When it comes to selling a home secured by a Home Equity Conversion Mortgage, open lines of communication between reverse mortgage servicers and Realtors are key to a successful transaction, according to several HECM and real estate industry professionals.
About one million reverse mortgages have been originated since the government authorized the Federal Housing Administration to insure HECM loans beginning in 1988, according to data from the National Reverse Mortgage Lenders Association (NRMLA).
For that reason, there is a good chance that Realtors may be tasked with selling a house that has a reverse mortgage at some point in the future, said John Boughtin, public issues media representative with the National Association of Realtors (NAR), during a webcast last week.
Real estate agents face a swelling Baby Boomer population that is looking toward home sales as a means to unlock their housing wealth. But as this demographic ages and becomes eligible for reverse mortgages, Realtors will also face the unique set of requirements that apply when the homeowner, their adult children or estate, puts up a home with a reverse mortgage for sale.
“These requirements are related to the fact that the loan must be paid off within a limited amount of time after the owner permanently vacates the home, whether to move someplace else or because they have passed away,” Boughtin said.
Another consideration for real estate professionals is they may need to work with a variety of people when handling the home sale, be them the family members of the homeowner, estate attorneys, and even the reverse mortgage servicer.
For Realtors trying to sell a home secured by a reverse mortgage, the first thing they should learn is who has authority over the property, said Flynne.
“Often times, a Realtor may be facing a situation where the owner passed away and the estate may not have been resolved yet,” she said. “Understanding who is the authority is a very important factor.”
This is particularly important, Flynne added, because Realtors like to take the lead and be informed while participating in a home sale transaction. In some situations, Realtors may choose to speak with the servicer of the HECM, however, in order to do that they must have authorization from whoever is appointed to administer the estate.
“So not only is it important that the head of the estate becomes an authorized member to talk to the servicer, but that the real estate agent can have that same ability,” Flynne said. “And it’s all done through writing and communicating with the servicer.”
But while real estate agents may want to be as helpful as possible in the home sale process, given the privacy laws that exist, reverse mortgage servicers are limited in the amount of information they can share, unless the agent has authorization to discuss the case, said NRMLA’s Irwin.
Realtors must also be mindful of the sensitive timelines associates with properties secured by HECMs, particularly when the loans become due and payable.
The NAR webcast also discussed what Realtors need to know about appraisals on properties that have reverse mortgages on them, as well as the various nuances they may encounter when selling such properties.
“HECMs sound scary—they’re not,” Flynne said. “We, as servicers, really appreciate a real estate agent being involved and being informed because it makes this transaction so much easier to wind down.”