Selling a house with a reverse mortgage isn’t as simple as selling a home with a traditional mortgage — but it can be done with a little planning.
What Is a Reverse Mortgage?
A new type of mortgage loan came out for homeowners looking to access their house equity in the 1960s. This and became popular with an unusual need that senior homeowners had which allowed them to stay in their homes during retirement, without it becoming unsustainable.
With a reverse mortgage, you borrow against the equity in your property to receive cash upfront or a stream of monthly payments. Instead of paying your bank, your bank pays you. However, this money is eventually owed back to the HECM by successors to the estate, or by the owners of the estate – should they choose to sell. Some small print of a reverse mortgage includes: interest fees piling on top of the principal as well as homeowners still being required to pay property taxes, insurance, maintain property condition, and use that home as their primary residence.
Is It Possible to Sell?
As mentioned briefly earlier, yes it is possible to sell a house with a reverse mortgage. If your home has appreciated in value then if it sells for more than what you owe on the loan balance plus those aforementioned charges, then not only do they get repaid but also make some extra cash from their property appreciation.
Reverse mortgages are tricky to navigate if your property declines in value. If it sells for its appraised cost, the reverse mortgage lender receives the proceeds of sale and mortgage insurance pays off any outstanding balance. This will not be the case if successors to the estate end up selling a house with a reverse mortgage. In this circumstance, the HECM does not require heirs to pay back more than the home is worth.
Routes to Take When Selling a House With a Reverse Mortgage
Find a Great Real Estate Agent
A real estate agent is a great way to get your home sold, but comes with an expensive price. Generally you’ll be charged either a flat fee or 6% of the sale for their services. But even if they work hard and try everything in order for your property to sell quickly, or if they don’t put in much effort at all- there will still only be one rate.
Though an agent handles most aspects of selling your home, if any repairs or renovations are needed, it will fall to you or your family to hire a professional and pay for those out-of-pocket. All while paying property taxes, utilities, homeowners insurance, and maintenance – in the end though there is no guarantee that these updates will sell quickly, they may just be worth the risk!
Consider the FSBO Route
If you were to sell-by-owner, all of a real estate agent’s responsibilities would fall on your shoulders. An agents job encompasses listing the property, creating a marketing plan, setting the marketing strategy in motion and executing it with open houses for prospective buyers as well as vetting them carefully before negotiating and handling tons of paperwork.
Selling your home by owner may seem like a good idea when you’re looking for ways to save on the realtor commission. But before making this decision, consider how much time and effort it will take from you in order to get things ready and then once all that work is done there are repairs or renovations which can be costly as well. Potential buyers usually require a home inspection to be done and repairs to be made before they get mortgage approval, but in doing so, the buyer still could encounter loan approval issues.
The Cash Buyer Option
If you are looking to sell your house fast, one option is a cash home buyer. They don’t need credit checks and can close the deal quickly so there’s no waiting on funding or bank approvals. If you’re looking to sell your home quickly, and for a fair price, then it might be time to consider selling in as-is condition. No need for costly renovations! Selling with a reverse mortgage is very easy with cash home buyers.
SellThatHome offers cash with no hassle. Our team of experts will give an offer on the spot so that selling becomes quick and painless. If our offer meets or exceeds what’s needed by both parties involved, there won’t be any need for home inspections or appraisal because every detail can be negotiated before closing day.