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Do you know if a reverse mortgage lender will accept a short sale? Has anyone had success doing one?
Here is the situation:
The seller’s mother recently passed away and the home has a reverse mortgage.
The mortgage was taken out 5 months ago and the lady passed a couple of months ago.
The house appraised for $237k when the mortgage was taken out, but based on the comps I believe it’s worth close to $200k, assuming it’s updated ($10k-15k rehab).
The current balance on the mortgage is about $180k.
A challenge in this case is that the high appraisal is very recent.
Comments?
Thanks,
Pedro
Repayment of a Reverse Mortgage (HECM) occurs when the borrower (or last surviving spouse) permanently vacates the home. The borrower or borrowers heirs then must facilitate the payback of the loan using either private funds or selling the house. After the loan is paid, all leftover proceeds from the sale of the home go to the borrower or the estate.
All reverse mortgages are non-recourse – the total amount owed can never exceed the appraised value of the home. If the amount owed exceeds the homes appraised value, then the lender or FHA will absorb the loss.
Based on the numbers provided, I’d say the deal is way to thin for a complicated deal. You’d need the new appraisal to come in at well under $150k.
If you can get a BPO or appraisal for a lower price you can usually get a short sale. But it would need to be much lower to make it worth your time. Even if you got the short, you need to think – what’s the exit strategy. You don’t want to buy at the short price, do the rehab then HOPE that you can find a buyer to make a profit. That’s too risky. It could take 6-7 months to find the buyer and your whole profit would be eaten up. So you’ll need to get a buyer lined up who will buy it “as is” as soon as the short is approved so you can do a double close.
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