Curious about a Reverse Mortage in Foreclosure. Any tips?

6 Replies

Hi BP Community,

I'm a REI newbie looking at/for opportunities. I ran across a house in foreclosure with a Reverse Mortgage.

What questions should I be asking? What research should I be doing? It looks like the owner is deceased. The reverse mortgage was for $625k. Market value is around $781k. It is going up for auction in two months. It looks to be in great shape.

Thanks for any pointers, suggestions.

Originally posted by @Brett Goldsmith :

you'll need to get in contact with the owner or the heirs in this situation if you want to have any chance at purchasing it prior to a foreclosure auction. 

 & keep in mind that $625k might have been the original balance, but reverse mortgages go up every month. Very probable that it's underwater and the heirs aren't in a position to do anything but let it go to auction.

Another FYI is that "has a reverse mortgage" is strongly correlated with "has heirs that are not financially doing so well and/or aren't financially savvy." You will have a hard time finding someone with a middle class (or better) income and/or with an average (or better) understanding of basic personal finance that lets their parents take out a reverse mortgage... better to write mom/grandma a $2k check every month than to let a reverse mortgage "pay" her $2k/mo!

If the home has equity it could be worth pursuing but if it's an update down asset with no listed heirs or if probate is required it may be a waste of time due to the proximity of the sale date.

@Jenny D. Well yes, investors want to buy an asset at a great price so they will bid accordingly. There is typically an opening bid set based off what is owed and fair market value. If no 3rd party meets or exceeds opening bid then it will revert back and become a banked owned asset. 

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here