Selling a house with a reverse mortgage is tricky – dealing with the loan balance, interest, and closing costs can be overwhelming.
It’s an unfamiliar territory for many, making the whole process confusing and leaving sellers unsure about the next steps.
But don’t stress! This guide’s here to help. Here, we break down the complexity of selling a home with reverse mortgages to empower homeowners with the know-how and strategies to navigate this challenging process confidently.
Table of Contents
Considering Selling a House With a Reverse Mortgage?
Thinking about selling your house with a reverse mortgage? You’re in the right place. Selling a property linked to a reverse mortgage loan can get pretty complicated.
In the next sections, we’ll dig into the important details and steps to help you navigate this decision wisely, which is particularly important when inheriting a mortgage. Whether you’re weighing your options, trying to understand how it works, or simply seeking guidance, we’ve got you!
Read on to figure out the ins and outs of selling a house tied to a reverse mortgage…
Can You Sell a House With a Reverse Mortgage?
Yes, you can sell a house with a reverse mortgage, but the process differs from traditional sales. The outstanding loan balance, paid off upon sale, is typically covered by the sale proceeds. The sale price must encompass the loan balance, closing costs, and accrued interest for smooth transaction completion.
Additional reading: Can you sell a house with a mortgage?
Is It Hard to Sell a House That Has a Reverse Mortgage?
Selling a house with a reverse mortgage can be trickier compared to a regular sale. Factors like the loan balance, accrued interest, and market conditions impact the process. Setting the right price and grasping how reverse mortgages work can make a big difference in how tough it gets to sell.
We’ll cover this shortly, so don’t worry about this too much just yet but you can also take a look at our related article titled “how long should a house be on the market before you reduce the price?”
What Happens When I Sell My House With a Reverse Mortgage?
Selling a home with a reverse mortgage means the sale proceeds cover the owed loan balance, interest, and closing costs. Anything remaining is yours to use. This clears the mortgage, allowing flexibility in utilizing the leftover funds for personal needs or as part of your estate planning.
How Long Do You Have to Sell a House With a Reverse Mortgage?
The timeline for selling a house with a reverse mortgage can vary. Usually, lenders give around six months to finalize the sale after the borrower leaves or the property becomes vacant. In some cases, they might extend this period, aiming for a seamless sale while following the lender’s rules.
The Options for Selling a Home With a Reverse Mortgage
When selling your home with a reverse mortgage, the main options are:
- Selling your home for cash
- Negotiating a foreclosure vs short sale
- Transferring the property via a deed in lieu
Each choice has implications, allowing homeowners to select based on their circumstances, but we have experience in all of the above, with a penchant for cash sales.
Sell Your House for Cash
Selling your house for cash can be a great choice if you’re dealing with a reverse mortgage. It lets you sell your property quickly and without stress, no matter the situation.
If you’re looking for guidance on how to sell your house for cash, we specialize in purchasing homes for cash, simplifying the process, particularly when dealing with a reverse mortgage sale.
This option offers flexibility and a direct path to a swift sale, bypassing typical steps such as listing, staging, or waiting for buyers.
Additional reading: how to sell your house for cash
Reverse Mortgage Short Sale
When it comes to California short sales, according to HUD reverse mortgage short sale guidelines, the property is sold for less than the outstanding mortgage balance owed to the lender, often pursued to avoid foreclosure.
This approach is typically considered when the property’s value is lower than the loan balance, enabling homeowners to negotiate with the lender to accept the sale proceeds as a full settlement of the debt.
This situation can arise due to various reasons, such as:
- Declining property values
- Financial difficulties
- Other circumstances that make it challenging to sell the property for the full loan amount
In California, the process for a reverse mortgage short sale is generally similar to that in other states:
- Negotiation with the Lender: As a homeowner, you need to communicate with the reverse mortgage lender and express your intent to pursue a short sale. The lender will assess your situation and may agree to accept the proceeds from the sale as full satisfaction of the loan, even if it’s less than the total amount owed.
- Listing the Property: The home is listed for sale through a real estate agent or broker, similar to a traditional sale. The goal is to find a buyer willing to purchase the property at the market value, which might be less than the outstanding loan balance.
- Lender Approval: When an offer is received from a potential buyer, it is presented to the lender for approval. The lender assesses the offer and decides whether to accept it, considering the amount offered and the market value of the property.
- Loan Repayment: Once the sale is completed, the proceeds will pay off the reverse mortgage. If the sale amount is insufficient to cover the entire loan balance, the lender might forgive the remaining debt or negotiate a repayment plan with you.
Transfer of Property via Deed in Lieu
In this process, you would voluntarily transfer ownership of the property to the lender to satisfy the outstanding loan balance.
This option is applicable when other methods of selling the home, such as a traditional sale or short sale, are not feasible.
It provides an alternative means to settle the mortgage obligation without going through the conventional sale process, although it may have implications on your credit and future financial decisions.
In our experience, the steps to follow for a deed in lieu “home sale” generally are:
- Voluntary Agreement: You first need to initiate the conversation with the lender to express your willingness to transfer the property’s ownership to the lender voluntarily.
- Lender Assessment: The lender will then asses your property’s value and financial situation to determine if accepting a deed in lieu is a viable option.
- Negotiation and Agreement: If the lender agrees, you’d then have to negotiate the terms of the transfer with them, including any conditions or consequences, such as forgiveness of the remaining loan balance.
- Property Transfer: Once an agreement is reached, you’ll sign the deed transferring ownership to the lender. The lender will then gain legal ownership of the property, and any claim you had over the propety is no more.
- Loan Settlement: The transfer of the property through a deed in lieu generally serves as satisfaction of the debt and this will effectively repay your reverse mortgage. However, the lender could still reserve the right to pursue you for any deficiency between the property’s value and the outstanding reverse mortgage balance at the time the deed was signed.
How to Sell a House With a Reverse Mortgage
Selling a house with a reverse mortgage involves a specific set of steps to ensure a smooth and successful transaction.
Understanding these steps is crucial for you to navigate the sale of a property tied to a reverse mortgage.
Here’s how to sell a home with a reverse mortgage:
Review Reverse Mortgage Terms
Take the time to carefully review and understand the terms of your reverse mortgage.
Identifying how much you owe is essential for the sale, and will likely include:
- Outstanding balance
- Accrued interest
- Any associated fees
Also don’t forget to check whether you have mortgage insurance and how that interacts with your reverse mortgage.
Seek valuable insights and advice from financial advisors or reverse mortgage specialists.
Their expertise can help you comprehend the implications and requirements associated with selling a property tied to a reverse mortgage, and they’ll assist you in making informed decisions throughout the selling process.
Contact the Lender
Once you’re aware of the terms and have consulted your financial advisor, it’s time to notify your lender that you want to sell the property.
They’ll then confirm the exact amount you owe, any specific requirements, and the process for loan repayment.
Evaluate Your Property’s Value
Engage professional appraisers or real estate agents who possess the expertise to provide an accurate assessment of how much your home is worth.
Understanding the property’s value is pivotal in setting a competitive and realistic selling price.
Explore Selling Options
Once you know how much the market thinks your property is worth, you’ll need to consider your options, as we discussed earlier:
- Traditional sale
- Cash sales
- Deed in Lieu aligns with your specific circumstances
Don’t forget that selling for cash can remove a lot of the burden of going via a real estate agent, so don’t hesitate to contact us to explore your options.
Prepare the Property
Ensure your property is in its best condition before listing it for sale. This can be done in collaboration with a real estate agent, who can advise on the things that you’ll need to fix/tough up in order to improve the “saleability” factor.
Common things you’ll almost guaranteed to need to do are:
- Necessary repairs
- Staging the house to attract potential buyers or investors
There’s no doubt that getting the input of real estate agents or even real estate attorneys that specialize in reverse mortgages will be helpful.
Their knowledge and skills can be invaluable, guiding you through legal complexities and ensuring a smoother sales process.
Listing, Marketing & Negotiation
If you’ve engaged with a real estate agent,part of their services will be to handle the list price, carrying out the marketing and handling anything to do with negotiation and offers.
Once a buyer makes an offer on the property, negotiate the terms and accept an offer that meets your needs. The offer should be contingent upon the buyer understanding the property is being sold with a reverse mortgage.
Offer Acceptance and Escrow
Once the offer is accepted, the property enters escrow.
During this time, the buyer’s lender conducts their due diligence, and necessary inspections are performed.
At closing, the sale proceeds are used to pay off your reverse mortgage.
The escrow company or closing agent coordinates with the lender to settle the outstanding loan amount from the sale proceeds.
Settlement and Distribution of Remaining Proceeds
If the sale proceeds exceed the loan balance, the remaining amount belongs to the homeowner or their estate — the escrow or closing agent disburses these funds accordingly.
Can I Sell My House With a Reverse Mortgage to You?
Absolutely! If you’re in Southern California and looking to sell your house with a reverse mortgage, SoCal Home Buyers is here to help:
- Give us a call at 951-331-3844 or simply fill out the short form below to request your fair cash offer.
- Await our prompt response – our team will get in touch to discuss your property in greater detail and schedule a convenient one-time inspection. This visit allows us to thoroughly assess your property’s value, enabling us to offer the highest amount possible.
- During the inspection, our in-house inspector will provide you with a fair cash offer. If you’re on board with the offer, consider your home sold!
- Choose your preferred closing date, and leave the rest to us. We offer flexible payment options, whether by check or wire transfer. Selling your house with a reverse mortgage has never been easier.
Contact SoCal Home Buyers today to get started on your hassle-free selling journey!
Key Takeaways on Selling a House That Has a Reverse Mortgage
- Selling a reverse mortgage house differs from regular sales. It encompasses outstanding balances and costs from the sale.
- Unique challenges may arise influencing the selling process of your home, like accrued interest and market factors.
- Timelines for selling typically vary, often allowing up to six months to complete the transaction.
Additional reading: Pros and cons of inheriting a house that is paid off