Home w/Reverse Mortgage disposal upon death.
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My father recently passed away. He had a will naming me executor. He has virtually no assets. He lived off his SS and his monthly reverse mortgage payment. His home (with the reverse mortgage) is in South FL (Broward County) is a 1BR condo and it’s about $60,000 underwater due to the ridiculously high appraisal he got about 10 years ago when he took the R.M. (about 3X what the condo was actually worth at that time). He owes $6000 on a 3 month old loan (basically a credit card loan that does not have a lien on the property) used to fix his bathroom due to his physical condition (why would a bank give a $6000 loan to a 91 year old man?). He owns a 2011 Nissan Sentra (free and clear) worth wholesale about $4000 due to having only 39,000 miles. My mom passed away a couple years ago. He does have a small IRA with a POD to me which they can’t touch. Since there are no assets we aren’t going through probate.
The R.M. bank gave us 2 (well, actually 3) options on how to deal with the home:
#1 - Walk away and let it go into foreclosure (could take a year or more).
#2 - Sign a Deed In Lieu of Foreclosure (DIL) actually signing the house over to the bank without going through foreclosure (supposedly could take 2-4 months).
#3 - Buy it (NO F’IN WAY!)They said in either case we have no responsibility for the house. Any educated opinions between option 1 & 2??
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@mistered I’d rent it out and make some money off it until the bank forecloses.
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If it’s clearly underwater, I would sign it over to the bank and be done with it. Just get whatever contents you want out of it (and figure out what, if anything, else you need to remove per the agreement with the bank).
The longer you hold it, the more likely you are to incur other costs — or get stuck with some other risk.
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@chyvan Wow, that’s what I call thinking on your feet! Talk about making lemonade out of lemons. Make it clear to the tenants that they need to buy renter’s insurance and provide the certificate to you before they move in. Also, give them a sharp price for cash. Win/win.
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Read the Reverse Mortgage paperwork. There are NO payments due, ever, period. That’s the purpose of an RM. Once the mortgage company gets their pound of flesh via the upfront fees and charges (taken out of the money due the elderly person or persons), all that happens is interest accumulates…and accumulates…and accumulates. When the last person on the RM dies, the heirs have a choice of paying off the balance due on the RM OR letting the mortgage company have it. Period. I would not call it “foreclosure” since NO money is owed by anyone living or by the estate. Given the circumstances, go with 2 and just get it done. (I’ve conducted a fair amount of RMs over many years as a Mobile Notary Public working for title companies, so I am familiar with the wording and terms on typical paperwork for these.) I can’t think of any “risk” unless the heirs take out fixtures that are part of the real property (no removing the furnace or central H&A, for example) or they damage the property in the course of removing the personal property. Make sure you clarify with the mortgage company the status of the property insurance and responsibility for securing the property and protecting it during the transition and also access for the heirs to remove said personal property.
