Reverse mortgages, otherwise referred to as home equity conversion mortgages (HECM), helps eligible homeowners stay in their house for a long time. However, things might change, and the borrower might wonder whether they can sell the property.
Selling reverse mortgage homes for sale is often tricky and different from selling a traditional mortgage house or a property with no mortgage. Nonetheless, you can do it if you understand the sale process. There are several crucial details you’ve got to be aware of before starting the process.
The following are tips for selling a reverse mortgage home to prepare you for a seamless and fast transaction. You can learn more on How to Sell a House with a Reverse Mortgage – propertyescape.net.
Can You Sell a Reverse Mortgage Home?
The answer is YES!! You can sell a reverse mortgage home, but the difference between it and a traditional mortgage house sale is the payoff process, which is more complicated for HECM homes. It’d be best to determine how much the home is worth and the amount you owe on the reverse mortgage while considering selling the property.
Understand that your reverse mortgage lender will want to accept 95 percent of the total loan balance or the property’s appraised value – whichever is less. However, there must be a purchase agreement before the mortgage lender can issue the house appraisal.
A purchase agreement, otherwise called a buy-sell agreement, refers to a contract signed by the buyer and homeowner confirming the closing date, purchase price, and other terms and conditions. Before the mortgage lender appraises your home, ensure you have a purchase price.
While it’s often not an issue, not having a purchase price might become a problem if you don’t have sufficient equity to pay for the reverse mortgage balance or the house value hasn’t increased.
Remember, the real estate agent you’ll be working with can’t list the house for a reduced price than the sum you owe the lender unless you intend to complete the money yourself.
Selling a Reverse Mortgage Home
With your new knowledge of the reverse mortgage home selling process, apply the following tips for a smooth and seamless sale.
Get a Real Estate Attorney
While hiring a real estate attorney is often discretional, it’s mandatory in some states. Your real estate attorney will work to ensure you don’t make costly mistakes while helping you navigate through the entire process. However, you’ll need to include the attorney fees when calculating the sale profit.
States that require you to hire a real estate attorney while selling your reverse mortgage house are Florida, Kentucky, New York, South Carolina, Kansas, Alabama, New Jersey, Pennsylvania, Georgia, Maryland, Mississippi, amongst others.
Communicate With Your Lender
When selling reverse mortgages, you might want to maintain strong communication with your lender and real estate agent. Besides regular contact with the realtor to fully understand the home selling process, you’ll need to constantly call the reverse mortgage lender to obtain the appraisal and close the sale faster.
Get an Appraisal
Ensure to get the property’s appraisal to ascertain its market value. If the value is lower than the reverse mortgage amount, then it’s crucial to get an official assessment so the lender can accept a lesser price to offset the debt. If you’re selling a reverse mortgage home on the grounds of a maturity event, the appraisal will be due within 30 days.
Establish a Repayment Plan
While it’s true that a reverse mortgage repayment is due once maturity is triggered by the borrower moving into an assisted care establishment, passing away, or selling the home, you might get up to six months to repay the loan depending on the loan terms and the lender. In some cases, there’s also the option of two three-month extensions.
It’d be best if you keep the lender updated with the entire process to prove that you’re actively pursuing the financing and the property is aggressively being marketed to avoid drastic measures like foreclosure.
So consider making your extension request in advance if you’ll need more time. Also, ask for written verification of your extension approvals from your lender.
List the Home
Consider hiring a real estate agent to help you get the home ready for sale, make videos of the house and take photographs to list on different listing platforms, and coordinate showings with interested buyers.
When deciding on a list price, understand that you’ve got to sell the property for nearly the appraised value to cover the loan balance. However, if you wish to avoid the problems that come with listing your property, consider selling through Property Escape and close within a few days after signing their sales contract.
Close and Distribute the Proceeds
Like in a traditional mortgage, immediately you’re successful in selling a reverse mortgage home, the profit will be used first to pay off the loan. Settling the reverse mortgage loan entails paying off the following:
- The principal amount borrowed
- Interest accrued on the borrowed amount
- Other unpaid fees, like mortgage insurance
If the reverse mortgage balance is more than the property’s value, you won’t be required to pay the difference. Simply put, a HECM is a non-recourse loan; as such, you aren’t meant to pay any loan portion that has passed the sales price or appraised value.
Thus, if the sales proceed is more than the amount owed, the remaining equity is yours.
The Bottom Line
While obtaining a reverse mortgage is tricky, the main difficulty lies in selling a house with a reverse mortgage short sale. Nonetheless, if you hire a professional real estate agent with adequate knowledge of how reverse mortgage works, the process becomes easier to navigate.
Remember to check that your state requires a real estate attorney to avoid getting into legal troubles.
Follow the tips mentioned here to have a seamless and smooth sale, or you can avoid these hassles and sell directly to Property Escape. That way, you sell your house without hassles and at the best rate to get out of your reverse mortgage in a few days.