Foreclosure in 48150>Question Details

Jordanna Ben…, Other/Just Looking in Livonia, MI

Why can't a reverse-mortgage foreclosed house be sold for less than appraised value?

Asked by Jordanna Bentley, Livonia, MI Sat Feb 18, 2012

There is a house in my neighborhood that is being subject to some federal rule 24 CFR206.125, whatever that means, but it has to do with the fact that the property is foreclosed due to the previous owner (now deceased) having obtained a reverse mortgage on it when he was alive. The listing office said that the property was appraised for a certain amount, and cannot be sold for less than that. A few questions:

1) Why would a property acquired by the bank due to a reverse mortgage be any different from one acquired through the normal foreclosure process? The latter, of course, can be sold for any price the bank agrees to sell it.

2) What are they basing their appraisal on? Obviously the so-called "appraiser" has no idea about repair and renovation costs.

Is there any way to re-negotiate with the bank to buy the property at a lower price? Obviously the house is not worth what it's listed for, otherwise it would have sold a long time ago. It's been on the market over 6 months.

Help the community by answering this question:


Hi Jordanna Bentley

To read your questions i can understand , you have many things to know about reverse mortgage. I have a reverse mortgage which name is reverse mortgage lenders direct .I think you get your right answer from their.…………
8 votes Thank Flag Link Fri May 3, 2013
I read through the answers you already received and none of them seem to answer your question, so here is your answer:
1. Hire an experienced agent/broker, they will be able to explain the process in details.
2. Listing agent is correct, house needs to sell at the list value, there is no negotiation at this point.
3. Reverse mortgage foreclosure does not work the same way as regular foreclosure and the rules of regular foreclosure do not apply in this case. So writing an offer below the list price is a waste of time and experienced buyer agent would tell you that right away.
4. Appraisers are almost always s wrong, and most of the time they do not take repairs into calculations, I can explain why and what is behind (HUD, FHA, FANNIE, insurance rules, etc) but just take my word for it, they do what they are told and the result is incorrect.
5. Lenders know that appraisals are not correct and order new appraisal every 90 days (sometimes every 120 days), so the price will go down eventually.
6. If you work with an experienced broker who is able to follow the property and catch the price change, you have a better chance of grabbing it before investor comes alone and snags it from you.
Good luck
2 votes Thank Flag Link Thu Sep 18, 2014
Thank you for your reply but I have run into a situation with a reverse home that is up for sale it Jacksonville FL List # 790725
This home was listed at 49.9 I did not know all the rules and reg: on thios kind of property I was told they had investors interested and that the price was firm like you explained nearly 4 weeks after that and I am still looking
the price went to 47. my realtor tried to get answers from the listing agent and was getting the run around , a few weeks after that it went to and is still at 45.
what is up with that I am pre approved and pre qualified are all listing agencies like that. This seems not legal!! From BW at
Flag Thu Jan 28, 2016
A reverse mortgage is guaranteed by HUD. There is a completely different process shared by HUD than other foreclosures.

They base their appraisal on the home, on comps, and the condition. You'd be surprised how accurate the appraisers are with their estimates and listing price. Someone will pay it eventually -- our available on market inventory is VERY low. Just yesterday, I had one of my listings in Dearborn Heights get 20 offers -- yes 20 and is under contract for $17,000 more than the asking price. Yet, if you watch TV, you'd think this was the worst market ever.

If the home hasn't sold yet, it's likely due to some damage done AFTER the appraisal due to break-in, deterioration, etc.

Unfortunately, there is no way you can get the bank to take less than their asking that I am aware of. That's why reverse mortgages are risky (and in my opinion bad) products for lenders.
2 votes Thank Flag Link Sat Feb 18, 2012
Based on the questions you have asked in the past I would suggest you hire an experienced Realtor and follow their advice. Good luck,
1 vote Thank Flag Link Sat Feb 18, 2012
After about 180 days from the last appraisal they will order a new one.
It's an inefficient method, but it is what it is.
1 vote Thank Flag Link Sat Feb 18, 2012
can i get my property back after a judicial forclouser in mom passed away,the property was a reverse mortgage
0 votes Thank Flag Link Tue Mar 22, 2016
12 replies and only 1 correct answer?? I guess realtors are really that stupid. Only Roxanne, a realtor in Lynchburg VA gave the correct answer. So to make sure everybody understands what a reverse mortgage foreclosure really means....

When a homeowner reaches 62 yrs. old and has lived in the home for decades, in most cases the house has earned plenty of equity (meaning it can sell for a lot more than what the owner paid for it.). If the owner is on a fixed income (Social Security for example) or needs more cash to pay their monthly bills, the owner can apply for a reverse mortgage. The lender will use the large equity in the home as collateral for the loan. When the owner dies or sells the house, the loan is paid back from the estate of the deceased or from the sale of the home.

However, in some cases if there is no family members who can sell the house or be in charge to pay back the loan, the bank or lender will foreclose on the property because technically the home was used as collateral for the loan. At this point, the lender doesn't care what the appraisal is or what condition the home is in. They just want the money owed on the reverse mortgage loan. If the balance of the loan is more than the value of the house, don't expect the lender to lower the asking price and feel sorry for you. The lender still wants the money. You are not forced to buy it either. Therefore, expect the lender to wait a few years before lowering the asking price.
0 votes Thank Flag Link Sat Mar 19, 2016
0 votes Thank Flag Link Sat Mar 19, 2016
The HUD Guidelines 24 CFR 206.125 is a code of federal regulation. It covers reverse mortgage foreclosures which are very different then a regular foreclosure. A reverse mortgage foreclosure is where a lender has paid the homeowner a monthly payment instead of the homeowner making payments.
This means that when the person either moves to a nursing home or is deceased, the amount of the reverse mortgage must either be paid by any family members who would wish to keep the property or the property must be marketed for sale and the proceeds to cover the reverse mortgage must be paid to the lender and if there is any excess, it would remain with the family member who sold it. If neither of these happen, the lender forecloses on the property and the reverse mortgage foreclosure process starts.
The appraisers in many cases are very accurate, and in others they are not. Most do consider repairs and use comparable properties in the market just as a Realtor would do for a market analysis. If the market is good, they may value it higher then it may actually sale for as many people see foreclosure and look for a deal. The listing agent should take lower offers even though they will be countered at full price. The lower offers will help to get the value lowered later in the marketing period.
0 votes Thank Flag Link Thu Oct 2, 2014
Thank you for this response, Roxanne, it contains some of the best information I have found so far on foreclosures resulting from reverse mortgages.
Flag Tue Mar 31, 2015
I don't have an answer I have a question on a rv mortgage and the listing agent stated it's a rev mortgage foreclosure & wont accept anything less that asking I go in and say ok...knowing it needs work and appraisal lower so I put in my bid and still I don't get in are they allowed to let me know why...or is my realtor not doing a good job getting me in...this would be my 2nd home that I try to bid on..?
0 votes Thank Flag Link Fri Jul 5, 2013
I found a HUD forclosed home in n'east San Antonio that I wanted to buy in Nov. 2012. I put in my bid & was accepted. Here I am Feb.1,2013 after earnest money, title fees, appraisals & etc. Come to find out the previous owners had a Reverse Morgage on the home !!!!!! I still want to buy the home, but the Lending Company keep asking for a $300 plus fee every 2 weeks. I am wondering what is going on ? How long will this game will continue ? Has anyone ever had this happen ? My Realtor & Lender are not giving out any information......Thank You, Concerned citizen
0 votes Thank Flag Link Fri Feb 1, 2013
Here is the portion of the Rule that covers your question:

"2) After notifying the Secretary, and receiving approval of the Secretary when needed, the mortgagee shall notify the mortgagor that the mortgage is due and payable, unless the mortgage is due and payable by reason of the mortgagor's death. The mortgagee shall require the mortgagor to (i) pay the mortgage balance, including any accrued interest and MIP, in full; (ii) sell the property for at least 95% of the appraised value as determined under ? 206.125(b), with the net proceeds of the sale to be applied towards the mortgage balance; or (iii) provide the mortgagee with a deed in lieu of foreclosure. The mortgagor shall have 30 days in which to comply with the preceding sentence, or correct the matter which resulted in the mortgage coming due and payable, before a foreclosure proceeding is begun."

You can read the whole law here:…

In terms of your good questions, it is government regulation, not exactly paragons of excellence.

Jim, American Bank
0 votes Thank Flag Link Sun Feb 19, 2012
Question: We are going to look at a house on Saturday that is "reverse mortgage foreclosed" The asking price is $67,500. I was told they wouldn't take any less than the asking which is fine, but is this truly the asking price? Or can they come back with what the value or "Zestimate" is, which is $154,000?
Flag Thu Nov 20, 2014
It seems to me you have spoken to the listng agent about this property. I suggest you work with a Buyers Agent and have them write up an Offer To Purchase. Also have the agent include in writing the reason for your offer listing all the repairs needed. All offers have to be submiitted to the seller and by only talking to the listing agent your offer does not get to the seller. As far as the appraisal, if you are going to finance the property your lender will order an appraisal. If it comes back less then your offer you can re negiotate the price.
If you are serious about purchasing the property work with a Buyers Agent who will help you through the process of buying a home. They will help you each step of the way. Unless you do this for a living don't try to figure it out on your own.

Good luck
0 votes Thank Flag Link Sat Feb 18, 2012
You do not need to work with a buyers agent though it may be a benefit to the buyer. A reverse mortgage foreclosure is a different beast then a regular foreclosure. The HUD Guidelines 24 CFR 206.125 states it must list and sale for the appraised value, and there are appraisers that are very accurate as there are also those that are not accurate.
The listing agent can submit an offer, as in many cases these are submitted through a system on the computer and if it is not full price it will be countered at full price and the amount of EMD that they require. The main idea though is always to encourage offers as the low offers can be used by the asset manager to eventually work to lower the price of the home.
Flag Thu Oct 2, 2014
Yes, obviously that's the case, or it would have sold for that price by now. Is there a way to get HUD out there to re-appraise the property? If I purchased it for the "appraised value", and had all the necessary renovations and repairs done, I would have spent more overall than I could re-sell the house for. The house is deteriorating constantly. The roof is leaking, and already has destroyed the ceiling in the family room, as well as other parts of the house. I bet they didn't account for that. It needs about $20,000 worth of exterior work done. And that's on top of at least another $20,000 in renovations it needs inside the house (kitchen, baths, carpet, paint, fixtures, etc ) These problems will keep compounding until someone buys the house and does something about them.
0 votes Thank Flag Link Sat Feb 18, 2012
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