Reverse mortgages have been a great option for aging homeowners who wanted to have a way to stay in their homes. This new type of mortgage started being offered in the 1960s for homeowners looking to access their home equity. It became a success fulfilling a need for senior borrows, and has benefited over one million Americans.
However, situations change, and borrowers found themselves needing to move away for one reason or another. Some needed to move to assisted living or into a nursing home. Others realized it would be best to live closer to family or wanted to live in a warmer climate. Whatever the details, maybe, if you’re going through a similar scenario, you probably have questions like, “can you sell a house with a reverse mortgage?” or” how does a reverse mortgage work?”
Well, you found the right place for answers to these questions and for more information about the reverse mortgage process in Wisconsin.
How To Sell A House With A Reverse Mortgage In WI?
What Is A Reverse Mortgage?
A reverse mortgage, also known as a home equity conversion mortgage (HECM), is a specific type of home loan only for homeowners 62 years and older. If you’re not entirely sure what a reverse mortgage is, you’re not alone. A reverse mortgage loan is similar to a conventional mortgage, granting homeowners to borrow money using their property as collateral for the loan. Similar to a traditional mortgage, when receiving a reverse mortgage loan, the title to your home remains in your name.
How Does Reverse Mortgage Work?
A reverse mortgage works differently from a traditional loan because there are no monthly mortgage payments like a home loan. The HECM is repaid when the loan borrower no longer lives in the house. What happens is every month, while you’re living in the home, fees and interest are added to the loan balance, and the balance grows. There are a few conditions the owner must agree to, including paying property taxes and homeowners insurance, using the property as a primary residence, and keeping the home in good condition. And the reverse mortgage loan balance must be paid if the homeowner passes away, if the owner moves out, or when the house is sold.
Can You Sell a Home with a Reverse Mortgage?
At this point, you’d probably like to know if you can sell a home with a reverse mortgage? And the answer is; yes, you can! But, it would help if you went over a few details, like what the payoff of your reverse loan is and how you would like to sell your house. However, the good news is that selling a home with a reverse mortgage is very similar to a traditional property sale.
Steps for Selling a House with a Reverse Mortgage
On the plus side, selling a home with a reverse mortgage is comparable to selling a house in general, only with some minor variations. Below is a standard breakdown of what the process may entail.
- Speak with your reverse mortgage lender and find how much you owe on your loan, which needs to include any money you have received to date, interest occurred, and any other lender fees. Verify if there are any additional fees. Make sure to get the full payoff quote in writing.
- Figure out how you want to sell your house with a real estate agent, by-owner, or home investor.
- Decide if you want to work with a real estate attorney to ensure that your reverse mortgage loan’s full payment is handled correctly.
- After your Wisconsin home sells, make sure that the reverse mortgage loan is paid in full from the profits. Then confirm the reverse mortgage account is closed. Once that’s completed, you get to keep the remaining amount.
These steps are very similar to selling your house with a conventional mortgage, but it is important to know if there are any differences with a reverse mortgage loan to be aware of.
Should I Let My Lender Know I’m Selling The House?
Yes, it would be best if you let your lender know, and while doing so, get the property’s payoff in writing in an official payoff quote. A payoff quote will show the approximate amount of money required to repay your reverse mortgage loan in full and close your account.
What Will Happen To The Money Once I Sell?
When your residence sells, the sale proceeds first go towards paying off your reverse mortgage loan balance. As well as any liens that are on your home will be paid, and any fees associated with the sale of your house. After all of those things are paid, the remaining balance is yours to keep.
Are There Any Penalties When Selling A Home With A Reverse Mortgage in Wisconsin?
There shouldn’t be any penalties for selling a house and repaying your reverse mortgage loan. But it doesn’t hurt to double-check with your lender when you go in to get your payoff quote.
How to Sell A Wisconsin Home With A Reverse Mortgage
Now that you have a better idea of all the technicalities of selling a property with a reverse mortgage, maybe it has been a little while since you’ve sold a house and want a review about the process. There are a couple of approaches you can use to sell a home with a reverse mortgage loan. Below are three common ways to sell a house and their advantages and disadvantages.
Sell With A Local Real Estate Agent
Hiring a real estate agent to sell your house will take a lot of work off your shoulders but comes at a cost. Usually, agents charge either a flat fee or a percentage of your property’s sale, which is generally 5-6% for their services. So if you were to sell your house for $250,000, your agent stands to make $15,000. Besides the commission, you will likely sign a listing agreement, giving the agent 3-6 months to list and sell your home.
Though a realtor handles most details of selling your home, if any repairs or improvements are needed, it will be up to you or your family to hire a professional and pay for those renovations to be made. All while paying utilities, property taxes, maintenance, and homeowners insurance.
Here is an estimate of what typical improvements can cost you to repair your house in Wisconsin:
- New Roof: average cost ranges from $8,000-$16,500
- New Furnace: $2,100- $6,000
- New Water Heater: between $1,500 to $3,000
- Window Replacement: $175-$700 per window
- Exterior Painting: to paint the exterior can cost between $1,000 and $3,000 per 500-1,500 square feet.
Some real estate agents may advise you to do some updates to get more money out of the sale of your house. Though updating certain areas of your home will help increase your residence’s resale value, you will still need to come out of pocket to make these improvements.
For reference, below are some typical renovation costs for popular updates:
- Kitchen: the average kitchen remodels range from $12,500 to $35,000
- New Kitchen Appliance Package: mid-range brand, costs between $2,000-$6,000+
- Bathroom Remodel: An average bathroom remodel costs $10,600, and a master bathroom can easily double or triple that amount.
- Updating Lighting Fixtures, including installation, can range from $150 and $840 per light.
- Interior Painting: The average cost to paint a house’s interior falls between $1.50 and $3.50 per square foot. If you’re doing the ceilings, walls, and trim, the cost per square foot will likely fall between $3 and $4, so if you’re painting the whole interior of your 2,000 square foot home, that can cost anywhere from $3,000-$8,000.
For many people, that is a large amount of money to invest in a home just to turn around and sell. And something else to keep in mind if you were to do any of these repairs or renovations, they will take time to complete.
Do you have extra time to go through property renovations before selling your reverse mortgage home in Wisconsin?
Here are some of the average time frames that these projects could take:
- Full Kitchen Remodel: 3-5 months to complete
- Bathroom Renovations: Bathroom construction 2-3 weeks. Overall, the reno can take between six weeks to three months to plan, execute, and wrap up loose ends.
- Roof Replacement: Usually for a full roof replacement takes between two to three days; however, it usually is finished in under a week as long as there is no need for major repairs and there are no severe weather interruptions.
That’s a long time to wait until you can sell your reverse mortgage home. And don’t forget you will need to remain in the house, as one of your reverse mortgage requirements. The property needs to be your primary residence for the lifetime of the loan. For most people living in construction does not sound appealing.
Plus, in the end, you might not make money back from the updates you’ve made, and it does not guarantee that your home will sell quickly.
So you might be interested in the next selling option- selling -by -owner.
Sell-By-Owner
Selling by-owner does give you the chance to sell your reverse mortgage house on your terms. But selling a home by owner isn’t as easy as you would think.
If you intend to sell-by-owner, all of a realtor’s responsibilities will fall on you to handle. A real estate agent’s job involves listing the home, creating a marketing strategy, setting the marketing plan in motion, hosting open houses, verifying prospective buyers, negotiating, and lots of paperwork.
And one of the most challenging things to do correctly when selling a home by owner is setting the asking price. If you list the price too high, you may turn interested buyers away, resulting in your residence sitting on the market for months with no interest. If you were to list your house too low, that could also look bad to potential buyers. When a property is priced below market value, it can be a red flag that something is wrong with the residence, turning buyers away.
One perk to selling by owner, though, is not having to pay a realtor fee for selling your house since you will be the one handling all that. But not so fast… If any interested buyers come in using an agent, you may be on the hook for their buyer’s agent’s commission. That amount can be a 2.5-3% commission you might need to pay. Using the example above, if your house sells for $250,000, that would be $7,500 (3%). However, you would still be doing the same amount of work on your end.
And let us not forget you might need to do repairs and renovations still to the house, which can be expensive.
Why, may you ask?
Prospective buyers usually request a home inspection to be done and repairs to be made to get loan approval. Or the bank processing the loan might require them before financing the mortgage. And once you go to all that trouble, the buyer still could encounter loan approval issues and end up backing out of the whole thing, resulting in you being at square one again.
Sell to A Home Investor
A third option is to sell to a cash home investor like Cream City Homebuyers. A cash home investor could be a single buyer or a group of buyers that purchase homes with cash. When working with a cash home investor to buy your home, the closing process is much quicker than a conventional buyer because they are not waiting on loan approval or bank financing. Another benefit to selling to a home investor is that they purchase houses in as-is condition- which would save you time and money on costly home renovations. When selling a house with a reverse mortgage in Wisconsin, the process is straightforward compared to the other ways to sell a home.
Home investors are very beneficial if you want to sell quickly and avoid making expensive repairs to a property you won’t be living in anymore. Since their process doesn’t require hiring a real estate agent, there are no agent fees or commissions. Investors like Cream City Homebuyers even help pay closing costs and work with you on your closing and moving timeframe. Working with a local investor takes the stress and hassle out of the process. So if you would like to sell your reverse mortgage house in Wisconsin, give Cream City Homebuyers a call today!
To learn more about Cream City Homebuyers and how they can help you, please visit their website for more information and find out about their easy home buying process.
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Cream City Homebuyers is a local home buying company serving Milwaukee and surrounding areas. They are a Better Business Bureau accredited business with an A+ rating and have a 5-star Google rating. Contact one of their team members today for more information and get started selling your reverse mortgage home in Wisconsin.
