Get Real about real estate
Reverse Mortgage is an option if retiring
Dear Michael: Can you let me know what are the advantages and/or drawbacks with regards to a reverse mortgage? I am getting a lot of mail and phone solicitations about this type of mortgage (maybe because I am turning 65) and wanted to see if this is a viable option for me.
Answer: A reverse mortgage is a loan for senior homeowners who use a portion of the home’s equity as collateral. The loan generally does not have to be repaid until the last surviving homeowner permanently moves out of the property or passes away. At that time, the estate has approximately 6 months to repay the balance of the reverse mortgage or sell the home to pay off the balance. All remaining equity is inherited by the estate. The estate is not personally liable if the home sells for less than the balance of the reverse mortgage. To be eligible for a reverse mortgage, the Federal Housing Administration (FHA) requires that all homeowners be at least age 62. The home must be owned free and clear or all existing liens. If there is a mortgage balance, it can be paid off completely with the proceeds of the reverse mortgage loan at the closing. Generally there are no income or credit score requirements for a reverse mortgage.
| Dear Michael: Why are some banks unwilling to actually sell a ‘short sale’ home? Don’t they need the money?
Answer: In a short sale the bank does not own the house. The owner is attempting to get the bank to settle for a shortage on the mortgage payoff and still allow the buyer to get a clear title. Banks can change their mind even at the last minute, just before closing (and sometimes do). They are not a party to the contract and therefore are not obligated to anything. They believe they will be better off agreeing to a short sale than foreclosing on the property. Banks will send a BPO (broker price opinion) to agree and determine if the sale price the seller has accepted is within the areas comparables. They will also review the original purchase contract to see if the seller is related to the buyer. This is defined as “Arms Length Transaction.” No party to the short sale contract can be a family member, business associate or a person who shares a business interest with the seller. Short sales can take up to 6 months to get approval from the lender and therefore may not work for some buyers. Dear Michael: We are buying a short sale home. After our home inspection we found some problems with the house and requested the seller to credit us $5000.00 for repairs. The seller said no. Is there any way that we can get a credit from the seller’s lender? Answer: When you purchase a short sale it is important for you as a buyer to understand that the seller has no money. This is why they are approve and doing a short sale. Setting expectations before beginning the short sale process is essential. Your real estate agent is your first source of knowledge. As a buyer you must be made aware of the challenges you will face during the transaction. Asking for a repair credit makes perfect sense; problem is that the seller is broke! If the seller says no to the credit, then turn your attention to the short sale lender. In my experience some lenders, and very few, will agree to a legitimate request for a credit. You have nothing to lose by asking. Keep in mind that you are purchasing a short sale property that is probably sold at a lower price compared to other properties in the area, interest rates are at an all time low and the real estate market may have seen the bottom. If you love this home and it makes financial sense to you, then it is up to you to make the right decision. Michael Kayem is a Realtor with Re/max Estate Properties serving Culver City and the Westside since 2001. You can contact Michael with your questions at 310-390-3337 or email them to him at: homes@agentmichael.com
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