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.
The Difference In Selling A Home With 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. What if you are underwater and your home will not sell for more than the mortgage balance?
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, like savings, 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 reverse 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, as there would be no benefit other than to avoid foreclosure. Ron Berg at Peoples Mortgage has written an excellent article on what you need to know about reverse mortgage short sales vs foreclosure.
You may benefit from speaking to a financial adviser to make sure that the plan for selling your home makes sense financially.
How To Sell Your Reverse Mortgage Home
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. Steps for selling your home with a reverse mortgage include:
Find a real estate agent.
While it is possible to sell your home without the help of a real estate agent, 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 – big and small – of the sale. 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 would be beneficial for you to interview several different realtors to make sure you find someone who is a good fit. Not all agents are equal, and you want to know that the person helping you with such a large transaction is someone you can depend on. Verify the references of the agent and make sure he or she has a list of homes sold recently. When you find an agent that sells homes for close to the original listing price, you know you have someone who can price a home correctly.
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.
If you have a reverse mortgage the odds are you have probably not sold a home in quite a while. The real estate agent you hire is crucial to your success! Understand that real estate agents are a dime a dozen – take the time to find a good one. You will be happy in the long run one and it won’t cost you a nickel more.
Prepare the home for sale.
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. Here are some easy ways you can make your home more attractive to home buyers.
Keep the home in good shape for showings.
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.
If you have a pet it is even more essential to keep your place odor free and clean. While many of us love our pets, lots of buyers get turned off by pet odors. Some so much so they will scratch the home of their list even it if meets all of their needs.
Update The Home if Necessary
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!
If your real estate agents says that the old shag carpet or dated wallpaper is going to get in the way of the sale make sure you listen to them! I know in my area of San Diego California and other local communities, wallpaper can be a kiss of death in trying to sell a home. People do not like it, especially if it is old. Nothing can change a home complexion quicker than removing wallpaper and adding a fresh coat of paint in a pleasing off white.
Another issue you may run into as well is general repairs that have been neglected. Most buyers today want turn-key properties. They do not want to invest the time, energy or money dealing with someone's problems. One of the big hurdles you will need to be prepared for is the buyers home inspection. Without a doubt the home inspection is the number on road block to a successful sale. More properties fall apart at the home inspection than at any other point in time during a real estate transaction. By being well prepared in advance and fixing most of the know issues you can increase your odds of moving forward to the closing.
Verify if you need a real estate attorney.
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. Here in my area of San Diego, hiring a real estate attorney is common place. I am always advising my clients to have legal representation. It just makes good business sense to be protected when buying or selling real estate.
Listen to your agent.
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.
Enjoy the profits from your sale.
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 what it takes to sell a home with a reverse mortgage!
Additional Helpful Mortgage & Home Selling Resources
- What happens to a parents reverse mortgage after death via Bankrate.
- Why get a home inspection before listing for sale via FocalPoint Real Estate Blog.
- Mortgage pre-approvals don’t work with some properties via Peoples Mortgage
- How to sell your home quickly via Imagine Your House.
- Clever packing tips when moving via Ferris Property Group.
Use these additional real estate resources to help with the home selling process. The advice comes from some of the top experts from around the country.
About the Author: The information on the how to sell a home with a reverse mortgage was provided by Tess Shepard, a Nationally recognized leader in her field. Tess can be reached via email at info@eFocalpointRealty.com or by phone at 858-349-3700. Tess has helped people move in and out of many San Diego towns for the last 13+ Years.
Thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!
I service Real Estate sales in the following San Diego County towns: Alpine, San Diego, La Mesa, El Cajon, Santee, Lemon Grove, La Presa, Spring Valley, Rancho San Diego, Lakeside, Winter Gardens, Casa de Oro-Mount Helix, Bostonia, Jamul, Harbison Canyon, Granite Hills, and Crest, CA.