💸 Can a Reverse Mortgage Be a Short Sale? Here’s What You Need to Know

If you’ve inherited a home with a reverse mortgage—or you or a loved one are facing financial hardship while living in one—you might be wondering: Can you short sell a home with a reverse mortgage?

The short answer is: Yes. But there’s a little more to it than a traditional short sale.Let’s break it down in plain terms.

⸻

🧠 First, What’s a Reverse Mortgage?A reverse mortgage (typically an FHA-backed HECM loan) allows homeowners 62 or older to borrow against the equity in their home without having to make monthly payments. The loan is repaid when the homeowner:

• Sells the home

• Moves out

• Passes away

But what happens when the home’s value drops… and the loan balance is higher than the current market value?That’s where a short sale may come in.

⸻

🛠️ When Is a Short Sale on a Reverse Mortgage an Option?

A reverse mortgage short sale becomes a real possibility when:

• The homeowner has passed away and heirs don’t want the home

• The home is underwater (worth less than what’s owed)

• The homeowner can’t afford taxes, insurance, or maintenance, and wants out

• The home is headed toward foreclosure

Bottom line: If the home can’t sell for enough to cover the loan, and the family doesn’t want to keep it, a short sale might be the best way out.

⸻

🔍 What’s the Process?

Here’s how it works—step by step:

Get in Touch with the Loan Servicer

Most reverse mortgage loans are serviced by companies like Celink, Novad, or PHH Mortgage. The first step is to notify them that you want to pursue a short sale.

HUD Appraisal

Because most reverse mortgages are FHA-backed, HUD will order an appraisal. They usually allow the property to be sold for 95% of appraised value.

Hire a Short Sale-Savvy Realtor (like me 😉)

This is NOT your average real estate transaction. You need someone who understands:

• How to submit HUD forms

• What the bank wants to see in the offer

• How to communicate with often slow-moving reverse mortgage servicers

Submit a Short Sale Package

This will include:

• Listing agreement

• Purchase contract

• Net sheet showing the lender what they’ll receive

• Hardship letter (if the owner is alive) or death certificate and will (if deceased)

• Proof of occupancy or vacancy

Negotiate and Get Approval

HUD may counter the offer or take time to review. It’s a waiting game, but once approved, you’re clear to close.

⸻

🧾 What If I’m an Heir?Good question. If you’ve inherited a home with a reverse mortgage, you typically have three options:

• Pay off the loan (usually 95% of appraised value)

• Refinance it into your name (if you want to keep it)

• Do a short sale if the home is underwater and you don’t want it

And here’s a relief: You are not personally liable for any deficiency. That’s the beauty of a non-recourse loan like a reverse mortgage. The lender takes the loss—not you.

⸻

⚠️ What If There Are Other Liens?

HOA liens, tax liens, or even a second mortgage? Things get trickier, but not impossible. Those will need to be settled or negotiated as part of the short sale approval.

⸻

🎯 Final Word

Short selling a home with a reverse mortgage isn’t simple—but it is doable with the right help. Whether you’re a homeowner ready to move on, or an heir sorting through estate matters, you deserve a clear path forward.

📞 Let’s talk. I help families navigate these exact situations with compassion, strategy, and a no-fluff approach.

⸻

Need help with a reverse mortgage short sale in Texas?

Reach out to me directly or book a free, no-pressure consult. I’ll walk you through next steps so you’re not stuck wondering what to do.