Estate Short Sell Reverse Mortgage or Walk?

I was contacted by the heir about listing a property. We quickly discovered that the deceased had a Reverse Mortgage and that the estate would not get anything from the sale. I suggested that we could do a short sale. The heir wants to walk away. Does anyone know what consequences there would be for the heirs, if they let the property go to foreclosure instead of trying to sell or offer to do a deed in lieu? When I see such properties on the Sheriff's Sale list, the estate and any heirs are included on the list of parties on the judgement.

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Permalink Reply by Brian Avery on January 12, 2012 at 12:16pm

There would be no consequences to the heirs in this case. They should just let it go since there is no equity.

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Permalink Reply by Kathleen Sheridan on January 12, 2012 at 1:44pm

Brian, Thank you for your reply.

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Permalink Reply by Kevin - Greenville, SC on January 12, 2012 at 5:02pm

Bottom Line - Always try to settle first.

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Permalink Reply by Thom Colby 888-391-5245 CA Brkr on January 13, 2012 at 11:29am

Just my .02 -

The purpose of a Reverse Mortgage is for the homeowner to take advantage of, and use, the equity in their home while they are alive. Maybe they needed it to offset some ongoing expenses, maybe they gave it away to the heirs while they were alive, who knows. When the homeowner dies with a Reverse Mortgage, they have left no "burden" for the surviving heirs. The deceased made that decision to handle it this way.

Has anyone contacted the Reverse Mortgage holder ?

Best of luck,

Thom Colby

Broker

Newport Beach and Palm Desert CA

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Permalink Reply by Kevin - Greenville, SC on January 13, 2012 at 8:01pm

What if Scenario - A few years down the road some assets of the deceased are uncovered that now have to go towards a possible deficiency which may have not been there if a settlement was reached. The heirs could be leaving money on the table even though they may not have any liability.

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Permalink Reply by Patrick Kernan on January 15, 2012 at 8:53am

The lender has already agreed in advance to take the property (and only the property) as collateral for the reverse mortgage if the equity runs out while the borrower/homeowner is alive. There is FHA insurance in the reverse mortgage by its very nature. Therefore there can't be a "short sale" (as we understand it) with a reverse mortgage.

Go list the property...and contact the reverse mortgage holder and let them know the borrower has died. Good luck!

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Permalink Reply by Kathleen Sheridan on January 15, 2012 at 3:29pm

Thank you Kevin, Thom, Patrick, and Brian for your insights. I'm not certain what this estate will do. They were anxious to sell the property, when they thought that they were getting the proceeds. Now they are not so enthusiastic. At least, thanks to SSS, I've learned something.