For real estate agents
Listing a home with a reverse mortgage while the owner is living
Tom Jarboe, NMLS #210600
The short answer
You list it like any other home. The reverse mortgage is paid off at closing from the sale, there's no prepayment penalty, and whatever is left after the payoff and selling costs goes to your seller. Order the payoff early and again before closing, because the balance keeps growing until the day it's paid. If the home could sell for less than the balance, talk to the servicer before you take an offer: HUD's minimum price depends on whether the loan is already due.
This page is for a living seller who is downsizing, moving near family or moving into care. If the owner has died, see inherited homes with a reverse mortgage. The consumer version is how to get out of a reverse mortgage.
What you'll see on title
A HECM (the FHA-insured reverse mortgage) usually shows up as two deeds of trust: one to the lender and a second one to HUD. Both are released when the loan is paid.
In California, the deed of trust must say on its face that it secures a reverse mortgage loan, so the title report tells you what you're dealing with. Private loans such as HomeSafe set their own rules, so ask that servicer for them in writing.
Getting the payoff, and who can ask
- Call the servicer. Its name and number are on the owner's monthly statement.
- The request comes from the owner or someone they authorize. HUD's handbook lets the servicer talk with a third party only with a signed authorization from the borrower, a power of attorney, a guardianship order or other legal papers. Get the owner's signed authorization at the listing appointment so you and escrow can ask directly.
- Ask in writing, and early. Federal rules require a payoff "as of a specified date." For most mortgages it must arrive within seven business days, but reverse mortgages are allowed "a reasonable time," so don't wait for the last week.
- Expect it to be higher than what was borrowed. Interest, mortgage insurance and fees keep being added, so a payoff for one date is short a few weeks later. Escrow orders the final one.
- No prepayment penalty. HUD's rule and California law let the owner pay a HECM off in full at any time without a charge or penalty.
If the home is worth less than the balance
A HECM is non-recourse: the owner has no personal liability for the balance, and the lender can collect only from the home. FHA insurance covers the lender's shortfall. That insurance protects the lender, not your seller. HUD's minimum sale price depends on the loan's status when the contract is signed:
| Loan status at contract | HUD's minimum price |
|---|---|
| Not due yet (the servicer hasn't called it due and payable) | The lesser of the full balance or the current appraised value |
| Already due and payable | The lesser of the full balance or 95% of the current appraised value |
So for a living seller, the 95% figure applies only once the loan is due. In a sale for less than the balance once the loan is due, HUD's rule limits the sale's closing costs to the greater of 11% of the price or an amount HUD sets (24 CFR 206.125).
- The servicer orders the appraisal within 30 days of the request. If the loan isn't due, the owner pays for it. If it's due, the servicer pays up front and is repaid from the sale.
- All the net proceeds go to the servicer in a short sale, and any other liens must be cleared, so your seller walks away with nothing from the sale and owes nothing more.
- Get the servicer's OK on the price in writing first.
Who signs
Whoever holds title signs, or someone with legal authority to act for them. If the home is in a living trust, the trustee signs.
If the owner can no longer sign, an agent under a power of attorney or a court-appointed conservator may, and the title company will decide whether the paperwork is enough. The family guide is power of attorney and conservatorship. For the legal questions, the client should rely on their own attorney.
A spouse who isn't on the loan
Ask at the first meeting whether a spouse lives in the home who isn't a borrower. HUD lets an eligible non-borrowing spouse, named in the loan papers, stay after the borrower dies and, under ML 2021-11 (for FHA case numbers from Aug. 4, 2014 on), also when the borrower has been in a care facility more than 12 months in a row.
A sale ends that protection for good. Make sure the spouse is part of the decision. See the non-borrowing spouse guide.
If the owner already moved into care
Timing matters most here. Under HUD's rules:
- A care stay of up to 12 months in a row still counts as living in the home.
- More than 12 months in a row away because of illness, with no other borrower living there, lets the servicer call the loan due with HUD's approval, unless an eligible non-borrowing spouse lives there and qualifies to defer (see above).
- A permanent move for another reason means the home is no longer the principal residence, and the loan can also be called due with HUD's approval.
Once it's due, the servicer sends a notice giving 30 days to tell it the plan: pay it off, sell, sign the home over (deed in lieu) or fix the problem. HUD requires the servicer to start foreclosure within six months of the due date unless HUD approves more time.
Ask the servicer in writing what time it will allow. Property taxes, homeowners insurance, HOA dues and upkeep stay the owner's until closing, and once the loan is due, HUD has the servicer inspect the home monthly to see whether it's vacant. See the occupancy rules.
Listing checklist
- Confirm the servicer's name and number from a recent statement.
- Get the owner's signed third-party authorization (or a copy of the power of attorney or trust papers).
- Order a written payoff at listing, then again before closing.
- Ask the servicer whether the loan is due and payable today.
- Ask whether a non-borrowing spouse lives in the home.
- Confirm who holds title and who will sign; give the title company the trust or power of attorney early.
- If value may be short of the balance, request the servicer's appraisal and get the minimum price in writing before accepting an offer.
- Confirm taxes, insurance and HOA dues are current and stay paid until closing.
- If the owner has moved, note the move date and any notice from the servicer.
- After closing, ask escrow for confirmation that both deeds of trust are released.
What can go wrong
- A stale payoff leaves a shortage at the closing table.
- An offer below HUD's minimum stalls if the servicer won't approve it.
- Silence after a due notice. The 30 days are for telling the servicer the plan, not for closing.
- A sale that isn't the owner's own choice. If you sense family pressure or confusion, slow down.
Buying again at 62 or older? See HECM for Purchase for agents. For taxes on the sale, the client should rely on their own tax professional.
Working with me
Want a second set of eyes on the payoff or the timing? Call me at (909) 869-6588 or email [email protected]. Your client is welcome to call me directly, and I'll tell them plainly if a reverse mortgage on the next home isn't a fit.
I'm not the servicer and can't change its decisions. If your seller does look at a new reverse mortgage, they'll meet with an independent HUD-approved counselor first, and California adds a 7-day wait after counseling before a final application or any fees. New American Funding is not acting for HUD, FHA or any government agency.
This page is education only. I don't pay or accept referral fees or anything of value for referrals, and your clients are always free to choose any lender.
Sources (read November 3, 2026)show all
- 24 CFR 206.125(a)-(d) (due and payable notice and 30 days to choose; sale price of the lesser of the balance or appraised value when not due, 95% when due; appraisal within 30 days and who pays; net proceeds and junior liens; foreclosure within six months): https://www.ecfr.gov/current/title-24/subtitle-B/chapter-II/subchapter-B/part-206/subpart-C/section-206.125
- 24 CFR 206.27(b)(8), (c), (d) (non-recourse; when the loan comes due, including more than 12 consecutive months away for illness; HUD's second mortgage): https://www.ecfr.gov/current/title-24/subtitle-B/chapter-II/subchapter-B/part-206/subpart-B/section-206.27
- 24 CFR 206.3 (principal residence; care stays up to 12 consecutive months): https://www.ecfr.gov/current/title-24/subtitle-B/chapter-II/subchapter-B/part-206/subpart-A/section-206.3
- 24 CFR 206.209 (prepayment without charge or penalty): https://www.ecfr.gov/current/title-24/subtitle-B/chapter-II/subchapter-B/part-206/subpart-D/section-206.209
- HUD Handbook 4000.1, last revised Aug. 12, 2026, III.B.1.d (authorized third parties), III.B.2.b.iii (due and payable notice options), III.B.2.b.iv (selling a property secured by a HECM), III.B.2.b.v-vi (inspections and appraisals), III.B.2.f.iv (short sale claims): https://www.hud.gov/hud-partners/single-family-handbook-4000-1
- HUD Mortgagee Letter 2021-11 (eligible non-borrowing spouse; care-facility deferral for case numbers from Aug. 4, 2014): https://www.hud.gov/sites/dfiles/OCHCO/documents/2021-11hsgml.pdf
- 12 CFR 1026.36(b) and (c)(3), Regulation Z (written payoff statement as of a date, within seven business days, with reverse mortgages allowed a reasonable time; applies to open-end and closed-end loans secured by a dwelling): https://www.ecfr.gov/current/title-12/chapter-X/part-1026/subpart-E/section-1026.36
- California Civil Code 1923.2 (no prepayment penalty; deed of trust wording; counseling and the 7-day wait): https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=CIV§ionNum=1923.2
Tom Jarboe, Regional Sales Manager, New American Funding, NMLS #210600, Diamond Bar.
Have a client weighing a reverse mortgage? Call or email me: (909) 869-6588. More for professionals.