Selling a Home With a Reverse Mortgage in Los Angeles, CA

Reverse mortgages have become a popular way for LA homeowners to access their home equity without monthly payments. But when it’s time to sell, a lot of people aren’t sure how the process works or if they’re even allowed to sell.

You can sell your home with a reverse mortgage and the process is not that difficult. The loan just gets repaid from your sale proceeds and any remaining equity goes straight to you.

In Los Angeles, where home values have climbed significantly over the past decade, many homeowners find they still have substantial equity left even after years of their reverse mortgage accumulating interest. Here’s how to handle the sale from start to finish.

What Is a Reverse Mortgage and How Does It Work?

A reverse mortgage converts your home equity into cash without requiring monthly mortgage payments. You had to be at least 62 to qualify. The loan doesn’t need to be repaid until you permanently move out, sell the property, or pass away. Most reverse mortgages are HECMs (Home Equity Conversion Mortgages) insured by the Federal Housing Administration.

The loan balance increases every month because interest and mortgage insurance premiums get added to what you owe. There’s no payment being made to reduce the principal, so the debt grows over time.

If you borrowed $200,000 five years ago, you might now owe $250,000 or more, depending on interest rates and fees. You’re still required to pay property taxes, homeowners’ insurance, and maintain the home in good condition. If you don’t meet these obligations, this can trigger the loan to become due immediately.

Can You Sell a Home With a Reverse Mortgage in Los Angeles?

You have full legal rights to sell your home at any time, even with an active reverse mortgage. The lender doesn’t own your property — they just hold a lien against it, similar to a traditional mortgage. You retain the title and all ownership rights, which include the right to sell your Los Angeles house fast for cash whenever you choose.You retain the title and all ownership rights, which include the right to sell whenever you choose.

The sale process requires you to repay the entire reverse mortgage balance at closing. Your title company will coordinate with your reverse mortgage servicer to get an exact payoff amount. That money comes directly from your sale proceeds before you receive anything.

If your home sells for $800,000 and you owe $300,000 on the reverse mortgage, you’ll net $500,000 minus closing costs and any other liens.

Los Angeles home values have appreciated significantly in most neighborhoods. This means many homeowners who took out reverse mortgages years ago still have considerable equity remaining.

You’re not obligated to sell to a specific type of buyer or use a particular method. You can list with a real estate agent, sell to a cash buyer, or even sell to a family member at fair market value.

How to Sell a Home With a Reverse Mortgage in Los Angeles, CA

Selling your home with a reverse mortgage follows most of the same steps as a regular sale, but you’ll need to loop in your reverse mortgage lender early. The whole process usually takes anywhere from 30 to 90 days, depending on how hot the LA market is and how fast you can get through escrow.

Step 1: Contact Your Reverse Mortgage Lender

Pick up the phone and call your reverse mortgage servicer before you do anything else. Don’t wait until you’ve already found a buyer. Just get ahead of this now. If you need additional guidance or want a cash offer, you can also contact Eazy House Sale for help navigating the process.

Tell them you’re planning to sell and ask what their process looks like on their end. Some servicers are super organized and have dedicated departments for payoffs, while others are a mess and take forever to get back to you.

Get the name and direct extension of whoever handles payoffs so you’re not stuck in phone tree hell every time you call. Ask them upfront how long it typically takes them to generate a payoff statement because you’ll need to factor that into your timeline.

If they say two weeks and you’re trying to close in 30 days, you need to know that now, not when you’re scrambling to meet a closing deadline.

Step 2: Get a Payoff Quote

Request your official payoff statement in writing once you’re ready to move forward with the sale. You need an actual document with specific numbers and a date.

The payoff quote shows the following:

your principal balance
all the accumulated interest
any servicing fees they’ve tacked on
prepayment penalties depending on your loan terms

Most quotes are valid for 30 days, but read the doc because some lenders only honor them for 15 days.

The daily interest charge also matters more than you’d think. If you’re accruing $50 a day in interest and your closing gets pushed back two weeks, that’s an extra $700 you’ll owe.

Keep bugging your lender if they’re dragging their feet on this. Some servicers are notoriously slow. You can’t price your home accurately or accept offers without knowing your exact payoff number.

Step 3: Determine Your Home’s Current Market Value

You need to know what your place is actually worth right now, not what your neighbor told you their cousin sold for last year. Interview at least two or three real estate agents and ask each one for a comparative market analysis.

They’ll look at recent sales in your specific neighborhood and tell you what similar homes have sold for in the past 90 days. Pay attention to how long those homes sat on the market, too, because if everything’s taking 60+ days to sell, you might need to price more aggressively.

Some agents will blow smoke and give you an inflated number just to win your listing, so watch out for that. If all three agents are saying $650,000 to $680,000 and one random agent says $750,000, they’re probably just trying to get your business.

You can also pay $400 to $600 for a professional appraisal if you want an unbiased opinion. Once you know what you can realistically sell for and what you owe on the reverse mortgage, you’ll see how much money you’re actually working with.

Step 4: List Your Home or Explore Other Selling Options

Next up, you need to decide how much effort you want to put into this sale. Listing with an agent gets you maximum exposure. They’ll stage it, photograph it, put it on the MLS, host open houses, and field offers.

You’ll pay 5% to 6% in commissions, which is quite a lot, however, a good agent in LA can often get you $50,000 to $100,000 more than you’d get on your own. This is especially true in competitive neighborhoods.

If you don’t want strangers traipsing through your house every weekend and you’re okay with less money, cash buyers will take it off your hands in two weeks. They buy as-is, so you don’t have to fix that weird kitchen sink or repaint the whole place — you can sell your LA Puente house faster without waiting for a traditional offer.

You’ll get maybe 80% to 90% of market value, but for some people, the convenience is worth it.

Another option is selling it yourself. But, unless you’re really comfortable with contracts, negotiations, and marketing, you might leave money on the table or screw up the paperwork. LA’s a tough market to DIY in because buyers expect a certain level of professionalism.

Step 5: Pay Off the Reverse Mortgage at Closing

Your escrow officer coordinates the whole payoff directly with your reverse mortgage lender. About a week before closing, they’ll request the final payoff amount with interest calculated through the actual closing date.

The lender will send over the exact number, and that money comes straight out of your sale proceeds before you even see it.

You don’t have to write a check or wire money yourself. It all happens behind the scenes at the title company. Once the lender gets paid, they release their lien on the property, which clears the title so it can transfer to the new buyer.

You’ll get a settlement statement showing exactly where every dollar went and then whatever’s left over hits your bank account a day or two later.

Save that satisfaction of the mortgage document they send you afterward because it’s proof the loan is done and paid off. Some lenders are slow about recording the lien release with the county, so check a month later to make sure it actually shows up in public records.

What Happens to the Reverse Mortgage When You Sell?

The reverse mortgage disappears completely once the sale closes. There’s no lingering debt or monthly payments to worry about. The lender gets their money and files the lien release. Then, you’re done with them forever.

Of course, what you’ll walk away with depends on how much equity you have left after the reverse mortgage gets paid off. Let’s say you sell for $850,000 in LA. Your reverse mortgage payoff is $425,000. Right off the top, you’re down to $425,000.

Then you’ve got to pay your real estate agent commission. Figure around $51,000 if you’re paying the standard 6%. Now you’re at $374,000.

LA county transfer taxes will run you another $935 per $1,000 of the sale price over $100,000, so that’s about $7,000. Title and escrow fees add another $2,000 to 3,000.

Any property taxes you owe get prorated and deducted. Maybe you’ve got a few hundred in HOA fees if you’re in a condo. By the time everything’s said and done, you might net around $360,000 to 365,000.

That’s still a lot of money, but it’s way less than that initial $850,000 sale price. The total changes depending on how much you owe on the reverse mortgage and how much your home sells for. However, closing costs and commissions always take a bigger bite than people expect.

Can You Sell a Home With a Reverse Mortgage After the Borrower Passes Away?

Yes, heirs can sell a home that has a reverse mortgage on it after the borrower dies. This is actually one of the most common situations where reverse mortgages get paid off.

The lender doesn’t automatically take the house. Your family has options and they get time to figure out what they want to do.

When the borrower passes away, the reverse mortgage becomes due and payable. The lender will send a notice to the estate or heirs explaining that the loan needs to be satisfied, usually within 30 days of being notified of the death.

But usually, lenders almost always grant extensions if you ask for them. Most will give you up to six months to sell the property and some will extend it even longer if you can show you’re actively working on the sale.

They’re not trying to take the house immediately. They just want their money back.

If the heirs want to keep the house instead of selling it, they can refinance the reverse mortgage into a traditional mortgage or pay off the balance with their own funds. But if nobody wants the house or can’t afford to keep it, selling is usually the cleanest option.

The proceeds from the sale pay off the reverse mortgage first. Whatever equity is left goes to the estate to be divided among heirs according to the will or state law.

What Are the Typical Closing Costs When Selling a Home With a Reverse Mortgage?

Selling a home with a reverse mortgage in Los Angeles comes with the same closing costs you’d pay on any home sale. You’re looking at anywhere from 6% to 10% of your sale price going toward various fees and commissions before you see any money.

Real Estate Agent Commissions

This is your biggest expense by far. Real estate commissions in LA typically cost 5% to 6% of the sale price, split between your listing agent and the buyer’s agent.

On a $700,000 home, that’s $35,000 to $42,000 right off the top. Some agents will negotiate their rate down to 4.5% to 5% if you push back, especially in hot markets where homes sell fast.

Discount brokerages charge less, sometimes as low as 1-2%. However, you usually get what you pay for in terms of marketing and service.

If you’re selling to a cash buyer directly, you can avoid agent commissions entirely. This saves you money even if the cash offer is lower than what you’d get on the open market.

Title and Escrow Fees

Title insurance and escrow services in Los Angeles usually cost around $2,000 to $4,000, depending on your sale price. The title company makes sure there are no surprise liens or claims on your property. They also handle all the paperwork and money transfers at closing.

Escrow fees cover the neutral third party that holds everyone’s money and documents until the deal closes. In LA, sellers typically pay for the owner’s title policy. This protects the buyer, while buyers pay for their own lender’s title policy.

Some title companies charge flat fees, others charge a percentage of the sale price. You should shop around a bit if you want to save a few hundred bucks.

Transfer Taxes and Recording Fees

LA County charges a transfer tax of $1.10 per $1,000 of the sale price and the city of LA adds another $4.50 per $1,000 if your property is within city limits. On a $700,000 sale, that’s about $3,850 total.

Some cities have even higher transfer taxes. Check with your title company because it varies.

Recording fees for filing all the documents with the county run another $50 to $200. These are tiny compared to commissions, but they still come out of your proceeds at closing.

Prepayment Penalties (If Applicable)

Most reverse mortgages don’t have prepayment penalties, but some older loans do. Do check your original loan documents or ask your servicer directly.

If your loan does have a prepayment penalty, it’s usually a percentage of the outstanding balance if you pay it off within the first few years. These penalties typically phase out over time. That means, if you’ve had your reverse mortgage for five or ten years, you probably don’t owe anything extra.

But if you do have a penalty, it could be several thousand dollars. It gets added to your payoff amount at closing.

Who Pays Closing Costs When Selling a Home With a Reverse Mortgage?

You, the seller, pay most of the closing costs when you sell a home with a reverse mortgage. It all comes out of your sale proceeds before you get paid. The buyer has their own set of closing costs to deal with, but those don’t affect your bottom line.

Sellers in LA typically cover the following:

real estate commissions for both agents
the owner’s title insurance policy
transfer taxes
escrow fees
any outstanding property taxes
HOA fees if applicable
the full reverse mortgage payoff

Buyers usually pay for:

lender’s title policy
appraisal
loan origination fees
home inspection
their portion of escrow fees

You can negotiate who pays what as it’s not set in stone. However, these are the standard expectations in the LA market.

If you’re in a seller’s market where buyers are competing for properties, you have more leverage to ask the buyer to cover some of your costs. In a buyer’s market where homes are sitting for months, you might need to offer credits or concessions to get the deal done.

Your net proceeds equal your sale price minus the reverse mortgage payoff minus all these closing costs. That’s the actual number that gets deposited to your bank account.

It’s always way less than the sale price, so don’t spend that money in your head before you see the final settlement statement.

Challenges of Selling a Home With a Reverse Mortgage in Los Angeles

Selling a home with a reverse mortgage isn’t impossible, but it does come with some headaches that regular home sales don’t have.

Limited Time to Sell After Triggering Events

Once something triggers your reverse mortgage to become due (like moving out permanently, letting the property taxes lapse, or the borrower dying), the clock starts ticking.

Lenders typically give you 30 days to pay off the loan or start the process of selling. But you can request extensions up to six months total. If you miss those deadlines. they can start foreclosure proceedings.

Loan Balance Growing Over Time

Every single day you wait to sell, your reverse mortgage balance gets bigger. Interest compounds daily, so if you’re accruing $40 to $50 a day and you take three months to sell, that’s an extra $3,600 to $4,500 tacked onto your payoff.

If you’re already cutting it close on equity, those extra months of interest can mean the difference between walking away with cash and barely breaking even.

Property Condition Issues

A lot of homes with reverse mortgages haven’t had major updates in years because the owners were on fixed incomes. LA buyers are picky and they’ll either lowball you or walk away if the house needs too much work.

Getting it ready to sell costs money you might not have. That makes you stuck choosing between spending $20,000 on repairs to get top dollar or selling as-is for less.

What Happens If You Owe More Than the Home Is Worth?

If your reverse mortgage balance is higher than your home’s value, you’re underwater. This can happen if you’ve had the loan for years and interest piled up while your home’s value stayed flat or dropped.

The relief is that reverse mortgages are non-recourse loans, which means the lender can’t come after you or your heirs for the difference. If you owe $500,000 and the house only sells for $450,000, the lender eats that $50,000 loss.

The FHA insurance built into HECM reverse mortgages covers it. You can sell the house for whatever it’s worth. As long as the sale price is at least 95% of the current appraised value, the lender has to accept it as full payment.

Your heirs get the same protection. They can sell it, hand over the proceeds, and walk away clean with no debt following them.

Frequently Asked Questions

Can you sell a home with a reverse mortgage if you still live in it?

Yes. You can sell anytime you want, even if you’re still living there. The reverse mortgage doesn’t trap you in the house. You’ll need to move out by closing day obviously, but there’s no rule saying you have to move out first before you can list it.

Many people sell while still living in their homes. They just have to deal with keeping it clean for showings and moving out once they accept an offer.

How long do heirs have to sell a home with a reverse mortgage in Los Angeles?

Heirs typically get 30 days from when the lender is notified of the borrower’s death, but you can request extensions. Most lenders will give you up to six months total if you’re actively working on the sale and communicate with them regularly.

If you need even more time because of probate delays or market conditions, some lenders will extend it further. However, you’ve got to ask and show you’re making progress.

Do you need to go through probate when selling a home with a reverse mortgage?

It depends on how the property was titled. If the home was in a living trust or had a transfer-on-death deed, it can skip probate and go straight to the named beneficiaries.

If it was only in the deceased person’s name with no beneficiary designation, then yes, it’ll probably go through probate in California. This means more months for the process. Talk to an estate attorney because probate rules vary.

Can you use the equity from selling a home with a reverse mortgage?

Yes, any equity left over after the reverse mortgage gets paid off is yours to keep. If you sell for $700,000 and owe $400,000, you get the $300,000 difference minus closing costs.

That money can go toward buying another home, moving into assisted living, or whatever else you need it for. It’s your equity. The lender only gets back what you owe them.

Key Takeaways: Selling a Home With a Reverse Mortgage in Los Angeles, CA

You can get out from under a reverse mortgage if you want to. But first, you need to ask your lender for a payoff quote and figure out what your LA home is worth. Then, choose your selling strategy based on how much time and energy you want to invest. The loan gets wiped out at closing and any leftover equity goes straight to you or your heirs.

If you need to sell fast and don’t want to deal with repairs, showings, or waiting months for the right buyer, Eazy House Sale can help. Learn more about how Eazy House Sale buys homes and how we can close in as little as seven days. Call us at (855) 915-1382 to get a fair cash offer and skip the stress of a traditional sale.