Reverse mortgages have become a popular option for older home owners who want to take advantage of the equity they have built up in their investments. Most of the time when you take out a reverse mortgage, you are planning to stay in the home for as long as possible. But there are instances where you need to sell. This leads people to ask how to sell a home with a reverse mortgage.
Fortunately, selling a home with a reverse mortgage is just like selling any other home. You just need to be aware of a few important details as you begin to move forward, because like any other mortgage – once you sell you will need to pay off the reverse mortgage in full.
Paying off a reverse mortgage is something that is often left to family members after a death. It is not uncommon for a son or daughter to be left to figure out how to sell a home with a reverse mortgage due to mom or dad passing away. Below you will find everything you need to know about selling a property that has a reverse mortgage.
If you want to sell your home with a reverse mortgage, take a look at your loan documents any other pertinent documents to determine what you have been paid so far. You want to know exactly what you will be required to pay should you sell your home, including all interest and fees up to the point when you make the sale. You can contact your lender to get a payoff quote, which will tell you what it would cost to payoff your reverse mortgage in full.
When you know what you will need to pay, you can compare that number to what your home is estimated to be worth. It can be helpful to speak to a Realtor to get a clear idea of what your home will actually sell for based on your market and comparable sales in your area. Ideally, your home will sell for more than what you owe on the reverse mortgage.
Reverse Mortgage Short Sale
If you owe more than what you can sell for, you may have trouble paying for the sale. Unless you have some other source of money to cover the costs of the sale it may not be possible to sell the home. Your last alternative could be what is known as a verse mortgage short sale. This is when the balance owed on the mortgage is greater than the market value of the home.
Unlike most conventional mortgage programs, a reverse mortgage is a non-recourse loans, which means that reverse mortgage borrowers and their heirs can’t be held responsible for any outstanding deficiency beyond the sales price of the home. As such, heirs who have inherited an underwater reverse-mortgaged home have no obligation to sell the property.
Once you have determined that selling is viable based on what you owe and how much you can sell the home for, you can start the sales process. Here are the steps to sell with a reverse mortgage:
While it is possible to sell without a realtor, doing so is more work than most owners are prepared for. For a commission, you can hire an agent who will take care of all the details. Your agent can help you price the home competitively, so you get as much as possible from the sale while avoiding pushing away potential buyers by pricing too high. A good agent also knows how to market the home, so you can get the word out to the right kind of buyers.
It is also important to choose an agent who is a good communicator. There are many real estate agents who do not posses good communication skills. You will find chasing them down to get information could become a regular routine. One clue in an agents communication skills is how quickly they respond to you before hiring them. If that don’t get back to you immediately BEFORE you hire them what do you think will happen once they have you under contract?
The best Realtors will also have the best online presence which is where homes are sold today. Pay careful attention to the agent who has exceptional photography, spends time writing listing descriptions and possibly offers a video tour.
One big advantage of working with a Realtor is that he or she can tell you what things you need to fix to attract eager buyers – and what things you should leave alone. Renovating the whole house is rarely a good investment, because most of the time you will not make your money back. Working with the real estate agent, you can identify the most important areas that need work and focus your efforts on those.
Buyers today do want homes that are in excellent shape. In real estate terms we call it “turn-key condition”. Lots of buyers don’t want to lift a finger when buying a home due to their busy lives and work schedules. Those sellers who can afford to make small improvements and repairs should do so. This makes your home far more marketable to the masses.
You want to put your best foot forward for potential buyers, which means keeping your house clean and in good order. It may be worthwhile to hire a cleaner to come in and do a deep clean of the home. Once you have removed all the clutter and cleaned up, it is important to maintain the cleanliness so you can show the house as needed. You never know when the right buyer will walk through the door.
One of the most difficult discussions your real estate agent may have with you is the need to update your home to today’s standards. Some of the biggest culprits that can stop a home sale are wallpaper and carpeting that need replacement. While you may think that someone can just do these things if they like the house many buyers do not have any vision. The dated wallpaper and old carpets can get in the way with seeing the potential in your home!
Depending on your area, you may need to work with a real estate attorney to sell your home with a mortgage. You can talk with your real estate agent about this and see if it is makes sense. You may want to talk to an attorney even if it is not required, just to make sure everything goes smoothly. It just makes good business sense to be protected when buying or selling real estate. When you study how to sell a home with a reverse mortgage, many will suggest involving an attorney.
If you choose a real estate agent, hopefully you will pick someone that you feel like you can trust. Once you are working with an agent, if you want to get the best results from your sale it is necessary to listen to your agent’s advice and follow it. If your agent recommends updating some part of the home, or asks you to leave the house during showings, you should do your best to cooperate. Your agent is a professional that probably has a good deal of experience selling homes – someone worth listening to. It is usually stubborn sellers that think they know more than their agent that end up having difficulty selling their property.
Once the home sells and all existing loans on the home are paid off – including your reverse mortgage – you can enjoy the rest of the money from your sale. Hopefully this has been helpful and you now understand how to sell a home with a reverse mortgage!
If you are in the Colorado real estate market, be sure to reach out and I would be honored to earn your business.
Shawn Manwaring, Associate Broker