Sell a House With a Reverse Mortgage in Arizona
A house with a reverse mortgage can be sold. The loan is paid off at closing from the sale price, the same way a regular mortgage is, and anything left over goes to you or to the...
Call (928) 928-4109. Walk us through the property in 5 minutes. We do the rest.What this means in practice
A house with a reverse mortgage can be sold. The loan is paid off at closing from the sale price, the same way a regular mortgage is, and anything left over goes to you or to the estate. What makes a reverse mortgage different is the clock. Most reverse mortgages are Home Equity Conversion Mortgages (HECMs), which are insured by the Federal Housing Administration. A HECM comes due when the last borrower dies, sells, or no longer lives in the home as a primary residence. Once that happens, the lender sends a notice and the family has a short window to pay the loan, sell the house, or hand it over. If you are a borrower thinking about selling, or an heir who just got a letter from a loan servicer, this page explains the federal rules, the deadlines, the 95 percent rule that protects heirs, and the Arizona steps needed before anyone can sign a deed.
When this path makes sense
- A parent with a reverse mortgage has died and the servicer sent a due and payable notice
- You are moving to assisted living or in with family and the house will be empty
- The loan balance may be more than the house is worth
- You need a signed purchase contract to ask the servicer for more time
- The house needs repairs you cannot pay for before selling
- You fell behind on property taxes or insurance and the servicer has warned you
- A trustee's sale date has been set
- Several heirs want a quick, clean sale and a simple split
How the process goes
- Call the servicer, then call us. Ask the loan servicer for a written payoff amount and tell them your plan. Then tell us about the house, the payoff, and who has legal authority to sell.
- One visit to the house. We look at the house once, as it sits. No repairs, no cleaning, and you do not have to empty it first.
- A written cash offer. You get a written offer. A signed contract is also one of the documents a servicer can accept as proof that the estate is actively selling. Our offer will be below open-market price.
- Close through an Arizona title company. Escrow orders the payoff from the servicer, pays the reverse mortgage and any other liens, and sends what is left to you or the estate.
What it costs
You pay no commission and no repair costs, and we pay the normal closing costs. The reverse mortgage balance is paid from the sale price at closing. That balance includes the money borrowed plus the interest and fees that were added each month, so it is often larger than families expect. Any other liens, unpaid property taxes or HOA dues are paid in escrow too. Whatever is left belongs to you or the estate. Our cash offer will be below open-market value. That matters a lot here. If there is real equity in the house and you have time, a higher-priced listing sale leaves more for the family. If the balance is higher than the home's value, the sale price changes little for the heirs, and speed may matter more.
The Arizona-specific legal + regulatory backdrop
The reverse mortgage rules are federal. The steps to sell the house are Arizona's. If the borrower is alive and selling, the borrower signs the deed and escrow pays off the loan. If the borrower has died, someone needs legal authority to sign. In Arizona that usually comes one of three ways. First, a beneficiary deed. Under A.R.S. § 33-405, a deed recorded before the owner's death can pass the house to a named person at death without probate. The loan still has to be paid, but the new owner can sell right away. Second, probate. Under A.R.S. § 14-3103, a personal representative gets authority once appointed and issued letters. A.R.S. § 14-3307 allows an informal appointment once at least 120 hours have passed since the death. Under A.R.S. § 14-3715, a personal representative may sell estate real property. Third, the small estate affidavit for real property. A.R.S. § 14-3971 allows it when the Arizona real property, less liens and encumbrances, is worth $300,000 or less. A reverse mortgage balance counts as a lien, so many reverse mortgage homes fit under the limit. The catch is timing. The affidavit cannot be filed sooner than six months after the death, which can be too slow when a servicer is counting days. That makes probate the more common path, and it is a reason to start early. If the loan is not paid, the lender's remedy in Arizona is usually a trustee's sale under the deed of trust. A.R.S. § 33-808 says the sale date can be no sooner than the ninety-first day after the notice of sale is recorded. The house can still be sold and the loan paid off before that date. Read more in our guides at /blog/arizona-beneficiary-deed/ and /blog/arizona-small-estate-affidavit/.
What to watch out for in reverse mortgage situations
Some patterns to avoid regardless of which buyer you talk to:
- Ignoring letters from the servicer. Call right away and ask what they need to grant more time.
- Letting property taxes or homeowners insurance lapse. The estate stays responsible until title transfers.
- Assuming heirs must pay the full balance when the loan is larger than the home's value.
- Signing a deed before someone has legal authority to sign for the estate.
- Waiting months to start probate, then running out of time on the lender's clock.
- Leaving the house empty and uninsured while the family decides what to do.
How this stacks up against the alternatives
Start with the numbers. Get the payoff from the servicer and a realistic idea of what the house would sell for. If the house is worth clearly more than the balance, the difference belongs to you or the estate. In that case, listing with an agent will usually bring the most money, as long as the house is in showable shape and the servicer will give you time. HUD says a lender may approve 90-day extensions when the estate shows it is actively trying to sell or repay. Heirs can also keep the house by paying the balance in full, often with a new loan of their own. If the balance is more than the house is worth, the rules change. HUD and the CFPB both say heirs can satisfy the loan by selling for at least 95 percent of the current appraised value, and FHA mortgage insurance covers the rest. The estate can also give the house to the lender with a deed in lieu of foreclosure. In that case there is little or no money in it for the family either way, so the simplest path is often best. Selling to us fits when the house needs work, the deadline is close, or the heirs just want it finished. Our price will be below open-market value.
Questions we get
Can you sell a house that has a reverse mortgage?
Yes. The owner can sell at any time, and so can an estate or heir with legal authority. The reverse mortgage is paid off at closing from the sale price, like any other mortgage. Selling the home is one of the events that makes the loan due, so the payoff happens in escrow as part of the sale.
When does a reverse mortgage come due?
According to HUD, a HECM becomes due and payable when the borrower sells the home, no longer lives in it as a primary residence, or when the last surviving borrower dies. The CFPB adds that borrowers must also keep paying property taxes and homeowners insurance and keep the house in good condition.
How long do heirs have after the borrower dies?
Not long. HUD's guidance for heirs says the loan must be satisfied within 30 days of the borrower's death, and the lender may approve 90-day extensions with documentation that the estate is actively trying to sell or repay. The CFPB says heirs get 30 days after a due and payable notice, and it may be possible to extend that up to six months.
What is the 95 percent rule?
If the loan balance is more than the home is worth, HUD says the estate or heirs may sell the home for at least 95 percent of the current appraised value, and the lender will accept the net proceeds as satisfaction of the loan. The CFPB says the remaining balance is covered by mortgage insurance.
Are heirs personally on the hook for the debt?
For a HECM, the CFPB says you will never owe more than the value of the house, and heirs will not have to pay more than 95 percent of the appraised value when the balance is higher. The shortfall is covered by FHA mortgage insurance. Reverse mortgages that are not HECMs can have different terms, so read the loan documents.
What if a spouse who was not on the loan still lives there?
HUD has special rules that may let an eligible non-borrowing spouse stay in the home and postpone repayment. HUD says the spouse must give the lender a Non-Borrowing Spouse Certification within 30 days of the last borrower's death, among other requirements. Call the servicer right away. The FHA Resource Center is at (800) 225-5342.
Do we need probate to sell a parent's house with a reverse mortgage?
Often, yes. If there was no beneficiary deed, trust or survivorship title, someone usually needs to be appointed personal representative before signing a deed. Arizona's small estate affidavit for real property can work when the value after liens is $300,000 or less, but it cannot be filed until six months after the death.
Will you buy a house with a reverse mortgage?
Yes. We buy Arizona houses as-is and close through a title company that pays off the reverse mortgage in escrow. We are a principal buyer, not a broker or agent. Our offer is below open-market value. If the house has strong equity and time allows, we will tell you that listing may leave the family more.
Sources: HUD - Inheriting a Home Secured by an FHA-insured Home Equity Conversion Mortgage (9/2019) · CFPB - With a reverse mortgage loan, can my heirs keep or sell my home after I die? · CFPB - What is a reverse mortgage? · CFPB - If I take out a reverse mortgage loan, does the lender own my home? (repayment events) · CFPB - What happens if my reverse mortgage loan balance grows larger than the value of my home? · A.R.S. § 33-405 - Beneficiary deeds · A.R.S. § 14-3103 - Necessity of appointment for administration · A.R.S. § 14-3307 - Informal appointment proceedings · A.R.S. § 14-3715 - Transactions authorized for personal representatives · A.R.S. § 14-3971 - Collection of personal property by affidavit; ownership of real property by affidavit · A.R.S. § 33-808 - Notice of trustee's sale
If it's the right fit
If a reverse mortgage has come due, or will soon, call (928) 928-4109, Monday through Saturday, 8am to 8pm Arizona time, or use the form below. We can give you a written cash offer to show the servicer, with no pressure to take it. This is general information, not legal or tax advice. Talk to an Arizona attorney or CPA about your situation.
Other situations we work with
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Standard 7-21 day cash close. No fees.
Pre-Foreclosure Sale
Close before the trustee sale. Protect your credit.
Inherited Property
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Clean equity split. Both parties sign.
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