Older Homeowners Receive Lower Returns When Selling, Studies Find

Recent research from two institutions has documented that individuals selling homes at older ages tend to receive lower financial returns compared to younger sellers. The findings highlight age-related differences in home sale outcomes and identify factors influencing these disparities.

The Center for Retirement Research at Boston College published a study indicating that the decline in returns for home sellers begins at age 70 and becomes more pronounced as age increases. The Federal Reserve Bank of Philadelphia also published similar findings, noting that homeowners over 70 experience reduced returns when selling their properties.

Both studies identify that older sellers are more likely to sell homes that have not undergone recent renovations or have deferred maintenance. Additionally, older individuals more frequently use private or pocket listings, which are less visible to the broader market and may result in lower sale prices.

According to the Center for Retirement Research, an 80-year-old seller typically receives about 0.5 percentage points less in annual return compared to a 45-year-old. This difference accumulates to roughly a 5 percent lower sale price over an average holding period of 11 years, which equates to approximately $20,000 on a $400,000 home.

What the numbers show

• An 80-year-old seller earns about 0.5 percentage points less per year than a 45-year-old
• The sale price gap over 11 years is around 5% for older sellers
• About 25% of the return gap is linked to lack of renovations or deferred maintenance
• Policy changes in Illinois reduced the gap from -0.8% to -0.4%

The Federal Reserve Bank of Philadelphia study also reports that the annual return for an 80-year-old seller is 0.5 percent lower than that for a 45-year-old, leading to a similar percentage reduction in sale price over a typical holding period. The research attributes about a quarter of this gap to the absence of major renovations or ongoing maintenance in homes sold by older individuals.

Another factor identified by both studies is the increased use of private or pocket listings by older sellers. These types of sales are less likely to attract competitive offers, which can further reduce the final sale price received.

Policy reforms can influence these outcomes. In Illinois, a change that increased transparency for private listings was associated with a reduction in the age-related return gap. The difference in returns between older and younger sellers was reduced by about half after this policy was implemented, according to the Center for Retirement Research.

The findings from these studies suggest that both property condition and sales methods play a role in the observed differences in home sale returns for older homeowners. The research provides data on how age and related factors can affect financial outcomes when selling a home.

* This article is based on publicly available information at the time of writing.