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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 for 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 not valid. He cannot afford a conventional loan as he only receives about $1,100 per month 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? My reasoning is 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 first address the primary concern regarding the home and the implications if your brother's significant other passes away before him. While I'm not a licensed attorney and cannot comment on the legal process of transferring the property to his name after her passing, it's much simpler to handle this matter now while both are alive rather than waiting until one has passed.

Currently, the property is solely in her name, and the reverse mortgage would become due and payable upon her death. If your brother is unable to pay off the loan, either through another loan (forward or reverse), he would need to sell the property or risk losing it to foreclosure.

I recommend consulting an attorney while both parties are still living for advice on the best course of action. If changing the title now is advisable, as I suspect it might be, this can be done without going through probate, allowing both parties to sign all necessary legal documents. To ensure that both can remain in the home for life, regardless of who passes away first, they could refinance the loan in both names. This way, the loan wouldn't be called due if either were to pass away first. In this situation, the 'five times benefit' is less significant than ensuring a definite benefit to the couple; otherwise, that can be determined with the loan (the right to remain in the property for both spouses).

Regarding your question on valuation, the appraiser will assess the home's value based on area sales data, making adjustments for differences in properties, including their condition. The goal is to find sales requiring minimal adjustments, as those requiring more than a 25% adjustment aren't considered comparable sales.

For example, if their home requires extensive repairs and all recent area sales are of new or remodeled homes, the appraiser can't compare their home to these “as new” homes without adequate sales data of similarly conditioned homes. The appraisal would be based on sales of homes in similar condition, size, and age, with adjustments supported by market data. HUD allows such objective adjustments within acceptable limits.

Subjective adjustments, which lack market data support, are not permitted by HUD. For instance, assigning a value to an outbuilding without comparable sales data to support that value is not allowed.

As for how our company determines a home's value, the answer is straightforward: we don't. We use a licensed FHA-approved appraiser selected by an independent management company under HUD Appraiser Independence Rules.

We cannot suggest a value or even choose the appraiser. All appraisals are delivered through HUD's EAD portal for HUD review and approval. The appraiser follows HUD guidelines and USPAP (Uniform Standards of Professional Appraisal Practice), but remember, an appraisal is an opinion of value and not an exact science.

I hope this information is helpful and guides you in making informed decisions regarding the property and mortgage situation.


Related: Reverse Mortgage After Death: What Heirs & Family Must Know.

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