Can you do a short sale on a reverse mortgage? The answer is yes, and we’re going to explore how you can navigate this unique situation where the seller owes more than the house is worth and still make this a Win/Win for all parties.
Understanding Reverse Mortgage
Before we get into the nitty-gritty, let’s first understand what a reverse mortgage is. These loans are unique and often considered predatory, targeting the elderly.
A reverse mortgage is a loan that allows an eligible homeowner to borrow money but it doesn’t work the same way as a traditional purchase loan.
A homeowner who is 62 or older and has a significant amount of equity can borrow against the value of their home and receive a lump sum of money, fixed monthly payment, or line of credit. Unlike a traditional mortgage a reverse mortgage doesn’t require the homeowner to make any loan payments during their lifetime.
Instead, the entire loan balance, up to a limit, becomes due and payable when that homeowner passes away.
Now when it comes to foreclosure, the only way a homeowner can lose the property or become in “default” is due to property taxes, insurance defaults, or the borrower passing away.
When dealing with reverse mortgages, it’s crucial to recognize that the payoff increases every month because the mortgage isn’t being paid, given the nature of the loan. The short sale process for these differ significantly from traditional short sales.
- No Financial Review: Unlike traditional short sales, reverse mortgages don’t require a financial review. This simplifies the process, eliminating the need to go back and forth with the seller on financial details.
- Automatically Qualify for Hardship: Being in a foreclosure situation automatically qualifies the seller for a hardship, streamlining the process further.
- Not an Arm’s Length Transaction: Unlike other short sales, these don’t have to be arm’s length transactions. Family members or heirs have the opportunity to purchase the property, presenting a unique chance for investors or realtors to facilitate the process without conflicts.
Appraisal and Negotiation
The appraisal process is distinct. The bank will accept 95% of the appraised value, not the net value. This eliminates the need to worry about a minimum net and makes negotiation more flexible.
Opportunities to Purchase
Understanding the intricacies of reverse mortgages can provide opportunities for both investors and real estate agents. As an investor, you will have the opportunity to purchase this property at a discount regardless of the current balance. If you’re a realtor representing heirs or family members, it’s a rare opportunity to facilitate a short sale with a discount for the heir. This is the only type of short sale that family members can purchase without violating an arms length transaction.
Conclusion and Resources
In conclusion, short sales on reverse mortgages are indeed possible, and they come with their own set of rules. If you are wanting to partner on a Reverse Mortgage you can refer the deal here: thessqueen.com, where you can find more resources and information.
And before you go, don’t miss our free pre-foreclosure class, where you can ask questions live and gain valuable insights. Click here to register for our next live class: Pre-foreclosure Class
Understanding the nuances of reverse mortgages empowers real estate professionals to navigate these situations successfully. Stay informed, be proactive, and make the most of the unique opportunities presented by reverse mortgage short sales.
For more in-depth case studies and educational content about short sales and pre-foreclosures, check out Nicole’s books “Short Sales Uncensored” and “How To Master Short Sales” on Amazon. These can be valuable resources to guide you through the process. Additionally, you can join the Facebook group, The Only Short Sale Group Worth Being A Part Of, to ask questions and gain insights from experienced professionals. Always feel free to reach out to us if you have any more questions or if we can help in any way.
See you next time!