Rusty Bradshaw of Independent Newsmedia wrote an article on March 2, 2017 describing the affects of the FHA Free Assumability clause on FHA purchases, refinances and reverse mortgages in the Sun City communities. He interviewed WeMAR member Vicki Frye and the Sun City RCSC officials.
As an increasing number of real estate clients find themselves unable to complete a FHA reverse mortgage, the question becomes… How do REALTORS® service their client needs?
The answer is one real estate practitioners have always had. The Life Estate sale. If you think about a reverse mortgage it is a Life Estate sale, but with lots of lender fees. The good news for real estate practitioners is the lenders have already convinced the client a Life Estate sale is good (unlike years ago when I was helping clients). All practitioners need to do is locate private investors ready, willing and able to participate in a Life Estate Sale.
Frequently, I found family members wished to step into this role. Not only did this provide the homeowner with income, no mortgage payments and the ability to live in the house until death or permanent relocation to another full time residence, but it was also an estate planning tool.
If there are no family members wanting to aid in the Life Estate sale, then locating a private investor is the answer and in Maricopa County we are fortunate to have a large population of private investors.
If your client was recently denied a FHA reverse mortgage due to the FHA Free Assumability clause, you might want to look into the possibility of a Life Estate sale. Help your client and you might even net them more money with fewer fees, now that is a win-win.