Offering a private reverse mortgage?

[HardDrive]

My 70 year old neighbor just lost her husband. He handled everything. I'm trying to help her unravel things. Currently selling her Mercedes 560SL (a bit shocked she's selling it, but she's adamant....must be a story there.....).

She has one child, a daughter who lives in Europe. Did not come home for dads funeral (....must be a story there....). She seems to be 100% out of the picture.

She has gardens and would like to keep the property, but she also wants to travel. It has not been maintained. Falling down filthy mess. Literally the worst house on the block, thankfully hidden by hedges. Needs $50k just to be inhabitable IMHO.

The property is gold. Seriously desirable land. Great views, so much good there.

So it got me thinking......

House next door just sold for 1.3million. Her property is worth $600k, but thats just the land value. The house is worth nothing. Offer her a reverse mortgage at $325k......

Anyone done this type of thing before? We would love to own this property.

[Bill Douglas]

Originally Posted by HardDrive

My 70 year old neighbor just lost her husband.

Maybe she left him at the post office?

[tevake]

Not sure how a reverse mortgage works, But the number you mentioned sounds like it would be a lowball offer if the land is worth $600K. How would that work, I assume it is a gradual buy out.
The Daughter could become very in the picture once the Mom passes.

Hope you can find a deal that works for both of you.

Cheers Richard

[Chocaholic]

I'm sure you have the best of intentions but it smells a bit opportunistic, and not in the interest of the bereaved elderly neighbor. Perhaps you could explain your plan in more detail?

[recycled sixtie]

Originally Posted by Chocaholic

I'm sure you have the best of intentions but it smells a bit opportunistic, and not in the interest of the bereaved elderly neighbor. Perhaps you could explain your plan in more detail?

+1 on this. Has this widow asked for your financial opinions?

[widgeon13]

Why not just buy it and get it over with? My guess is the daughter might not be too happy when it comes time to settle the estate and realize mom's been taken to the cleaners. She sues and it's tied up in court for who knows how long.

[Steve Carlton]

Sounds like a bad idea to me. First off, she could live to be 100 and your money + interest would be tied up until then. There's probably a million disclosures required for a transaction like this and I don't think yours would be considered arms-length. If something's not done exactly right, you could be on the short end of the stick. She should consider a reverse mortgage from a normal lender for those kinds of loans. She probably doesn't need a large lump-sum, anyway. Maybe some cash and a monthly income for the rest of her life.

[HardDrive]

Originally Posted by Chocaholic

I'm sure you have the best of intentions but it smells a bit opportunistic, and not in the interest of the bereaved elderly neighbor. Perhaps you could explain your plan in more detail?

We are being opportunistic (why turn down potential opportunity?), but I am certainly not looking to take advantage of this woman. She is a friend. I was hoping to find someone who can help me work out a deal that is fair to her.

$325K sounds like a low ball offer because it doesn't take into account that she gets to live in the house until she dies. It also doesn't take into account that I would be putting $50k into the house to make it reasonably habitable.

Like Steve C said, its actually quite a risky proposition for me, not her! She is in good health, and she easily could live another 20+ years.

[recycled sixtie]

Most of the respondents above give negative responses for different reasons. There is not one that says go for it. It is not unusual for people to go on this forum for advice and not take it.

The difference is that you are being subjective and the rest are being objective because we are not clouded with self interest. Naturally it is your decision.

If it was me I would do the following:
Listen to and read what the Pelicanites recommend.

[stomachmonkey]

I immediately thought of this situation.

Can't trust those old biddies.

A 120-Year Lease on Life Outlasts Apartment Heir - NYTimes.com

[nota]

most RMs require the owner to pay to keep the house in good repair

you deal sounds like you will do the repairs out of your pocket

and are mostly monthly payments ONLY not a lump sum up front +++ repairs ongoing

[andrew15]

Firms that offer reverse mortgages are able to minimize their risk by diversifying over property type, location, age, etc.

By doing a private, one time deal you are opening yourself up to a huge amount of risk.

It would be a cleaner transaction if you bought it outright and leased it back to her until she passes away or moves into a care facility.

[Cajundaddy]

Originally Posted by andrew15

Firms that offer reverse mortgages are able to minimize their risk by diversifying over property type, location, age, etc.

By doing a private, one time deal you are opening yourself up to a huge amount of risk.

It would be a cleaner transaction if you bought it outright and leased it back to her until she passes away or moves into a care facility.

^^ This! Much cleaner transaction with no clouded issues or unreasonable risk. The end result is the same.

[Baz]

Originally Posted by andrew15

Firms that offer reverse mortgages are able to minimize their risk by diversifying over property type, location, age, etc.

By doing a private, one time deal you are opening yourself up to a huge amount of risk.

It would be a cleaner transaction if you bought it outright and leased it back to her until she passes away or moves into a care facility.

Dang Andrew......I think we have a winner. Great advice!

[HardDrive]

Thank you for the advice all. Its sounds like this is a poor idea.

I'm trying to help her stay in her house, but the place is falling apart. She said she would like to rent it, but its not remotely rentable. She doesn't have the money to make repairs.

The market is so hot right now in this area, I think she should sell, and used the proceeds to buy a house only a few miles away. I think she very much could get $600k for the house, and then buy a home only a few miles away for $350 that is in decent condition.

I'm not her family, I'm just a neighbor, but given how much she is relying on me, it doesn't seem like she has any family she trust in the US.

BTW, if anyone is looking for a decent 1986 Mercedes 560SL, I will be posting it in the classifieds in the next day or so here on PP. The neighbor is having me sell it for her. She has told me flat out she needs to the money.

[HardDrive]

This does seem like a better idea on all fronts. Thank you.

Originally Posted by andrew15

Firms that offer reverse mortgages are able to minimize their risk by diversifying over property type, location, age, etc.

By doing a private, one time deal you are opening yourself up to a huge amount of risk.

It would be a cleaner transaction if you bought it outright and leased it back to her until she passes away or moves into a care facility.

[stomachmonkey]

She should sell and rent a small apartment in a managed complex.

If she can get 6 for the place why toss half a nice nestegg back into a house that she likely wont be able to maintain any better than this one.

My 2 cents.

[Baz]

Originally Posted by stomachmonkey

She should sell and rent a small apartment in a managed complex.

If she can get 6 for the place why toss half a nice nestegg back into a house that she likely wont be able to maintain any better than this one.

My 2 cents.

That's a good point.

Some people though want to own their own domicile though....plus there wouldn't be any rent to pay if she owned.

[Cajundaddy]

Another option:
Buy the place at fair appraised value and let her carry the note. A guaranteed monthly income for her and a much simpler loan process for you than trying to deal with banks right now. It could be a win-win.

[stomachmonkey]

Quote de stomachmonkey

She should sell and rent a small apartment in a managed complex.



If she can get 6 for the place why toss half a nice nestegg back into a house that she likely wont be able to maintain any better than this one.



My 2 cents.

That's a good point.



Some people though want to own their own domicile though....plus there wouldn't be any rent to pay if she owned.

Yeah but if she's strapped for cash now.......

What's the cost of living in that area and how long can she live comfortably on $300k vs $600?