The reverse mortgage, in theory is one way for someone without a family to live comfortably for the rest of their life. However, in practice, in years past, it was used as a predatory lending practice. A very large percentage of these people have severe dementia but without having legally been found unfit, the heirs have no recourse.
This is a market that many investors tend to leave alone. The fact is that many heirs on an Estate, welcome the help. Whether they want to keep the house or sell it, there are ways to make the situation work out well.
An heir that would have lost the home to foreclosure and walked away because it is not tied to them personally can potentially still come out with an inheritance. There are several options available to them and a few situations that can be really beneficial for the heir.
It surprises me how many people don’t know their options, don’t know where to go for help and don’t know their rights. Not surprisingly there was a time not so long ago when lending practices were not geared for the well-being of the homeowner.
Today there are many resources available to distressed homeowners, but this scenario doesn’t trickle down to the heir in all cases. In todays market the heir still has a chance to come out ahead (for now). This is because of the fact that many houses are underwater. The pay-off on a reverse mortgage isn’t the same as the pay-off for a conventional loan. So although the house has lost value, especially if it is in disrepair, getting a loan on the ARV is a great way to make it a profitable venture.
If the heir has no funds they can seek out a knowledgeable investor that will buy the property. A better solution is to actually partner with an investor and split the proceeds. In this manner the heir can still get the property at 95% of the CURRENT appraised value or the loan amount. Many investors don’t see the value in this approach to motivated sellers. The fact is that 80% of people in probate want to sell. Creating a win/win situation is truly a feasible scenario. Partnering with the sellers is a welcome solution for many heirs to an Estate.
This is a neglected topic, and the complications can seem unsurmountable especially to the grieving family. In fact you will find that many heirs don’t even know that the house will be going into foreclosure. The lenders demand a response and can foreclose before a death certificate has even been issued. Not that that happens often, but being aware of your rights, and finding help is possible.
Executors should seek a Real Estate professional in addition to a probate attorney because it will save and make you money. This is usually not the probate attorney’s area, however if the situation is complicated do see a qualified attorney for legal advice.
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