My parents have a reverse mortgage and have exhausted all funds with a negative available line of credit. My mother has been in a nursing home for over 2 years with Alzheimer’s and my dad, who had been living in the house, passed away in December 2019. My brother and I are at a loss of best way to handle this situation. We have not yet paid the property tax bill, which was due on 01/31/20. We are confident that the current total loan balance may exceed the value of the house, but not positive. We have not yet contacted the Lender, but we believe they know dad passed away, since now the monthly statements only have mom’s name listed. We were also not sure if necessary, to contact an Elder lawyer. Again, mom is not in the house, but is still alive. We do have access to an appraiser and neither my brother nor myself want the house. We do need to clear the house of its contents. My brother and I are both POA for both mom and dad. Unfortunately, I cannot locate a signed contract to even give to a lawyer for review, when the loan was set up. However, it does appear that I may have all the monthly statements. Of course, this is a difficult time for all of us, during this virus crisis. What would be your professional advice for us going forward? Thank you for your time.
Work with a senior real-estate specialist
I think we would advise you to first decide what you want to do. The easiest way to do this is probably to contact a senior specialist real estate salesperson near the property location. They can visit the home and determine the most probable sales price based on the current condition and can tell you how long properties in that area are taking to sell.
You can compare that information to the latest statement to determine if there is any equity left in the home. If so, it is always better to sell and use the money for mom’s care than to let the lender take it.
Is there a Power of Attorney?
The next step if you are going to sell is to visit an attorney to be sure you have all the paperwork in place to be able to sell the home. If you have the POA you may or may not be able to sell the home with just that document.
Some POA’s are limited and you will want to be sure you have the full authority to sell the home before you start making plans only to find out that you do not actually have authority to sell the home. But you can still be working with the real estate specialist to set up an estate sale at the same time to sell any of the remaining items in the home after you have removed any of the belongings that you wish to keep.
Most senior specialists have associations with estate sale companies who will come in, catalogue everything, perform the sale, donate any unsold items after the completion of the sale and “broom clean” the home so that the sale can proceed.
Your agent will discuss with you what would need to take place at that point (possible staging, maybe a quick coat of paint, etc.) for the best and highest sale without spending a lot of money.
“Broom Clean” personal belongings from the home
After you meet with the real estate agent, if you determine that there is no equity and you do not want the home yourselves, then the next step I would suggest, would be to try to remove all the personal belongings you wish to keep or give to friends and relatives, then contact an estate sale company on your own to see if they want to do the sale.
If there is not enough left after you remove the items you want to conduct an estate sale, then you can always contact a removal company and for a relatively small cost have all remaining items removed and donated or thrown away. This is important from the standpoint that the sooner the property is “broom clean”, the sooner you can offer the lender a Deed in Lieu of foreclosure.
The lender cannot accept this option if the property has other liens or is full of personal belongings. The benefit to giving the lender the Deed in Lieu of foreclosure to you and other heirs is that it can resolve the issue sooner. There will be no cost to you either way as far as the loan goes but as long as mom still owns the property, you never know what possible legal liability mom or the estate may have if anything happens while the property is vacant.
If home is underwater / negative equity
The last option is if one of the heirs wishes to keep the home, even if it is underwater, you have a right to keep the home and repay the obligation at 95% of the current market value or the amount owed, whichever is less.
If the amount owed is more than the property is worth, you should contact the lender and let them know that you would like to keep the home and would like to repay the obligation at the lower of the amount owed or 95% of current market value. They would then do an appraisal on the home and issue a demand for pay off based on that figure.
When researching a reverse mortgage, it’s important to speak to your family and trusted financial advisor to weigh both the pros and cons. Learn more about how a HECM loan might be right for you by contacting one of our top reverse mortgage lenders, or check your eligibility with our free reverse mortgage calculator.