Reverse Mortgages: When Home Values Drop

j0422339.jpgWow! It has been some time since I have written. My apologies to those who have been following this blog. To be honest, I have been trying to get a feel for the current market. It is crazy, and very frustrating. But today I thought I would give some insight as to what I have been doing with homes that have shown a drop in their value. It goes without speaking that when homes decrease enough, it makes it more difficult to make a reverse mortgage work. Waiting for values to come back might be the best advice. But it is always based on speculation, not real hard data.

 1. While evaluating the hard data (financial benefit) for a reverse mortgage, find out what current sales prices are going on in the area. Many county websites will have research functions that you can use. Another website that will provide general data, but not always real reliable, is Zillow ( Zillow will provide “ballpark” figures. It also will show recent sales.

2. If you are not getting good information, many appraisers will send you an update of sales in your area. They have software that can do that. I can’t say that all appraisers will do this for you, but those who want your business should be able to provide you something.

3. Once you choose to move forward with an appraisal, be sure to communicate with them about what your expected value should come in at. Ask them if they will contact you immediately if they see the values not supporting the expected level. In most cases, they will. This can also reduce the cost of the appraisal.

4. Once you get good data from the appraiser (written or verbal), it may take some juggling of numbers to allow the reverse mortgage to work. I recently had a client who let me know that he did have some cash available if he had to use it. In that case, I reduced my numbers where I could and went forward with the appraisal. There are limitations as to what we can do, but if an originator is in this business for the right reasons, there should be some flexibility when we are in this type of market.

5. In the situation where there is a home that may need some repair, it is a good idea to walk around the house and get a feel for areas that show a safety concern (i.e. open wires, leaning sheds, etc). Also, check areas that may show structural concerns. Dry rot, fallen gutters, shingles missing, etc. This may put the project right over the top. In this situation, there may be some government programs that will provide some low interest loans for home repair for seniors. U.S.H.S. is a good organization to look into. This may buy you some time so that once values do increase again (and they will), the homeowner will be able to take out the reverse mortgage and payoff all of the debt.

One organization that I have recently learned about, but have never used their services, is Virgin Money. This organzation is the conduit between two parties, often times either friends or family. They create the legal component between two parties who want to create a lender-lendee relationship. They have the ability to do a reverse mortgage. Obviously, this is not an FHA reverse mortgage, but it works similar. And it is a lot cheaper. Again, I have not used this company, but the services they provide seems like it may work in the right situations.

As we wait through this downturn, hold tight and do your due diligence.

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2 Comments on “Reverse Mortgages: When Home Values Drop”

  1. Dr. Mariah Tenamoc Says:

    I am very interested in the photo that accompanies this article. I am compiling a document about the impact of aging society on the delivery of services to vulnerable older persons. May I use this picture in the document? (a man sitting in a chair using a laptop computer). If so, please let me know how to give credit where credit is due for the photo.


    • I just went to the Windows Online link. It asks to enter any description of what you are looking for. I think I entered “technology” or something like that. It is a free picture so you may even be able to save it to your own computer by “right clicking” the picture on my blog. Hope that helps. If you go to a Word document, then go up to “Attach”, it should provide you an option to go to this site.

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