The HECM for Purchase is probably the most challenging reverse mortgage loan to close because of all the people involved: the seller, the seller’s agent, the buyer, the buyer’s agent and the title company. But I believe the HECM for Purchase is also one of the most rewarding loans to close, because we are assisting a senior buyer with the purchase of their retirement dream home—a move that might not have been possible without this important product.
Navigating the Challenges
When initiating a Purchase transaction, the first challenge we often face is with the seller’s agent, whom we may have never met and who may not be educated on how this loan works. The seller, therefore, might be convinced to pass on the offer because they don’t understand what a HECM is and are wary of what can seem like a complicated loan.
In this case, the buyer’s agent might try to explain the HECM for Purchase to the seller’s agent, hoping to spur on the deal. But the agent is not a reverse mortgage specialist, and it’s unlikely that they would be able to fully explain the intricacies of the loan. The situation could lead to some lingering confusion about the details of the transaction, even if the seller agrees to move forward with the process.
In some cases, the complications persist. Because most real estate agents don’t have much experience with HECMs, the agent typically needs assistance completing the Purchase contract. It’s understandable that they wouldn’t be aware of the down payment requirements and what details need to be included in a Purchase contract. And, because this is an FHA loan, the FHA financing box needs to be checked. In many states, the seller then chooses the title company.
Once these tasks are completed, the constant need for communication between the real estate agents and the buyer comes into play. Near-daily communication is necessary in many cases to ensure that all parties are up to speed and that the transaction is moving along.
All of these potential roadblocks highlight the importance of a knowledgeable reverse specialist who is deeply involved and readily available to answer any questions and deal with any issues that may arise during the process. Once you have completed a transaction—if you are diligent—you have the opportunity to turn not one, but two agents on to the power of the HECM.
Combatting Negativity
We often face challenges long before we even get in front of a single real estate agent. I am sometimes amazed by the objections we get: “I don’t sell to seniors,” “I only deal with cash buyers,” “I have no need for any type of financing,” and the most frustrating: “Reverse mortgages are too expensive and you’ll lose your home.”
I have found the one helpful way to overcome these initial objections is to present the loan as a HECM for Purchase, avoiding the term “reverse mortgage,” which can generate negative feedback. I often explain that reverse mortgages are for refinancing a property and the HECM for Purchase is for buying a new property. Although both are FHA loans, reverse mortgages effectively began in 1988 as a refinance program, I explain, and the HECM for Purchase is a different variant that was established in 2008. Embracing the term “HECM for Purchase” has opened many doors for me as I work to connect with Realtors and builders, side-stepping the negative reaction that some agents exhibit when they hear the term “reverse mortgage.” Once I am able to fully explain the HECM for Purchase and the agent comes to understand its benefits, we can discuss how the loan is connected to traditional reverse mortgages. Excited by the potential of the Purchase loan, agents are usually able to let go of their negative perceptions.
Educating Our Partners
In my time working to sell HECM for Purchase loans, I have come to see how essential it is to work with knowledgeable Realtors. Having a dedicated network of real estate agents who are educated on the details of a HECM for Purchase is a huge benefit to a reverse specialist. When our Realtor partner is a champion of the product, and they are able to help senior clients understand how they can purchase a home with only half down and no additional mortgage payments, everyone wins.
To work on developing this network, my company has helped its specialists obtain Continuing Education certification so they can meet and educate Realtor groups in their area. The experience has taught us that, once all the questions have been answered, it’s fairly easy to get real estate agents—and even their entire office—excited about the HECM for Purchase. After teaching a class about the ins and outs of the loan, the excitement among our professional partners is often palpable as they begin to understand the possibilities. But if there is no follow-up, this enthusiasm can wane as the agent begins to forget how incredibly awesome the HECM for Purchase really is. If no marketing has been done and no discussions with seniors have arisen, time erases the agent’s memory and most (if not all) of our efforts have been wasted.
To combat this problem and keep the interest alive, we have created a HECM for Purchase Real Estate Kit, complete with yard signs, open house signs, brochures, a HECM banner, templates for personalized flyers, and a “How to Market the HECM for Purchase” booklet. In the booklet, we discuss what wording to use on MLS (the multi-listing service), what to post on social media and how to get the conversation started with potential senior homebuyers.
But even with the kit, follow-up is extremely important. It’s important to be continually touching base with your Realtor network, because out-of-sight means out-of-mind. We have developed a series of emails, direct mail and social media campaigns to help us stay in contact with our Realtor partners. We keep them informed of program updates and remind them of our services, stressing the fact that we are available any time should questions about the program arise. Education is key and continuous excitement about the program is important.
The most important thing to focus on as you work to build your own Realtor network is all of the seniors who could benefit from this tremendous product. If we as an industry continue to educate our partners, promote our product and offer our services to those in need of guidance, more seniors will be able to purchase their ultimate retirement dream home.
