Property with Lien and Reverse Mortgage should I Buy?

Question

I am fairly new to real estate investing and need some advice regarding purchasing a property with a lien and reverse mortgage. This property is located in Dallas Texas and its a good deal.

Background: The property owner who is the executive of the will put the property up for sale by owner after both of his parent past away. The owner stated he did not need to go to probate court because all of the family member on the will agree to the sale of the property and divide the profit equally after the sale. After negotiating the selling price i come to find out that the property has a reverse mortgage from AAG of 65,000 when the father was alive, and now there is also a lien fromHUD/FHA for 150,000. The owner was unaware of the lien and after speaking with AAG rep. the owner stated that once the mortgage is pay off the lien will be remove from the property.

Questions?

1. Is this normal to have a Lien on a property when there was a reverse mortgage on the home?

2. Will a written pay off statement from AAG be enough to protect me from the 156,000 lien?

3. If i got through a title company will they give me the protection against this lien if the deal does close with the seller?

4. Since the son is the executor of the will does he need to go to court to get a letter of testamentary to close this deal? All of his sibling on the will agree to the sale of the property.

Thanks again for the help.

Wayne Brooks · Answer

The lien is related to/is the same debt as the reverses mortgage, which is insured by FHA. The lien would be for the anticipated maximum of the reverse Mtg at some point in the future. Being in the will, and agreeing amongst themselves, doesn't avoid probate. Yes, use a title co., and they will tell you what they need from the seller, as far as authority to sell.

Chris Mason · Answer

Any time you buy a property that already has a mortgage on it, you're buying a property with a lien.

The net proceeds to the seller come from sales price minus realtor commissions minus paying off any outstanding liens. What those liens are is generally the seller's problem, not yours.

If there will not be enough money to pay off all those liens, it'll have to be a short sale and then it becomes in part your problem because you have to wait a zillion years for bank approval.

Title insurance protects you from any of the seller's BS becoming your issue. None of the stuff in your questions 2-4 are your problem, provided you use a legit title company that issues title insurance.

Chuong Pham · Answer

HI J Beard and Wayne Brooks,

Thank you for the reply.

The RM was file through American Advisors Group. My agent found out that The Deed of Trust is a Reverse Mortgage DOT ("Home Equity Conversion Deed of Trust") for $150,000.00.

I will talk to the owner and inform him that he will need to go through probate court and have a write off quote from AAG.

Jeff B. · Answer

The lien should have come after the reverse mortgage, as the RM would have paid it off otherwise.

(5) Sonny doesn't know squat. Even with a Will, there's the Probate process and one way to have avoided that (too late now) was a Living Trust.

The RM has a process where the grantor certifies annually their residency AND that property taxes have been paid.

The issue is the Lien - - what kind and filed by whom?

Property with Lien and Reverse Mortgage should I Buy?

Property with Lien and Reverse Mortgage should I Buy?

Most Popular Reply

5 Replies