Selling a House With a Reverse Mortgage

A reverse mortgage is still a lien. The monthly bill may have stopped years ago. The recorded claim did not. When the house sells, that claim has to be paid just like a forward mortgage, with a written payoff, at a title company, from the sale proceeds.

I buy these files in St. Louis as a cash purchaser, not as a lender. I will not quote HECM interest rates, “typical” balances, or a rule of thumb for how much equity a reverse mortgage leaves. Those numbers live on your payoff demand. This page is the seller mechanics. It is not lending advice and not legal advice.

What the CFPB says happens when you sell

The Consumer Financial Protection Bureau answers this in plain language. On What happens if I have a reverse mortgage and I want to sell my home?, the CFPB states that when you sell your home, the reverse mortgage loan will need to be paid back, the money borrowed plus interest and fees.

The same page draws three lines I will not dress up:

If the loan balance is less than the amount you sell the home for, you keep the difference.
If the loan balance is more than the sale amount and you sell the home for the appraised value, the sale proceeds go toward the outstanding balance and any remaining balance is paid for by mortgage insurance.
If the reverse mortgage is in default and you have received a notice that the loan is “due and payable,” you may sell the home for 95 percent of its appraised value. The sale money goes toward the outstanding balance, and any remaining balance is paid for by mortgage insurance.

The CFPB notes that this information applies to Home Equity Conversion Mortgages (HECMs), the most common type of reverse mortgage. If your loan is not a HECM, do not assume those insurance and 95-percent rules apply. Ask the servicer what product you have, then have title request that servicer’s payoff demand.

When HUD says a HECM becomes due

HUD’s Inheriting a Home Secured by an FHA-insured Home Equity Conversion Mortgage (September 2019) states that the borrower makes no payments on the loan while living in the house, but the loan balance becomes due and payable when the borrower sells the home, no longer occupies it as a primary residence, or upon the death of the last surviving borrower. At that point, HUD says, no more funds may be disbursed from the HECM proceeds.

That occupancy line is the one families miss when someone moves to care. A last borrower who no longer occupies the house as a primary residence can make the loan due even though no one has died and no one has signed a sale contract yet. If that is the move you are making, read moving to assisted living and selling your St. Louis house next to this page.

HUD’s inheriting flyer is written for heirs. It says you may need to sell the home to repay the HECM. If the loan balance is more than the home is worth, the estate or heirs may sell the home for at least 95 percent of the current appraised value, and the lender will accept the net proceeds as satisfaction of the loan. HUD also says any post-death transfer is treated as a “sale” for those purposes. If the heirs want to keep the home, the HECM balance must be paid off in full.

HUD tells heirs to contact the HECM lender immediately. The flyer states the loan must be satisfied within 30 days of the borrower’s death, and that the lender may approve 90-day extensions with satisfactory documentation that the estate or heirs are actively trying to sell or repay. Property taxes and insurance remain the estate’s responsibility until title is transferred. A non-borrowing spouse may have separate rules that can postpone repayment if the spouse meets the lender’s requirements, that is a servicer and attorney conversation, not a cash-buyer promise.

I am quoting HUD’s flyer, not rewriting your loan. Your note, your endorsement, and your servicer’s letters control the file.

Title still needs a payoff demand

The federal pages explain what kind of loan this is. They do not replace the closer’s checklist.

A Missouri title company will still:

Confirm who is on the deed
Request a written payoff (or due-and-payable demand) from the reverse-mortgage servicer
Line up any other recorded items, taxes, a second, a judgment
Pay what the settlement statement lists at closing

The same stack I describe on what happens to your mortgage when you sell applies. Surplus, if any, is seller or estate proceeds. A shortage that the insurance rules do not cover is still a shortage. We do not assume the HECM. A cash purchase still pays the servicer.

Do not rely on last year’s annual statement as the payoff. Interest and fees continue. The closer will use the demand that is good through the closing date.

Occupancy, vacancy, and who can sign

Selling is a title problem. Occupancy is a loan problem that can become a title problem.

If the last borrower still owns the house and can sign, that is the simplest file. If a durable power of attorney or a conservator will sign, title and a Missouri attorney have to see the document. I will not guess that a hospital POA is enough to convey real estate. The assisted-living page walks that signature question.

If the house is already empty, insurance and utilities are the family’s job until closing. We can still buy it. We do not need the rooms staged. See sell a vacant house and can I sell a vacant house?.

If the last borrower has died and heirs are sorting the estate, start with probate or inherited. HUD’s 95-percent path for an upside-down HECM does not skip Missouri probate when the deed still sits in the decedent’s name. Title needs the personal representative or the people who own the house now.

How a cash sale works on a reverse-mortgage house

House Sold Easy buys as-is for cash in about 75 miles of St. Louis. Furniture can stay. The kitchen can be original. The basement can take water. Condition is a walkthrough fact. It is not a reason we refuse to look.

Call 636-525-1566 and tell us there is a reverse mortgage. Name the servicer if you know it.
David Dodge or Michael Slane walks the house about 30 minutes. No cleaning required.
You get a written offer. If you accept, title opens a file and requests the HECM payoff demand. You pick the date when title is ready.

We typically cover our standard closing costs. The HECM payoff is a lien, not a fee we absorb. The process page is how it works.

We have bought 1,000+ houses since 2016. The office is 1750 S Brentwood Blvd, Suite 503, Brentwood, MO 63144. Google shows 4.7 from 65+ reviews.

What we will not do

We will not tell you the loan is “forgiven” because it is a reverse mortgage. We will not estimate a HECM balance from the year the loan closed. We will not promise that mortgage insurance will cover a remainder on a sale that is not at the appraised value the CFPB describes. We will not keep the house as a listing project while you wait for a retail buyer’s loan, that is a realtor’s job, and a retail buyer still has to satisfy the same HECM.

If the house would show well, occupancy is settled, and you can wait, compare cash offer vs listing. The HECM still has to be paid on that path too.

Common questions

Do I have to pay the reverse mortgage before I can sell?

You do not have to write a personal check first in every case. Title pays the servicer from sale proceeds when the demand and the numbers work. The loan is still paid. It is not ignored.

What if the HECM balance is larger than the offer?

Does a move to assisted living make the loan due?

HUD says a HECM becomes due when the last borrower no longer occupies the home as a primary residence. Confirm occupancy status with the servicer. Then call us about the house.

Can heirs sell if the house is upside-down?

HUD’s inheriting flyer says the estate or heirs may sell for at least 95 percent of the current appraised value if the balance exceeds the home’s worth, and the lender will accept the net proceeds. Missouri title still needs the people with authority to sign. Probate or inherited.

Is this lending advice?

No. Read the CFPB and HUD links. Ask the servicer and a Missouri attorney about your note.

Who writes the offer?

David Dodge or Michael Slane. Call 636-525-1566.

Selling a House With a Reverse Mortgage in Missouri