Michael G. Branson, CEO of All Reverse Mortgage, Inc., and moderator of ARLO™, has 45 years of experience in mortgage banking, with the past 20 years devoted exclusively to reverse mortgages. A Forbes Real Estate Council member, he developed the industry's first fixed-rate jumbo reverse mortgage and has been featured in Forbes, Kiplinger, the LA Times, and Yahoo Finance. (License: NMLS# 14040)

Cliff Auerswald, President of All Reverse Mortgage, Inc., and co-creator of ARLO™ — the industry's first real-time reverse mortgage pricing engine — has 27 years of experience in mortgage banking, with 20+ years focused exclusively on reverse mortgages. A recognized expert in reverse mortgage technology and consumer education, he has been featured in Kiplinger, Yahoo Finance, Realtor.com, and HousingWire. (License: NMLS# 14041)

Reverse Mortgage Payoff at 95% Appraised Value — Can Heirs Buy the Home?

By Michael G. Branson

CEO · 45 yrs in mortgage banking

Edited By Cliff Auerswald

President · All Reverse Mortgage Inc.

Updated Nov 23, 2025 ⏱ 5 min read ✓ Fact Checked HUD-Lender #26031-0007 29 comments

Hello All Reverse,

I’ve read through your website and the Q&A section, and I’m confused by a few points. I’m hoping you can explain what really happens with my mother’s home and whether her grandchildren are allowed to buy it.

Your site says a reverse mortgage is non-recourse, so the estate doesn’t have to pay the difference if the home sells to a third party for less than the loan balance. But the same section says family members can buy the home for 95% of the appraised value. I also noticed in several of your replies that heirs, including grandchildren, can purchase the home at that same 95% amount.

Here’s my situation:

My mother passed away and her reverse mortgage balance was about $230,000 and could have grown to around $270,000. Since then, I’ve stayed in contact with the lender, rented out the property, paid the taxes, and taken care of maintenance. I’m not able to buy the home myself, but two of her heirs (the grandchildren) are trying to get financing to purchase it for 95% of the lender’s appraised value, which is $140,000.

Because of the conflicting information, I’m not sure whether the home can be sold to her grandchildren. Can you clarify this?

– Don H.

Hi Don,

Here is the exact verbiage in the Note and Deed of Trust for the HECM reverse mortgage about no Deficiency Judgment:

Deficiency Judgment

2.10. Manner of Payment. Only a Borrower has a right to receive the Borrower’s Advance. Borrowers agree that payment from any subsequent Loan Advance should be made directly to the applicable third party for the benefit of the Borrowers.

Deed of Trust

11. No Deficiency Judgments. Borrower shall have no personal liability for payment of the debt secured by this Security Instrument. Lender may enforce the debt only through sale of the Property. Lender shall not be permitted to obtain a deficiency judgment against Borrower if the Security Instrument is foreclosed. If this Security Instrument is assigned to the Commissioner upon demand by the Commissioner, Borrower shall not be liable for any difference between the mortgage insurance benefits paid to Lender and the outstanding indebtedness, including accrued interest, owed by Borrower at the time of the assignment.

Verbiage in the HUD Manual 4235.1

(c) Notice to Lender. Borrower shall notify Lender whenever any of the events listed in this Paragraph 9 (a)(ii) and (b) occur. (d) Notice to Secretary and Borrower. Lender shall notify the Secretary and Borrower whenever the loan becomes due and payable under Paragraph 9 (a)(ii) and (b). Lender shall not have the right to commence foreclosure until Borrower has had 30 days after notice to either: (i) Correct the matter which resulted in the Security Instrument coming due and payable; or (ii) Pay the balance in full; or (iii) Sell the Property for the lesser of the balance or 95% of the appraised value and apply the net proceeds of the sale toward the balance; or (iv) Provide the Lender with a deed in lieu of foreclosure.

What it all boils down to is that the Note, Deed, and Security Agreement the borrower has signed, and the loan contracts, if you will, all guarantee that there is no personal liability for the loan. Since there is no personal liability, HUD and the lender can only look to the property to repay the debt.

Therefore, HUD has realized that a sale in the marketplace will cost them money. They will not be able to sell the property for above-market value, and the costs will be at least 5%. If the family sells the home, they can pay off the loan for 95% of the property’s current value or the balance owed, whichever is less.

HUD makes no differentiation in anything I can find; they only talk about the right to sell the home for at least 95% of its current appraised value, and there is no restriction on to whom the home is sold.

Having said that, you brought up another issue here that I would like to touch on. The Deed of Trust also contains provisions for the Assignment of Rent (and you mentioned that you rented the property).

Assignment of Rents

22. Assignment of Rents. Borrower unconditionally assigns and transfers to Lender all the rents and revenues of the Property. Borrower authorizes Lender or Lender’s agents to collect the rents and revenues and hereby directs each tenant of the Property to pay the rents to Lender or Lender’s agents. However, prior to Lender’s notice to Borrower of Borrower’s breach of any covenant or agreement in this Security Instrument, Borrower shall collect and receive all rents and revenues of the Property as trustee for the benefit of Lender and Borrower. This assignment of rents constitutes an absolute assignment and not an assignment for additional security only. If Lender gives notice of breach to Borrower: (a) all rents received by Borrower shall be held by Borrower as trustee for benefit of Lender only, to be applied to the sums secured by this Security Instrument; (b) Lender shall be entitled to collect and receive all of the rents of the Property; and (c) each tenant of the Property shall pay all rents due and unpaid to Lender or Lender’s agent on Lender’s written demand to the tenant. Borrower has not executed any prior assignment of the rents and has not and will not perform any act that would prevent Lender from exercising its rights under this Paragraph 22. Lender shall not be required to enter upon, take control of or maintain the Property before or after giving notice of breach to Borrower. However, Lender or a judicially appointed receiver may do so at any time there is a breach. Any application of rents shall not cure or waive any default or invalidate any other right or remedy of Lender. This assignment of rents of the Property shall terminate when the debt secured by this Security Instrument is paid in full.

The sooner you can complete the sale, the better, as all rent should go to the lender.

Are You an Heir Navigating a Reverse Mortgage Payoff? We help families understand their options every day — including the 95% appraised value rule and how heirs can purchase the home. Call All Reverse Mortgage, Inc. (ARLO™) at (800) 565-1722 or get a free consultation online.

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29 Comments on this Article

Tammy P.
January 2nd, 2026

Thanks for all the information. I'm almost at the deadline for PHH 95% Heir payoff. Loss mitigation question: my loan agent says everything should be fine for my loan just in time. That's not a guarantee. Do I need lender pre-approval by the deadline or proof of funds? Escrow is open and set to close in 30 days. My lender still needs their appraisal. I emailed to at least ask if they'd authorize 14 more days, since we're doing everything over the holidays. This 95% heir payoff was granted after multiple violations and an ultimate trustee auction rescission because of their violations, including needing to have a FHA/HUD federal agent getting involved, though, they accept no fault or error admission.
Reply to Tammy
- Michael Branson
  January 2nd, 2026
  
  Hello Tammy,
  It sounds like you have a lot going on with your payoff that I don't know anything about and I'm a little hesitant to comment on. Typically, lenders and HUD are very accommodating and willing to work with borrowers and heirs as long as they see that they are making positive progress toward paying off the loan. Remember, having the loan paid off at 95% of the current market value of the property is as beneficial to HUD as it is to you. If they take the property back through foreclosure, carry the property for any length of time then pay the costs to market and sell it, that would normally cost them 5% or more of the property value so it's a win for both you and HUD.
  If you are within 14 days of closing your loan, the lender can't foreclose on the loan in 14 days anyway. Unless they already started the process and are just postponing the sale date, a foreclosure would take much longer than 14 days so it is definitely to their advantage to work with heirs who are legitimately working toward paying off the reverse mortgage and is almost finished with the process. Not to say that if one thing after another kept coming up to keep delaying the closing date that they would not need to eventually decide to take further actions to protect their interests, but I would be very surprised to see them do anything if you only needed 14 extra days.
  Reply to Michael
Carla M.
September 29th, 2024

I am an heir to a property with a reverse mortgage. I want to sell the home and pay off the loan. Is my payoff the total loan balance or 95% of the appraised value, whichever is less? How can I get the lender to adhere to the 95% payoff if that's what is owed, as they are quoting me the full loan balance?
Reply to Carla
- Michael Branson
  September 29th, 2024
  
  Hello Carla,
  As the heir, you have the right to pay off the loan for the lesser of the total loan balance or 95% of the current appraised value. Have you received a recent statement from the lender or servicer showing the actual loan balance? Additionally, has the lender provided you with a copy of the appraisal they performed to determine the payoff amount? According to HUD guidelines, the servicer must obtain an appraisal from a licensed HUD-approved appraiser to establish the correct payoff amount. Without this appraisal, the lender cannot determine whether to offer the actual balance owed or 95% of the current appraised value.
  If you believe the lender is providing you with a payoff amount that exceeds the lesser of these two figures, I recommend contacting the lender to request both the most recent loan statement (which will show the balance without accounting for the appraised value) and a copy of the current appraisal used to determine the payoff amount. It should be easy to verify whether the lender's Payoff Demand Request exceeds 95% of the current market value. If it does, you should challenge the lender based on HUD's guidelines, which allow heirs to repay the loan at 95% of the appraised value if the balance exceeds that amount.
  Let me know if you need further assistance or clarification.
  Reply to Michael
John
May 23rd, 2023

Hello Arlo,
Good Morning! Since I know you are an expert on the Home Equity Conversion Mortgage, I believe you are more experienced in this kind of thing. So, I am asking for your guidance.
For a HECM loan, once 98% hit, the original investor will assign the loan back to HUD. Then, HUD will service those loans themselves (by Celink). In some situations, if borrower deceased (default) and loan is currently serviced at HUD. HUD may decide to sell those loans to third party investors (usually an assets pool). HUD did several rounds in recent years. The end buyer of those notes are big players like VRMTG Trust or Gitsit Solutions or other smaller ones.
So, here is my question. Would they still going to follow HECM 95% of appraisal short sale term in the original note like original investor going to follow or they will be more flexible like they may more willing to negotiate on the number?
Thanks,
John
Reply to John
- Michael Branson
  May 23rd, 2023
  
  Hello John,
  The mortgage insurance remains in effect, and therefore, any agreement to accept less than 95% of the current appraised value would require HUD's approval as it would require a higher payment from the MIP fund when they pay the claim on the loss. We really cannot predict what HUD's position may be in the future. They have reviewed individual offers in the past on sales, though, and it never hurts to present an offer. You never know their answer (but unfortunately, how long it may take to get an answer sometimes).
  Reply to Michael
Daphne D.
May 20th, 2022

Hello Arlo,
My friend's mother passed away in April, this year. She and her two adult children reside in the brownstone. My friend was once on the deed, but in 2011, his mother told him to sign himself off the deed because at the time his mother's home was in pre-foreclosure, and took out a reverse loan. She and both sons had no income at the time. Presently, no one's name is on the deed, note, loan, & or will. They want to keep the home. They are researching probate lawyers to become executives on the estate. Also, on the lenders' options of repayment notice, both brothers indicated that they intend on exercising the 95% payoff option to obtain financing. Both adult males have no income. Please advise.
Reply to Daphne
- Michael Branson
  May 23rd, 2022
  
  Hello Daphne,
  
  You seem to have the steps down pretty well. The heirs need to complete the probate of the property and have the title transferred to themselves so that they can get the financing to pay off the existing loan (assuming they do not have the cash available to pay the loan off without needing to finance the payoff with a new loan).
  The problem that it sounds like they will run into though is how they intend to obtain the financing that would be necessary to pay off the outstanding loan. You stated that the brothers have "indicated that they intend on exercising the 95% payoff option to obtain financing" but that they have no income so I am a little confused as to how they intend to proceed.
  
  You also indicated that they had no income in 2011 when their mother obtained the reverse mortgage but that they had been living with mom in the property at that time and are still living in the home.
  If one or both are over 62 and they have been able to save money since 2011 living with mom, and since there has been no mortgage payment over that period of time, it is possible that they could get a reverse mortgage on their own now if they can pay the loan down to meet the loan to value requirements.
  But even at that, they would need to show at least enough income to qualify under the financial assessment guidelines which would require at least enough income to meet the residual income requirements.
  Other than that, I have no suggestions since even a 95% forward or traditional loan would require them to have sufficient income to meet the lender's requirements and to be able to make the monthly payments.
  Reply to Michael
Andrea B.
February 1st, 2022

As a heir I'm trying to buy my deceased parents' home for 95% of the appraised value as a short sale. They are telling me the short sale was denied from the appraisal coming back higher than the balance. The property has significant storm damage from a hurricane and was never repaired. My father passed before it could be fixed. I submitted CMA's and paid for a inspection to show the condition of the property. They are trying to foreclose. Is reverse mortgage required to give me a copy of their appraisal? The appraiser told me he has to submit values for an amount if there was no damage and also with damage. I do believe the appraisal amount they told me is if the property had no damage. I'm very familiar with the area and repairs that need to be done and wondering what can I do to get a accurate appraisal?
Reply to Andrea
- Michael Branson
  February 2nd, 2022
  
  Hello Andrea,
  
  As the heir to the property, you aren't buying the home, you already own it. It is the payoff that you are discussing and under most laws, as the owner of the property, you are entitled to a copy of any appraisal done on the home.
  I would suggest that you contact an attorney and ask what your rights are if you believe you are not being given full disclosure of the actual appraised value.
  Reply to Michael
Annemarie B.
July 11th, 2021

Our original reverse mortgage was with Financial Freedom. In April 2018 we received a letter that as of May 2018 we would be dealing with Celink. When Celink took over we didn't realize that they were a service company. We have never been told who our actual lender is. We just sold our home and can't close because Celink refuses to give us the payoff amount. They have used o need excuse after another. Our closing was June 29,2021 and now (July 10th) they are telling us that we need an appraisal. Our loan is not backed by HUD. We are desperate and hope you can help us. Your assistance and prompt respond are appreciated.
Reply to Annemarie
- Michael Branson
  July 19th, 2021
  
  Hello Annemarie,
  
  If you are requesting a payoff of the loan, the servicer must perform in a timely manner as required by law. There are federal laws that require servicers to issue payoff statements within reasonable timeframes. A reverse mortgage is an exception to the 7-day rule under which servicers must comply with a payoff notice on other loans, but they still must sent out a statement within a reasonable period of time.
  Lenders must be sure that they are not requiring you to repay more than the amount owed or 95% of the current market value of the home and an appraisal is the only way to make that determination in some instances. If you are certain that the loan balance is below 95% of the current market value and are not disputing the payoff balance, I would suggest you specifically make that appeal to them in writing.
  
  I am not an attorney and cannot give you legal advice if your appeal based on the value and payoff is not successful. I would suggest that you contact a real estate attorney and I believe they will assist you in sending the servicer a registered letter with an official written complaint that includes your name, your account number, detailed information about attempts to obtain the payoff information including dates, the fact that you are not requesting a payoff of less than the full amount owed and that delays for appraisal are unwarranted in your case and that they are causing you financial harm.
  
  I can see both sides of this. The servicer wants to be sure you are not over-charged on your payoff, and you need to close the loan. That's where you may need to be able to articulate the circumstances to someone higher up at CELINK. The person handling the payoff may just be following the rules but if your equity is strong and there is no question about the value and therefore the payoff, you may be able to get someone with authority to use some common sense.
  I honestly do not know how much leeway they have in this area at this time, but I have been involved in payoffs in the past that did not have this requirement (but they also had a large amount of equity in the home so there was no question about the payoff balance).
  Reply to Michael
Kendra P.
March 30th, 2021

Hello,
My mother passed away with a reverse mortgage. I am her sole heir. The balance due on the loan is $250k, but I strongly suspect the appraised value will be far less. I want to purchase the property from my mother's estate.
The document that the mortgage company provided to me, "95% of Current Appraised Value Loss Mitigation Option" states that "If the loan is in a due and payable status, then the sales price of the property can be 95% of the current appraised value, as long as 95% of the appraised value meets or exceeds the current balance of your loan." The last half of that sentence seems to contradict your advice to Don, and I'm wondering if there's a nuance that I'm overlooking.
Any help you can provide would be greatly appreciated.
Kendra
Reply to Kendra
- Michael Branson
  March 30th, 2021
  
  Hello Kendra,
  
  Their terminology is a bit confusing; I agree. However, this pertains to you selling the home, not keeping the home, and paying the loan off as the heir and current owner of the property. Just remember, as mom's heir, you are not "buying" the property, you inherited it from mom.
  Now you just need to pay off the loan that has become due and payable. The terms of the loan state that as an heir, you have the right to repay the obligation at the amount owed or 95% of the current market value. Make sure that when you contact the lender, you are not talking to them about a "sale" or purchase of the property.
  You are NOT "buying" the home from mom's estate - you now own it or should own it because of being her heir. It sounds to me like they are either thinking that you are selling the home or possibly just telling you that if you do sell to a third party, the deal changes, and the offer of payoff at 95% of the current appraised value is only good if that 95% meets or exceeds the amount owed if you sell it instead of keeping it.
  
  You don't have a "sales price" as the heir. You inherited the property from mom and you just want to pay off the loan (which means you need to have either the cash available or a new loan ready to put into place). If you changed your mind and want to sell the property to a third party, the lender is not required under the terms of the loan to offer the same deal where they discount the payoff down to 95% of the current appraised value.
  That would be considered a short sale and subject to a whole new review and approval. My advice is to be sure you do not use the term "buying the home from my mom's estate" and begin making sure you treat the house as your property as the heir, since that is what it is.
  If you have not already taken the steps to change the title over to your name, you may want to take care of that. By the way, if you change your mind and sell it later, that is your choice and there is no time limit you would need to wait to make that call.
  Reply to Michael
Jennifer
October 22nd, 2020

My mom has a reverse mortgage & I would like her to sell it and move closer to me, I think it will appraise for less than is owed, so upon sale, she'll owe 95% of the appraised value. If she improves the home to make sure she gets at least the 95% of the value, can she keep any $ above the 95% if the sales price is at or under the balance owed? Or does she have to sell for more than the balance to make any $?
Reply to Jennifer
- Michael Branson
  October 22nd, 2020
  
  Hello Jennifer,
  
  The "lower of 95% of current value or the amount to repay the loan" is guaranteed to families of reverse mortgage borrowers who wish to keep the home after the borrower has passed.
  If a borrower voluntarily sells the home to move, HUD does not have a provision stating that they will accept 95% of the current value or the amount owed.
  The loan is still non-recourse so the borrower or their family will not owe more than the home is worth.
  On the other hand, if you sell the property for more than is owed on the loan, you would keep any amounts over the amount needed to pay the loan at close, but there is no agreement to accept 95% of the value on a payoff for a voluntary move especially when the sale would net more than that amount.
  If you plan to sell though and you are going to be short the funds to repay the loan, I would urge you to contact the lender and see how they are willing to work with you.
  You may find that there is still something they can do for you in that circumstance that is mutually beneficial to both you and the lender/HUD.
  Reply to Michael
Christopher S.
October 8th, 2020

As an heir what does the process look like when paying off the reverse mortgage by applying for a new mortgage? I just got preapproved by a lender for 95% of the appraised value. I am trying to understand what the process is going to look like to pay the reverse mortgage off.
Reply to Christopher
- Michael Branson
  October 8th, 2020
  
  Hello Christopher,
  You will open an escrow just like any other loan and the escrow/title/settlement attorney will send to the lender for a Beneficiary's Demand for Payoff statement.
  The lender will supply that statement based on the lower of the amount needed to pay the loan in full or 95% of the current value based on the appraisal they have procured.
  
  To make this work, you should have already received title to the property because you cannot "refinance" a property you do not already own.
  You should have been in contact with the lender who is servicing the reverse mortgage to let them know of your intent to pay off the loan with new financing and copies of the paperwork that show that you inherited the property and now have title to the property so that they will honor the Demand Request.
  Lenders cannot give information to unauthorized third parties and they need a signed authorization from the borrower, or someone authorized by the borrower to give out any information on the loan (such as payoff figures).
  If you don't have a signed authorization from the borrowers to receive this information (and almost no one gets it before the borrowers pass), the lender needs to see that you now hold title (usually as a result of the will/trust/probate) and then they have the authority to give you the information you need to pay off the loan.
  If you have not yet done so, you need to let them know that you are paying off the loan and if you have not transferred the title into your name yet, that you are in the process so that they do not take additional steps to collect the loan thinking no one is working toward that end.
  Reply to Michael
Arturo P.
September 23rd, 2020

I am the heir of a reverse mortgage and the total due is $55.5k, but the appraised value came out at $28k which the 95% comes out to $26,600.00. If I sell the property for $40K does the lender keep all the amount or just $26,600.00. I would like to have an answer ASAP as I am running out of time. Thank you.
Reply to Arturo
- Michael Branson
  September 23rd, 2020
  
  Hello Arturo,
  
  The option to pay off the loan at 95% of the current appraised value is yours if you wish to keep the home and you would need to speak with the lender if you are talking about doing a short sale of the property for loan payoff (where you do not intend to keep the home but want HUD and the lender to approve the total payoff for an amount less than owed on the current loan).
  The program has no guarantee of approval for short sales. It says it will allow heirs to keep the home and pay off the debt for the amount owed or 95% pf the current market value, whichever is less but does not make any guarantees of accepting a short sale from a third party.
  Having said that, they may do so but that would be a negotiated payoff.
  
  If you plan to pay off the loan and then sell it later, you can do whatever you want. If you later sell the home for $40,000 after you have paid off the mortgage and closed that transaction, that would be a separate transaction.
  Neither the lender nor HUD would have any claim to any proceeds you received on that sale.
  If you are asking the lender to accept a short payoff from a third party because you want to sell the home and have the lender accept a payoff of less than the amount owed, that would be a negotiated event and they are not obligated to do so.
  If the payoff were resulting from a sale for a higher amount, I doubt that they would accept an amount less than owed knowing that information.
  Reply to Michael
Tina W.
September 4th, 2019

We are currently trying to do the 95% heirship buy back. The reverse mortgage company's appraisal expires 9/27/19. We had an FHA approved appraisal done 3 months later to qualify for a loan. Ours came in 3,100.00 lower. The Reverse Mtg. company answered me today that if we close in 30 days, we use their appraisal. If after 30 days, we will use ours. They will not order another as required by FHA. Why can't they lower it now? I know the current payoff is good thru 9/2/19. Which will require another letter. The date of default was mid-May. Please any help would be greatly appreciated!
Reply to Tina
- Michael Branson
  September 4th, 2019
  
  Hi Tina,
  
  HUD has some peculiar rules sometimes but sometimes there are specific reasons why they are pretty set on their timelines and appraised values/appraisals are one of those areas in which they do not waiver.
  They have set times in which they will require an appraisal to remain in effect and then there are procedures to cancel one and use another to prevent people from "appraisal shopping".
  After all, if the reverse were true and the second appraisal had come in higher, you would not have wanted them to raise the cost to you and the rules allow you to exercise your right to pay off the loan for 95% of the value regardless of the amount owed and they will hold it for a set amount of time pursuant to the rules in place. An appraised value is a value given on a set date. In other words, it is a snapshot in time.
  There may be other sales available between now and the date the appraisal with which they are working expires that indicates a lower value or a higher value but until the appraisal has expired, HUD will not entertain a new value, higher or lower, each time a new sale is available.
  Reply to Michael
Maria Garcia
August 20th, 2019

We husband n l have a reverse Mortgage, it will be a year in October. We want to take out the whole amount due us, my two sons , started paying payments that would go toward interest ,is that going to be helpful when the loan is due. Also do l have to make a will for them
Reply to Maria
- Michael Branson
  August 25th, 2019
  
  Hello Maria,
  Any payments made will cut down on the interest that accrues and yes, that would make it easier for your sons to get a new loan at that time. Remember, even a full draw is not the full value of the home as the loan balance typically grows with the interest but if the interest is being paid and not left to accrue, the balance will remain lower in relation to the value.
  I would recommend you investigate a will and possibly a trust as well. I recommend you contact an estate attorney and determine if a trust is right for you that would resolve title issues. One thing to remember, do not change the title to the home in the name of the trust until you have it approved by the lender to be sure it meets all HUD requirements.
  You could also add your sons to title at any time, you do not have to wait until you pass if you would rather go that route rather than creating a trust. It might be much easier for them if they are not successor trustees of an approved trust if they are on title in advance and you also send the lender written authorization for the lender to give them any information required to work on the loan. It makes things much easier when the time comes that they must make arrangements to repay the loan if they are already authorized to work with the lender on the loan.
  I applaud your advance thinking! Many times, we receive comments about people who have problems working with the lender because the lender has no authorization to work with heirs and it can really be a problem. It is not too difficult or costly to set up the safeguards in advance to ensure your sons do not run into problems when the time comes, and I wish all borrowers did the same for their heirs.
  Reply to Michael
Christopher V.
April 4th, 2018

My uncle has a reverse mortgage.. he owes $289,000 my mother in-law wants to buy it for $300,000. From my understanding you cant do a short sale. So what are their options. How does my mother in-law approach this?
Reply to Christopher
- Michael Branson
  April 4th, 2018
  
  Hi Christopher,
  
  I'm afraid I don't quite follow you. Firstly, if your mother in law is looking to pay more than what is owed on the property, that would not constitute a short sale. A short sale is when the owner is selling the home for less than the loan amount owed. That would require the lender's approval if the seller was not coming in with the amount of the shortfall because they would have to agree to accept less than the full amount owed as payment in full for the lien. Your uncle does not need the lender's approval to sell the home for $300,000 when he only owes $289,000 and the full balance will be repaid with the sale.
  
  Let's suppose though that the facts were reversed and that there are family members who want to buy the home for $289,000 and the balance on the reverse mortgage is $300,000 and you were requesting the lender to accept a short payoff of the loan. This would require not only the lender's approval but HUD's approval as well since HUD would have to pay a claim on this loan to cover any loss. I do not want to make any assumptions here, but you say "my uncle" and my "mother in law" so is it safe to conclude that your mother in law is not directly related to your uncle other than by marriage and would not be considered an heir of your uncle? And you stated that your mother in law would like to buy for $300,000, but is that the current market value of the home or would you say that is below the current market value? If the sale price is higher than the amount owed, there is no need for a short sale and your uncle can sell to your mother in law directly without even enlisting the aid of a real estate sales person, avoiding the commissions. I would suggest that you use a reputable escrow and title company (even if your mother in law is paying cash) just to be sure there are no issues on title that are unknown and to be certain all paperwork and liens are handled correctly.
  
  If you are actually seeking a short payoff but the property is worth more than the loan balance, the short payment would not be approved. The lender will not accept a short payoff if they do an appraisal that indicates the property is worth more than the amount you are trying to pay, regardless of what your mother in law and uncle agreed to. If you fear that may be the case, I would suggest you look closely at the sales in the neighborhood and determine if you are willing to raise the price to at least a point high enough to cover all costs and loans owed. Finally, and this is the wild card answer because there are no guarantees on this one, if the property really is worth less than what is owed, you can get your information together to approach the lender about paying off the loan for 95% of the current market value, but that come with a risk and a catch. This option is reserved for heirs of the borrower. From your previous questions, I know that your uncle has a daughter, that he is still living (that he did not pass but has just moved) and that the lender has not yet called the loan due and payable. The lender and HUD are under no obligation to work with you at this time and may not even be able to give you any information since you are not on the loan, the borrower has not passed and you are not even the heir of the borrower currently going through probate on the property.
  Reply to Michael
sid
September 13th, 2016

I have a similar situation. Mom died and after florida probate, "the house" is in my name. The mortgage is 400k, HUD appraisal is for 280k. The bank (financial freedom) has offered it to me for 100% of the appraisal (not 95%). I want to keep it in the family. I'm collateralizing with my home as well as "the house".
My problem: the bank will only give me a "short sale approval" letter and requires a HUD-1 with it. My lender's attorney wants to see a "short payoff" letter or they won't close. My attorney says that he can't issue a HUD-1 since there is no sale. The bank refuses to use an escrow agent.
My Florida attorney bought us 120 days more to work it out by giving them a judgement in return for a 120 day auction date. That's December 12th and we're at an impasse. I've spent over $20,000 for title work, 4 lawyers, insurance, etc. and now it might all be for nothing. Any suggestions?
Reply to sid
- Michael Branson
  September 14th, 2016
  
  Sid,
  
  I've never heard of such a thing and I know that HUD does not want to own this property. Have you called HUD directly to see if they will intervene and to ask them about the payoff amount? I certainly would. Financial Freedom no longer originates reverse mortgages and has not for some time so they may not be as concerned with the optics of how they are proceeding as they should be. HUD has an interest in this transaction as they insured the loan and if the lender has to foreclose and resell the home, the odds are great that they will not get 95% of the current value of the home after all the costs and delays so HUD may be much more inclined to listen to reason.
  Reply to Michael
Brad Wright
September 7th, 2013

Awesome information. I'm in a similar situation dealing with a reverse mortgage. It's a pretty confusing process. This definitely helped clear up some questions I had.
Reply to Brad

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Reverse Mortgage Payoff at 95% Appraised Value — Can Heirs Buy the Home?

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Assignment of Rents

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