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From America's #1 Rated Reverse Mortgage Lender

Hello Arlo,My brother, who is 75, lives with his significant other, aged 70. They have been together for over 25 years. Although they never married, they believe they are in a common-law marriage in Texas. The house they live in was inherited from her mother. It has no liens or mortgages, and the deed is solely in her name (my brother's name is not on it). In 2012, she took out a reverse mortgage when the house was appraised at $93,000, primarily due to many needed repairs. Currently, comparable homes in their neighborhood are valued in the $200,000 range or higher. Her reverse mortgage was for around $45,000, of which a large sum was used to replace the carpeting, tile flooring, and other things. They received their final payment this month and have letters from the reverse mortgage company suggesting they might consider another loan. This leads to my questions:I believe that if she were to pass away and be the only name on the reverse mortgage, my brother would be in a difficult situation unless he could prove their common-law marriage status is valid and that he inherited the home in her will. She has no living family members or children and has a handwritten holographic will, leaving everything to my brother. Even then, I expect that if he inherited the house, he would have to pay off the existing reverse mortgage along with probate and court fees, possibly by obtaining another reverse mortgage. I'm unsure about the required paperwork, but it would likely be substantial. I have warned him that he might be homeless if she passes, and he has no legal right to continue living in the house. I also raised the issue of him getting a second reverse mortgage to pay off the first one if the "five times rule" I read about in an earlier post is invalid. He cannot afford a conventional loan as he only receives about $1,100 monthly in SSA benefits, and taxes, insurance, and utilities would consume most of that.I told them that they would not have to repay any of the reverse mortgages they have now until either she passes away or sells the house. If this happens, is there an estimated timeframe for taking care of this if she passes? Would they try to force my brother out of the house? How do the appraisals requested by a reverse mortgage company like yours reflect the house's value? Does it consider comps in the area and then deduct any obvious repairs that need to be made, or how does it work? I reason that their house is now "appraised by the CAD" at around $180,000, but I believe it is worth more if fixed up. Thank you for your help.

By Dan on 01.11.2019

Hello Dan,

Let’s start with the main concern regarding the home and what happens if your brother’s significant other passes away before him. While I’m not a licensed attorney and can’t advise on the legal transfer of the property, addressing this matter now—while both are living—will be much easier than waiting until after one has passed.

What Happens to the Home?

Since the property is solely in her name, the reverse mortgage will become due and payable upon her death. If your brother cannot pay off the loan—either by refinancing with a new mortgage (forward or reverse)—he would need to sell the home or risk foreclosure.

I strongly recommend consulting an attorney while both are still alive. If transferring ownership now is advisable, it may allow them to avoid probate and sign all necessary documents in advance.

How to Protect Homeownership Rights

To ensure that both of them can stay in the home for life, they could consider refinancing the loan under both names. This way, if one passes away first, the loan would not be called due.

While some may weigh the financial benefits of the loan, the most critical benefit is ensuring that both individuals have the right to remain in the home without uncertainty.

How the Home’s Value is Determined

The appraiser determines the home’s value based on area sales data, making adjustments for property differences, including condition.

The goal is to find comparable sales that require minimal adjustments.
If the home needs extensive repairs, but most recent sales are new or remodeled homes, the appraiser must use comparable properties in a similar condition.
HUD allows objective adjustments, but adjustments must be supported by market data.

What is NOT permitted?

Subjective adjustments without market data (e.g., assigning a value to an outbuilding without comparable sales to justify it).

Who Determines the Value?

Lenders do not determine a home’s value.
A licensed FHA-approved appraiser is selected by an independent management company under HUD’s Appraiser Independence Rules.
Lenders cannot influence the value or choose the appraiser.
All appraisals are submitted through HUD’s EAD portal for review and approval.

While appraisers follow HUD guidelines and USPAP standards (Uniform Standards of Professional Appraisal Practice), remember that an appraisal is an opinion of value, not an exact science.

I hope this helps you make informed decisions about the property and mortgage situation.

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