, and the ultimate move to the retirement community.”
• Visit prospects in their own homes. Making personalized sales calls in the prospect’s home rather than in the professional sales office helps the sales team understand the personal circumstances and/or challenges that people may be facing in either selling their home or moving from their home. “That makes you a better and more empathetic counselor, and your recommendation will more likely be a better fit,” said Starke.
• Proactively help prospects sell their homes more quickly. To deal with the tough housing market, provide access to (or discounts for) a home staging consultation with a real estate expert to make the property as presentable as possible. The consultant can also advise the homeowner on right pricing and on what should or must be repaired or renovated to sell the home at an appropriate price.
• Offer flexible payment terms and move-in requirements. Some communities require people to pay up the entrance fee balance and move in within 60 days of making the reservation. “If the community has inventory,” Starke said, “we suggest the provider relax the rules to relieve the pressure on prospects. Allow them to move in prior to making full payment of the entrance fee but collect the regular monthly fee.” Spectrum has found that when prospective residents have flexibility on their move-in date, they begin the process of selling their home. “It might take six months instead of 60 days,” he added. “But when there’s inventory on the books, this makes perfect sense.”
• Develop new financial products that respond to needs of today’s prospects. Many CCRCs are exploring new and creative ways to meet the needs of today’s prospects. One Spectrum client, for example, offers new residents a satisfaction guarantee. Anyone dissatisfied within one year of moving in can move out and receive a complete refund of the entrance fee. “That’s one way to assure folks that it’s okay to make the move,” said Starke. Other financial products that might encourage prospects to make the move include: 100%-plus refunds that share appreciation with the resident or the resident’s estate; synthetic equity, which enables the resident to have some experience of ownership; and unbundled monthly fee plans that give residents a greater sense of choice and control.
• Provide promissory notes. Some providers provide promissory notes to prospects who are having difficulty selling their homes. The terms may require an interest payback over the life of the loan or accrue interest that is repaid when the home sells. Generally, these promissory notes are usually written for no more than a year. “It’s an attractive tool for people who are actively trying to sell their homes, have priced it right, have staged it, are anxious to move into the CCRC, and want to defer paying the entrance fee,” said Starke.
• Educate prospects about the financial security of CCRCs. Remind prospective residents of the organization’s not-for-profit status, sponsorship, leadership strength and board tenure. Let them know that you’re accredited and that organizations financed via the tax-exempt public market go through a rigorous financial review and have ongoing financial operating requirements. Stress the fact that the CCRC industry is highly regulated through state departments of health, insurance agencies, and other licensing entities.
Advise prospects that living in a community provides a cushion against inflation with regard to health care costs, utilities and food that an individual family would have trouble weathering alone. Finally, remind them that the debt-free house they purchased years ago has produced a windfall profit and that a refundable entrance fee protects residents from the risk of any further downturn in the housing market.
Like this article? Sign up below for a FREE TRIAL to Senior Living