Selling a house in and of itself is serious business. It takes thoughtful planning, and usually money, good marketing, and patience. The first thing most of us think of when it comes time to sell is looking up a realtor. Realtors can be an excellent resource if you have a house that can pretty much sell itself. But what are you supposed to do if your house has some not-so-attractive history behind it? You know, something that no one wants to be bothered with like a reverse mortgage. Unless you work in the mortgage business or have had personal experience with one, you might not even know what a reverse mortgage is.
What’s a Reverse Mortgage?
A reverse mortgage is also known as a Home Equity Conversion Mortgage. Basically, if you break it down into its parts, it means that you’re taking the money you’ve built up in the house (the equity) and turning it into a new mortgage. These types of mortgages are generally only available for homeowners who are 62 years old or older. In a lot of cases, they are offered on houses that have been paid off. In other words, it’s free-and-clear. Of course, there are other criteria, but this is just a quick overview. Older homeowners tend to be attracted to this type of mortgage because it provides them with a source of income—lump sum or over time—that they might not otherwise have access to. Reverse Mortgages are especially attractive when you’re facing steep medical bills and/or are on a fixed income like Social Security. It’s important to know that reverse mortgages are complex and have lifelong consequences for senior homeowners who get them, and their heirs who may be caring for them or their estates afterwards. Depending on how you look at it, one big downside is that the full balance becomes due, the house faces foreclosure or goes back to the mortgage lender once the person who took out the loan no longer lives in the house or passes away. Where that person may have wanted to leave the house to a loved one, that dream often doesn’t end up becoming reality. If someone does want to keep the house, they would have to come up with the full amount of the mortgage balance due or 95% of the appraised value. Remember how I said that it converts the equity in a usually-free-and-clear house? Well, that often means that the mortgage amount is pretty hefty. Most people I know don’t have an extra $200,000, $300,000, $400,000 or more just laying around.
Getting One Is “Easy,” Getting Out of It Is Not
So like I was saying earlier, a lot of people aren’t familiar with what a reverse mortgage is. What we’ve found here at Next Chapter Property Solutions is that people who serve as power-of-attorney, family caregivers, or personal representatives of estates where there is a reverse mortgage are often caught offguard. Quite often a family member comes into the picture after their mom/dad/aunt/uncle has taken out the mortgage. At that point, it can’t be undone. If you want to keep the house, you’ll need to pay off the mortgage balance. If you want to sell the house, you’d better hope that what’s owed is significantly less than what the house is worth and the house is in good-enough physical condition to attract an everyday homebuyer (who wants a move-in ready house). We don’t see that last one happening a lot.
What to Do If You Don’t Have the Money to Pay
When we first started talking in this post, I mentioned that selling with a realtor can be a really good option. This is usually not one of those cases. When it comes to trying to sell a house with a reverse mortgage, you need to think outside of the box. In my experience, it generally takes a while for a lender to begin foreclosure proceedings on a house with a reverse mortgage where the person has died or moved to live in another place. By the time a foreclosure case has been filed, a year or two—or even more—has gone by. With no one taking care of the empty house, you can bet it’s going to need repairs. Oh, and by the way, the lender typically pays the property taxes so they don’t lose their investment. Why? Because property taxes take precedence over anything else that’s owed on a house (we’ll talk about that in another post). If you’re trying to sell a house with a realtor, you’re going to have to come up with some money. Catch-22, isn’t it?! You’ll need to figure in money for repairs, money for possibly staging the house to make it look better, money for realtor fees, and once you finally find a buyer, you’ll probably have to come up with money to pay them to for things they request–like closing cost assistance or a carpet replacement allowance–to go through to closing (those are called seller/buyer concessions). Finally, you’ll need money to pay closing costs to cover transfer taxes, title company fees, attorney fees, and more. I hope I didn’t just make your head spin!
How to Sell a House Without Spending $1
Don’t worry, I didn’t just tell you all of that to scare you. I’m telling you because I want you to know you have another option. One that doesn’t require you to come out of pocket with a single $1. I bet you’re wondering how that’s even possible (or legal) and what it is. It’s simple and it’s legal: you can sell the house to a real estate investor that specializes in working with families dealing with reverse mortgages. We do that. Word of warning though: not all “We buy houses for cash” investors are created equal. Next Chapter Property Solutions has worked with tons of family caregivers, personal representatives and people serving as power-of-attorney for someone who wants to sell a house with a reverse mortgage. The bottom line is that we don’t charge any fees, we pay cash, and we pay the closing costs so you don’t have to. We have good relationships with lenders who do (and foreclose on) reverse mortgages and we work with them closely once a homeowner or their representative decides they want to sell the house instead of letting it go to foreclosure. If that’s what you want, we can help. You have to get in touch with us though. Not to toot our own horn, but we are the best at what we do. I really don’t know of another company that does what we do and with the genuine care that we do.
Ask the Magic 4 Questions
Before I go, I want to leave you with another tip that will save you time that I know you don’t have to waster. When you’re dealing with a house that has a reverse mortgage you need to ask yourself these 4 questions:
- Do I want to sell the house or keep the house?
- If I want to keep it, do I have the money on hand to pay off the mortgage?
- Do I want to let the house go to foreclosure and lose everything that mom/dad etc. worked for?
- If I want to sell, am I willing to put up money to sell it with a realtor?
If you answered “No” to two or more of those questions, call us and let us help you. Check out what our client, Quinton, had to say about selling us his deceased father’s house that had a reverse mortgage.