Reverse Mortgage Deal Options?

9 Replies

Hi, I'm hoping someone can offer up some thoughts on this as I've run out of ideas.

House has a reverse, balance is about 270k, value is about 230k. The heir can't qualify to buy, but really wants to stay in the house. I'd like to help them figure it out, even if that means no money for me.  I'm assuming even if they did a 95% short sale on it, there's no way to rent it out profitably. Market rents are in the 1600-1700 range.

I appreciate any thoughts!

I'm assuming the borrower has died or no longer living on the property. With a reverse mortgage the home would need to be sold or refi'd within 6-12 months of either of the two happening. Since the home is upsidedown it is best to short sale the home. If the heir doesn't want to go through the trouble the lender will sell it on their own. 

You or another investor can buy the home at the new value and rent the home to the heir with an option to buy. It's then up to the heir to get their act together so that they can financially be able to purchase the home. 

At a value at 230k, a monthly mortgage payment could be lower than 1600-1700 so monthly mortgage is paid for. Terms would be negotiated by owner and renter.

Originally posted by @Allen Maris :

Hi, I'm hoping someone can offer up some thoughts on this as I've run out of ideas.

House has a reverse, balance is about 270k, value is about 230k. The heir can't qualify to buy, but really wants to stay in the house. I'd like to help them figure it out, even if that means no money for me.  I'm assuming even if they did a 95% short sale on it, there's no way to rent it out profitably. Market rents are in the 1600-1700 range.

I appreciate any thoughts!

Is the property held in a trust or does the heir have court powers?  No one can refi or sell if there isn't a trust or court approved admin/exec.  RMs are usually dead in the water right there.  95% payoff amount plus court costs to probate an upside down property.  Isn't usually worth it.

if the property is held in a trust, then the choices are pretty clear cut.  Payoff the loan at 95% of value.  Or don't and let them foreclose. 

Thanks, @K. marie P. and @Diego Loya . Guess my conclusion is unfortunately the same. It's not held in trust and the heirs are dealing with the time constraints. The mother passed away 5 months ago. Seems the only option they have is to short sell it. Even at 200k if I were to finance it myself, rents won't allow me a decent return on my money.

Originally posted by @Allen Maris :

Thanks, @K. marie P. and @Diego Loya . Guess my conclusion is unfortunately the same. It's not held in trust and the heirs are dealing with the time constraints. The mother passed away 5 months ago. Seems the only option they have is to short sell it. Even at 200k if I were to finance it myself, rents won't allow me a decent return on my money.

"They" can't short sell it without opening a probate and someone being appointed admin or exec.  Which opens the can of worms of other debt.  Banks have to foreclose on property like this in order to gain title re-sell it.  Most heirs don't have $5K+ sitting around to spend on something they have to sell and will receive no proceeds.  

Has the lender filed the NOD? You can let the heir know that the foreclosure sale is 4 months out from the NOD. This should give them time to make plans for other housing and storage or sale of the personal property.

Originally posted by K.marie P.:
Originally posted by @Allen Maris:

"They" can't short sell it without opening a probate and someone being appointed admin or exec.  Which opens the can of worms of other debt.  Banks have to foreclose on property like this in order to gain title re-sell it.  Most heirs don't have $5K+ sitting around to spend on something they have to sell and will receive no proceeds.  

Has the lender filed the NOD? You can let the heir know that the foreclosure sale is 4 months out from the NOD. This should give them time to make plans for other housing and storage or sale of the personal property.

Yes for sure. One of the heirs has been appointed the exec and she's the one wishing to keep the house in the family and needs a bit of reality check that it's just not possible. Sounds like no one in the family has the money to pay back the mortgage or pay rent or get new financing. Not a good place to be.

NOD hasn't been filed yet.

Originally posted by @Allen Maris :
Originally posted by @K. marie P.:
Originally posted by @Allen Maris:

"They" can't short sell it without opening a probate and someone being appointed admin or exec.  Which opens the can of worms of other debt.  Banks have to foreclose on property like this in order to gain title re-sell it.  Most heirs don't have $5K+ sitting around to spend on something they have to sell and will receive no proceeds.  

Has the lender filed the NOD? You can let the heir know that the foreclosure sale is 4 months out from the NOD. This should give them time to make plans for other housing and storage or sale of the personal property.

Yes for sure. One of the heirs has been appointed the exec and she's the one wishing to keep the house in the family and needs a bit of reality check that it's just not possible. Sounds like no one in the family has the money to pay back the mortgage or pay rent or get new financing. Not a good place to be.

NOD hasn't been filed yet.

Were there other assets?  Why did they open a probate to short sell something from which they will see no proceeds or if they didn't have a plan to payoff the mtg? That's the worst. The reality check is that no one is going to buy that house to rent it back to them.  Even if the numbers were better.  The last few calls I've gotten from heirs with RMs were from the SY valley.  Must be in the water.

Originally posted by K.marie P.:

Were there other assets?  Why did they open a probate to short sell something from which they will see no proceeds or if they didn't have a plan to payoff the mtg? That's the worst. The reality check is that no one is going to buy that house to rent it back to them.  Even if the numbers were better.  The last few calls I've gotten from heirs with RMs were from the SY valley.  Must be in the water.

Who knows why they did what they did. 

The RM broker must have been working his way around town! Lots of people got sucked in that didn't understand what it means.

@Allen Maris I know the SYV pretty well. You ever go to the little coffee shop by Neilson's on Alamo Pintado? I run a private Mastermind group out at the Alisal. 

K.marie P. (you cropped your last name!) said it well enough. Unless there's other assets, an upside down estate property will only help everyone else except the PR and heirs. 

I do business with a few probate attorneys in Solvang. Lender will probably have to foreclose as expecting coop from PR is doubtful.

Rick Harmon Hi Rick, yep I swing by there sometimes but usually go to El Rancho. Better espresso drinks. Glad to hear there's another person in the area! Allen

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