Recently I encountered a listing that had a reverse mortgage on the property. The former owner is now deceased. The family estate is in control of the property and they want to sell the house. Sounds complicated – but really it’s not! As a buyer this can be a good opportunity to get a great deal and as a seller it can be a smooth process and doesn’t need to be complicated.
If there is equity in the home, obviously it can be sold and the profits recaptured by the seller. This is ideal for the seller. However, the reason an owner would get a reverse mortgage would be because they need the money while they are alive. It’s a very good option for some people in their aging years to be able to take out a monthly income from their home. The problem is that when they pass, the home may have lost all of its equity and now the estate is left with a home to dispose of with a mortgage higher than what it’s worth.
That’s when the sales process becomes interesting. Basically, if there’s negative worth in the house, the mortgage company must approve the sale just like any other short sale. The good news is that it usually only takes them a couple weeks to approve the sale vs. several months like a traditional short sale. Usually they require a formal appraisal of the home and will accept 95% of the appraised value. They also will pay the seller related closing costs (commissions, doc stamps, title insurance, etc..) which is good because if the estate isn’t responsible for the mortgage – they obviously aren’t going to pay for anything. If the taxes and HOA fees are behind, the bank will not pay those on the closing statement, they need to be added to the overall cost of the mortgage.
It’s really a great option as a buyer to buy a house this way because you have a seller that doesn’t want the house because they don’t stand a financial gain from it if there’s negative equity. The bank doesn’t want to have to file a lengthy and costly foreclosure process. They are motivated to get it off their books because it’s much easier if they can just be rid of the property.
Obviously you’d want to speak to an attorney, but if you see a reverse mortgage sale pop up, go check it out. Don’t be afraid! It can be a great way to buy a home. If you happen to inherit one of these properties, don’t fear – it can be a smooth and easy transaction for you!
Gabe Mellein was voted a Top Real Estate Agent – Exceptional in Service and Overall Satisfaction by Gulfshore Life Magazine in 2012. He is the broker of Gulf Pointe Properties, Inc and has over 8 years experience in the SW Florida Real Estate Market. He is a member of The Naples Area Board of Realtors, Bonita Springs – Estero Association of Realtors, Realtor Association of Greater Fort Myers and the Beach, The Florida Association of Realtors, The National Association of Realtors, and is nationally certified in Feng Shui for Real Estate. Need real estate help? Please contact Gabe at: 239.825.2234, Gabe@GulfPointeProperties.com or www.GulfPointeProperties.com