I am a real estate broker here in Pensacola, FL and I want to share with you a recent tragedy that I experienced regarding reverse mortgages. I met a wonderful gentleman years ago and we communicated from time to time. He owned a charming historic home in downtown Pensacola that he also used as a photography studio.

A few months ago I was contacted by his children who had found one of our communications. They called to relay that their father had passed away earlier in the year and that they needed to sell his house. When we met, they presented the durable power of attorney and last will and testament. The eldest son was also left executor of the estate and personal representative of the father – all seemed to be in order. The children were disabled and could not afford to operate or maintain the historical home in which they were living – the home represented the entirety of the estate that they had inherited.

They explained that their father had taken out a reverse mortgage several years prior to make renovations to the home for their sick mother, who had passed away a year before their father. The reverse mortgage company, per their note repayment guidelines, was now sending them demands for repayment of the loan given that the mortgagor was now deceased. Basically the “due on death” clause was in full effect. Options available to the children: pay the debt in full, which would require selling the home, or let the property go back to the bank.

At my first visit, the once charming home was now in poor condition with a tremendous amount of deferred maintenance issues and significant roof leaks. We listed the home, requested an extension from the bank & sent the documentation off to a title company for preliminary title work to be performed. About the time we generated significant buyer interest, title work came back with a probate requirement. Basically, the documents that the father had drawn by an attorney were insufficient to give the children the legal authority to sell the home without going through a court procedure to determine 1. that the property was the homestead of the deceased and 2. that the children were in fact now the legal heirs & owners. Cost? Probably $2000 because it would be pretty straightforward. Problem? The children are living on disability, can’t even afford to run the air conditioning & are catching roof water in 5 gallon buckets in the pantry.

So, this historic home will most likely be going back to the bank via a foreclosure or deed in lieu action and the children will be left with no home, potentially a foreclosure on their credit, probably a deficiency judgement, and no ability, cash or sufficient credit to secure another residence.

If you are considering a reverse mortgage on your home, please investigate your options & the possible implications thoroughly – the effects could be devastating for those you leave behind.