How It Works Not all seniors want to stay in their home. With children grown and gone, many find that a large home becomes a liability and maintenance challenge. They are ready to downsize, or perhaps move into a more accommodating community. By utilizing a HECM for Purchase, they won’t have to pay 100 percent cash for the home and can reallocate that cash for other investments or uses. This avoids the need for a new forward mortgage with monthly payments at a time when the senior’s income may be fixed. This is a huge potential new market for real estate sales.
Originating: You Can Buy a Home with a Reverse Mortgage?
“I didn’t know that!” That’s what I heard last week from 12 owners of real estate offices representing more than 110 agents. I had just given a presentation called “HECMs for Purchase,” the use of a reverse mortgage to buy a new home. Those incredulous real estate agents are not alone! Even experienced reverse loan officers do not understand how the “P-HECM” can improve the lives of seniors, with the bonus of adding an entirely new referral source to the mortgage broker’s database. Will you take the lead and be the first P-HECM trusted advisor in your marketplace?
Overcoming Realtor Perceptions
Many real estate agents fall prey to the same myths that reverse mortgage professionals have been trying to overcome for years. Like many Americans, Realtors think that reverse mortgages are only for poor people, that the homeowner loses equity or control of the property, that reverse mortgages are expensive, that there will be nothing left for the children, etc. These objections and misperceptions must be overcome using education-based responses.
Real estate agents are also curious as to why a senior would go the reverse mortgage route to buy a home when they may be able to pay cash or take on a new mortgage. It is a case of better cash management. By utilizing a P-HECM, the borrower can conserve cash and, in many cases, improve their retirement security.
Many in the real estate business are aware of the financial pressures older homebuyers face, and the difficulty of obtaining traditional mortgage financing for seniors. Having the P-HECM option gives a real estate agent a powerful new tool to help older buyers.
Building Realtor Relationships
Becoming the go-to expert on P-HECMs for real estate professionals in your market is a great way to expand your referral database and create a new source of leads. But it does require effort on your part. You will need to become a teacher, educating local real estate agents about P-HECMs. Make yourself known by volunteering to make presentations at the weekly staff meetings of local real estate offices, or to speak at monthly meetings of Realtor associations. Add as many Realtors with the Seniors Real Estate Specialist (SRES) designation as possible to your database.
Don’t oversell the P-HECM, and don’t try to force real estate agents into becoming loan officers! Instead, focus on teaching the Realtor to listen for clues that a potential buyer might be sending, such as, “We’d love to downsize but can’t afford the payments,” or “We want to move but our house is our retirement security.” These are indications that the homeowner does not understand how to use the equity they already possess.
Tutor the real estate agent on how to respond to these signals by presenting the P-HECM option. Make yourself available to explain the process and benefits to the senior buyer. An hour of consulting could pay off in a tidy reverse mortgage.
The market potential is huge. Of the 5 million home purchases made last year less than 2,000 were P-HECMs. Why? Because “I didn’t know that…”