Inheriting a House With a Reverse Mortgage, with Liz Reese of ReeseSquared Mortgage

0:02 So, bad news, some of your life passes, maybe your parent who leaves you a house, good news, you're coming into a perhaps a small fortune or a large fortune. Oh, no, but you inherit a house that has a reverse mortgage. What do you do? Well, I'm excited to have here today Liz Reese, who is from Northern California, ReeseSquared Mortgage. So, Liz, what happens? Mom and Dad pass, sad, you I mean, the second of them pass, sad.

0:28 Right. But, they leave me a house, great, could be life-changing money, but oh no, there's a reverse mortgage. What do I do? Yeah, I think there's always a lot of panic around that, like, oh crap, because part of what happens is the lender wants to know what your plan is, and you're grieving and you're sad, of course, and you have to take care of some stuff. And so, there's a few options that you can that actually not a few, there's just two, really. You the loan has to be paid off. It passed away with your parents. And so, the loan has to be paid off either by a refinance or a sale. And a reverse mortgage is just a loan on the house. It's like a it's an FHA loan. It can the benefit, I'm going to say this is a great benefit, if your parent passes away and has a reverse and has a regular loan, you still have to figure out how to make a house payment. If they have a reverse mortgage, you don't have to make a house payment. You can figure out what you want to do, and then take care of it, and you have certain amount of time to do it, but you have some space. So, you've either got to refinance the house if you want to keep it, or sell it and pay the loan off. Those two are really the choices.

1:45 Now, the challenge, and what one of the reasons I launched this podcast was that okay, if you decide you want to sell it, well, who's the you, right? The property, if it's in a trust or some sort of an planning tool, then the estate can sell the property. But if not, which is true for too many people, it's just in the name of mom and dad, or mom or dad, who sells the property? How's that happen? That's where I get involved. And talk about your experience in that situation.

2:12 Yeah, so actually we have one right now that she was taking care of her aunt, and she's in that ex- this exact situation. So the probate has now given her access. She found me on TikTok and was like, "My aunt just died. What do we do?" And so the it's in probate cuz they didn't have a trust, and the I guess it's the attorney the judge, or whoever you're kind of the expert on that side, I'll say, has given her permission to deal with it. So now she gets to deal with it. And what they want to do is keep the house. And so it's her and her parents want to keep the house, and we're doing a refinance is what it is, because she is there was a will, and it does identify her as the person who's supposed to inherit everything. So you know, correct me if I'm wrong, Bill. I mean, I know it's probate, but if something gives some guidance, right? She gets to deal with it. So she's we're refinancing it. Yeah.

3:14 Well, I think so what happens is I'm not giving legal advice, but I'll just share with you I've done enough of these episodes with attorneys. A will does not transfer the title. It guides the court, the probate

3:25 Right. As to what to do. So if mom and dad said, you know, this child gets it, or these children get it, somebody has to file to take that will, put it in court, be in charge of the estate. It could be the person named in the will. It could be not if that person doesn't want to do it. And then the court's going to decide who's in charge, and once they decide that, with the papers you get to be in charge, you then can sell the property. The challenge is that gets to be a little harder than it sounds, cuz you have to fill out the paperwork, get the court to approve you, then you have to get maybe a bond perhaps, get the letter signed by the court. That can be easier in some counties and harder in other counties. So, that's the challenge. So, Liz, I think one of the things that I find I launched this podcast I actually did reverse mortgages, what I call the 1.0 version back in the I want to say the '90s when they were there's one product, I think it was Financial Freedom. There was a lot of abuse. But at the same And also there've been a lot of problems when people pass and the kids take over. Those two factors, the abuse, financial abuse, and the succession gave the product a terrible reputation. I believe the industry corrected the first part with the new versions of the product are much safer, much better, more effective, more customer service oriented.

4:42 But the second piece is so is not solved by the big 800 phone number call centers, cuz they just want to foreclose. And it can be solved by professionals like you who have relationships with their clients. So, talk a little bit about your relationship. You have so many calls you get on TikTok. But I'm sure you also have customers who call you who say, "My parents passed, what do I do?" right? That you did the loan and they figure out who you are and get and get you somehow.

5:06 Right. Yeah. Yeah, so we're there we are there for the full support of it. So and I love it when the kids are involved in the beginning of it because then they know what to sort of anticipate, I guess, of what could happen or is going to happen and how it works. So, everybody's on the same page. There's no surprise, Mom did a reverse mortgage and they're like, "Who's this loan lady that you know, got my mom into a reverse." So, I love it when the kids are involved. Basically, it's There's real estate agents out there. I'm sure, Bill, you're one of them that has that senior real estate designation, right? That SRES.

5:46 No, I'm just a senior myself, so Oh, you're just you're a senior. I am a senior. I don't need to be certified. Yeah, well, I'm not a reverse specialist, though. Or not reverse, but like a senior specialist.

5:57 SRESs, they're people who specialize in that and have a certification. I don't. I mean, in all truth, I don't. I think if you're 25 years old, you better get the designation to help older people. But I am a senior, so

6:08 Right. What are they going to teach me? Yeah, you're already there. Yeah, okay. That makes sense. That's fair. I like that. With my wife, so I you know, I already live with a senior every day. Yeah. So, we can help them connect with a real estate agent who can help sell the house. Now, if the house is upside down, that's that is not necessarily tricky, it's just different. It can be Basically, you inherit this reverse mortgage, the house is upside down, you have an option. You can buy it from the bank at 95% of the value of the house, so the market value. Now, when it's over, but the market value, or you just walk away from it. The estate isn't responsible for what's upside down on it. So, that's what's pretty awesome about the reverse mortgage is that. It's a It's a non-recourse loan. So, that estate, if the house is upside down, the estate doesn't get stuck with this bill. It just is like, "Here you go. Here you go, bank. Figure it out."

7:11 You know, the 95% is a great feature. Now, I think appraisers, if you look at statistically, are going to vary high too high, too low by maybe 3%. Right? A million-dollar house, they might be at 970 or a million 30, kind of somewhere in that range. If you get a 970 appraisal, and then they offer to you at 9 at 5% off of that, you're really getting a property, perhaps, that you know, it's 5, 7, 8% below fair market value. Investors would say, "Well, buy that property all day long. I mean, that's a great deal." Right. To hold real estate if you because you make money on invest real estate on the purchase, not the sale. And if the price is too high, then you just have to let it go. It's unfortunate, but it is a great feature of the program. It's something people should consider, you know, buying it. And there's no closing costs involved because I mean, there's no I'm sorry, Realtor® costs involved cuz you're not having to list the property. There's closing costs and but even those are limited because the lender's going to work with you directly on that. So, that's a great opportunity. The other part about the reverse mortgage you and I talked a little bit on the pre-record was on reverse for purchase. And I think that this shocked me as a real estate agent cuz I think I'm pretty smart. I watch the news and on the real estate market. I have a podcast on the real estate market news. And I was I was talking to another colleague about how I want my fantasy, it's never going to happen. I was going to buy a home in Florida, make that my residence.

8:33 It's not going to happen cuz my daughter lives here with our three grandsons. We're not going anywhere, but I thought, you know, and I had about $500,000 extra cash I could buy for cash. But there was nothing really I that I felt comfortable living in for $500,000. And my friend said, "Well, why don't you get a reverse mortgage and shop at $800,000?" And I said, "What do you mean?" He said, "Yeah, you can probably get at least a $300,000 on a $800,000 purchase. Take your 500 and the 300 and you could shop at a higher and you have no more payments still." And I thought, "What?" But the reverse for the purchase opportunities with reverse mortgage are so underutilized. I don't think anybody knows about it. Talk a little bit about, you know, the use of a reverse mortgage to buy a house for cash, why maybe somebody should look at it either to extend the purchasing power or to conserve cash when they buy a property.

9:21 Right. Yeah, that's exactly it is I've had some sellers in the past couple years that they were going to sell their house and probably net around 300,000 for it. And they wanted to pay cash for their next place. Well, it was like there's nowhere I want my grandma living that would be a $300,000 cash house, right? And so, we were able to figure out what could they purchase using a reverse mortgage purchase loan that could pop them maybe into like a 55-up community. So, it allowed their It expanded their purchasing power so that they could buy in a in a I don't want to say safer, maybe that's not a fair way to say it, but they were looking at condos and stuff, and I just thought, you don't want to live on the second story of a condo in your old age. Like, let's figure something else out here. The benefit for this couple and all couples that do this is there's no house payment required. So, they had that paid in cash feeling without having to pay cash for the house.

10:24 That's what I was looking at because I, you know, I kind of give this to my wife, I have this much money we could, you know, put down and not change our lifestyle here in LA. I could make that my residence, and I could get my license in Florida, and I could make all that work. The reverse mortgage took me from a kind of, you know, barely could squeeze into to No, with, you know, in this case I could have got like a three-bedroom condo, which would be big enough for me to have an office, and an extra room for the grandkids when they came to visit or the parent or kids to come visit. It went from being barely squeezing into it created more options. But, as you mentioned, and no payment. No payment required.

11:00 Yeah, no payment required. Yeah, that's a huge part of it because there is a payment, it's just it's an option to pay. So, you'll get a statement every month, just like you are when you have a regular mortgage, and if you want to pay it, great, you can pay it, and if you don't want to, you don't have to. Just that payment gets added to the balance each month.

11:20 And I would think that having the flexibility to not have to pay and the flexibility being able to access that equity by writing a check, basically, I'm not there yet, but if you're buying a retirement home for cash, you know, you're going to have less cash when you're done than when you started by definition, the money put down for the house. Why would you not want to have access to that just in case it costs more than you plan on, just in case something goes wrong, just in case things don't work out? Why would you not want to do that?

11:48 Right, yeah. Yeah, definitely. We've definitely helped a senior about a month ago. She's had this huge house. Her husband had passed away 15 years ago. So, she lived in this big house for a long time. And she was just ready to get into her 55 and up community and go to her book clubs and wine, you know, all the social things that happen in those communities. And but she was running out of cash. So, what we did for her is the reverse purchase. So, we used a chunk of what she her proceeds to get the into the reverse mortgage into this nice 55 and up community. And then she's had about three or $400,000 left over. Instead of dumping all of that and paying cash for the next house, she was able to put that with a financial advisor who could help her, you know, help her grow and distribute it you know, at a pace that would also help just live a little bit more fruitful life, I think, you know, not worry so much. You know, there's a psychology around money and having some in the bank is there's it may helps you breathe a little easier. Just does.

12:57 I think the other part challenge of this industry and I've been a critic in a sense, but I also want to be a cheerleader for the industry. I think we should be doing 10 times as many as we are. Between people own house for cash that should have a reverse mortgage equity product of some sort. And those who should be buying for with a reverse rather than cash. We should be doing 10 times when I look at it, easily 10 times what we are. But it's the reputation number one and two the education. I see though that this loan does require a lot more time per customer than a standard forward mortgage. If you compare the two, on one hand I feel like it's more time up front on the servicing but I would imagine you have much greater opportunity on the back end for repeat, for referral business satisfaction and there's less competition. Talk a little bit about that as a businesswoman, how you trade off your time and how that works out for you.

13:53 Yeah, they definitely the I will say the sale cycle is longer cuz it's a lot more of like thinking and processing for the most part. Sometimes I get people that are like, this is what we want to do. I've been researching online. I'm ready for it. I found you on Facebook and I trust you, know, like and trust you. So I've found like educating around social media has been helpful because a lot of the educating I would have to do one-on-one is actually happening through video content and stuff and they're getting to know and trust me which I do really value and appreciate. They typically will take about 45 days to do if we're doing a revert like a refinance. Like if you're going to live in your house, do the reverse on that house you're staying in. Purchase can be 30 days. Part of why it takes a little bit longer is because in the senior space they just are a little slower. So it's not that the lender themselves is the underwriting takes longer. It really is about like they have to do a counseling session and in California there's a 7-day cooling off period. So they have the counseling and then we can't submit anything for 7 days. So that already gets calculated into the equation of time.

15:11 And then really it's just sometimes they don't have email addresses. Sometimes they want to mail me loan documents or you know, so it's but it's I think it takes a patient a patient hand to kind of walk through that with them, which I don't know. I love I love to shuffle through the clothes, so I'm okay with that.

15:32 You know, the other thing is many some do now e-sign. Some of the seniors Yeah. Pre-COVID, none of them e-signed. Oh, yeah. Now, I'd say three quarters of what you sign things, which is great. The core that don't, you got to find somebody to go sit with them and in my case, I find a colleague or somebody who is local who can do that and then maybe talk on the phone. And also, pre-COVID, nobody had video chat, Zoom. Now, almost all do. And if you're grandparent, you definitely have FaceTime because you have grandkids you want to see them. So, I think that's why it changed a lot, but there's no substitute for the relationship. I think that's the other part of this. Talk a little bit about I you know, you mentioned a couple deals that came to you through TikTok, through Facebook, which is great. It does create a lot of trust in a short period of time, but I'm sure the bulk of business must come from somebody who knew you, liked you, and trusted you before they called you.

16:26 Yeah, so I get I get some leads from like real estate agents, and I have a financial advisor that I have a relationship with, and so that does help. You're right, after COVID, like that has definitely helped. Most of my meetings are Zoom meetings with seniors. I've a handful of times been in person with them, and I'm happy to do that. I just have found most of them feel confident enough in the technology space that they or frankly, like I have a lot of Southern California clients, so I just am not there to physically do it. And so, we hop on a Zoom call, and sometimes it's their first time they've done Zoom, but they feel so proud that they like are going to call their kids or their grandkids and like, "Look what I know how to do." So, it's really sweet.

17:16 Yeah, being a real estate agent, I you have meetings on Zoom. I use Google Meet, FaceTime with some people. You know, you know, there's Microsoft Teams. Yet, you know, in every they all have their pluses and minuses. And so, it's funny you get the seniors on the call and they have the name of their granddaughter on Zoom because they're using their granddaughter's notebook or something.

17:36 But you have to kind of learn how to go along with that, right? And ask the question, "Who is that?" "That's my granddaughter." "Oh, how old is she?" It's a whole different process.

17:44 Yeah, we just we meet them where they're at. We're happy to I have a woman right now, she's 99 years old. She has an email address, but she hasn't a clue how to get into it. And I'm working with her trust attorney to like he's helping her figure out some she needs she needs more in-home care and she's running out of money. Like she doesn't have the money to do this. She has this $3 million property in San Francisco with a $60,000 loan on it. Like this is such this is so ideal for her. She gets to stay in her house. We're setting up a monthly distribution for her. It's going to pay for her in-home care. Like it's just it's so perfect. But she needs a lot of help from like signing things. She just does.

18:30 So, you're working with a trust attorney in this case, but I find that trust attorneys and estate planners almost always I don't have a dog in the hunt dismiss reverse mortgages as a tool. But this like you said, this is a perfect case. Like what's her alternative? She can't qualify for a mortgage loan. She can't qualify for a line of credit most probably. And she doesn't want to sell the house. What's the option?

18:55 Yeah, she's 99. She maybe selling the house and moving to an assisted living community. Maybe that's a great the best option. I don't I don't know. Everybody's so individual in what they want. I mean, she wants to live in her house until she passes away. This is a great way to do it and she has a couple of kids and they will inherit this house. I mean, she's even if she lives for 5 more years, they're going to inherit a quite a bit of money from the equity in the house. It's not like she signed her house over to the bank or anything. So, will they inherit as much money? No, but they she will have gotten to live in her house for as long as she wants to and gotten the care that she needs and I always say to people, the money has to come from somewhere. So, like if her if her kids are like, "Oh, I really want all that money." Like, well, your mom needs money right now. So, her care is 12 grand a month. If you guys can figure out how to help her get that and she can stay at home, great. Do that. But, if you can't, this is a great alternative. You still inherit the house. Gobs of money and equity in that San Francisco house. So, I always say if you bought a house 30 years ago in the Bay Area, it's like you won the lottery. It's

20:15 Well, especially with the tax laws, I think also, it's not even just it's not even just the fact that it went up in value, but in a way that no stock would possibly

20:24 Oh my gosh, yeah. This woman's This woman's property taxes are $2,600 a year in this like

20:34 Prop 13 California. I mean, it's just amazing as you know. My neighbor I feel pretty good. My next one it was got even better by like another 20, 30 years and they're they pay less per year than the house two doors down pays per month annually. It's just crazy how the how the market's changed. So, And one question is, how do you operate as a business? Are you an independent? Are you a broker? Are you affiliated with a lender? How do you function and why do you choose that format to deliver your service in the marketplace?

21:06 Yeah, so I am a broker owner. My husband and I opened our mortgage company in 2019 and we just have always been in the broker space. When we first got in 20 years ago, we were working for a broker. So, I've actually never worked for a bank or a direct lender or anything like that. So, when we wanted to just I think control our own business, I guess, we started our own mortgage company. So, we do forward stuff too and you know, which I if I'm being honest, I think it's really valuable to work with a reverse mortgage person who offers more than just reverse mortgage because if you're talking to somebody who only does reverse, they're going to like really reverse is the answer. Let's do it. Let's do it. But, there could be other options and so it's good to work with somebody who has options, I think.

22:00 Talk about an example that might have other options. I mean you could do like So, part of what this attorney, what he approached me with it wasn't a reverse mortgage at first. It really was like

22:12 Line of credit. A line of credit or just cash out. And so, sometimes that is that is the best option. If you're if you need the cash out to fix up your house to sell, getting a reverse mortgage is not the way to do it. If you don't think you're going to be there for very long. I mean, reverse mortgages are expensive and a big part of that expense is the mortgage insurance premium. Now, that is the mortgage insurance premium is great in the reverse space. The forward space, it's protecting the lender. In the reverse space, it protects the senior. And so, but they're but they're expensive. And so, I think that sometimes, depending on like really what the situation is, there could be other options that make more sense for the senior and it'll be lesser cost.

23:00 Yeah, I mean and you say that like the 99-year-old, she's not going to you're not going to do a lot of points to buy down with a 7-year break-even point. It does I mean,

23:09 Right. God willing, she lives to 120, but, you know, the odds are not that's going to happen. Yeah. And so, as a broker, that gives you access to a variety of lenders. Are there are there a few that you work with most consistently? Do you work with a broad slate? How does that How do you offer products and services to customers?

23:26 Yeah, so personally, our company, we work with Finance of America and Longbridge and Mutual of Omaha are kind of our three primary. They all offer a little bit something different, so and then we actually just signed up with somebody that offers home equity loans. So, maybe the reverse mortgage doesn't make sense for them, or they just frankly don't qualify, but they still need some access. Traditionally, a home equity line of credit, since it's adjustable, the payment will go up at some point in time. This company offers home equity loans that there's just a fixed payment, no matter what's going on in the market. It might work a little bit in reverse for a little while, but it'll So, they can anticipate what their bill will always be. You know, there's that, you know, but they all offer something a little bit different. Finance of America actually has a second loan that's a reverse mortgage, so if you know, there's so many people out there that have a 2.6 interest rate on their 30-year fixed, and they never want to get rid of that, but they still need some money, and they don't want to mess with their cash flow, you can get a second mortgage that's a reverse that works as the same process.

24:39 Got it. Well, I again, I kind of go back to the interview people from different, you know, loan companies that are, you know, retail, and they talk about the advantage that they have, and I think the brokers talk about the variety and the multiple options, and I do think can offer more competitive pricing by definition. You can put a few lenders against each other. So, it's just interesting to hear how those different formats work.

24:58 Yeah. Well, and if something doesn't work in one place, it's easy for us to just shift it to another place, you know? So, if somebody has a rule about rural property here, all right, let's just take it here cuz these guys don't have that rule.

25:12 Right. Yeah. Talk a little bit, you know, I as I when I say that the industry should be doing 10 times as many loans as they are, obviously, you know, individual originators can do 10 times as much or they can get 10 times the number of originators or combination of both, I think is more likely. But anyway, slice it, we probably need more and new originators in this space. What would you say to somebody, well, first of all, what would you think is the right format, somebody who's a forward originator to add reverse or somebody who's not done that to kind of start with a reverse mortgage as their focus, or not?

25:48 I would say I've kind of I've worked in this space with enough people who have done it both ways. I do like the idea that the forward people learn how to do reverse and really know how to do it because, like I said, if it's if they only know reverse, they only are selling that and they may sell reverse to somebody who it's not a good idea, right? But they're just so focused on you know, making a doing their job, making a sale. And so, I do think though that the forward person doing reverse needs to do some like really intentional coaching on it because it's not the same it's not the same type of product. The income isn't calculated the same. The explanation on how they work is so different. And so, a lot of times, most of the time, when you get somebody when they're ready for a reverse mortgage, it's kind of all that's left. Like, this is it. And if you do it wrong, you're going to mess up so much of their future. And so, you really need to know how to do it. So, I think that's really important. If you're going to offer a reverse, like do the training, do the coaching, don't rely on the account executive at the lender to tell you how everything works. Like I just They're there to guide you, but I think you really need to invest in some coaching so that you can really be a good a good steward of it, really.

27:19 Yeah, I also think that when mortgage originators tell me they're struggling, it There's two problems. One is, you know, it's a challenging market, obviously. People who are successful strive above that. But same time, it's also must be something they're doing wrong cuz there are people who are succeeding in this market. Same with real estate agents. And I would say you need to look at yourself and see what you're doing wrong and correct that. You can also change strategies. You can also add reverse mortgages or move into reverse mortgages. But you can't bring the same attitude that's not working into a new product that's working. And I find when I talk to reverse mortgage professionals like you, it's much more of a holistic relationship helping the customer focus, whereas the forward mortgages, it's just all about rate and points and refinancing them and lining them up and knocking them down real fast. It's a It's a whole different mindset, I think, when you deal with it. Now, you do both, but I think, you know, you can maybe change hats as appropriate. I find that sometimes originators have difficulty putting on a new hat. What do you think?

28:20 Yeah, that's definitely true. And sometimes it's I think there's been enough about reverse mortgage in the past that people still are not very educated on it. So, I think people get a little bit nervous about how do I bridge that conversation on you know, often I'll say to you or not say to you, but say to people who I can tell a reverse mortgage would really make sense for them. And so, I will tell them, like, you know, I wanted I want to talk to you about a loan product that I'm not going to try to talk you into, but I want you to know that I offer it and I can educate you on it. And that's a reverse mortgage, and I think that this might be the thing that will help solve a lot of your problems. So, I think some of it is just they don't know enough or they know too much of like maybe what they used to be that they are just they get caught up and not knowing how they communicate it. And they haven't That's why I'm saying be a some intentional on the education part of it because you have to be able to explain it.

29:19 Right. Well, you have to explain a lot about the industry for us today. I really appreciate your time, Liz. Liz Reese is the Loan Lady Liz on TikTok. Now, I don't I have a TikTok account. Go on TikTok typically, but that's the best way to reach her at Loan Lady Liz.

29:36 Yeah, that's my Instagram. You've got that pulled up, but yeah, on TikTok I'm Loan Lady Liz everywhere actually, so. Yeah. Oh, okay. And you have a Linktree if you want more information there. And then I had your Instagram up There's your Instagram as well. So, yeah, kind of kind of fun, a lot of good information. And then also we have a contact information down below. Phone number [phone number] or [email address]. And if you're driving and can't get this down, feel free to reach out to me. We'd more than glad to put you guys together. Liz Reese, thank you so much for joining us today. We really appreciate your insights both in terms of your business and the industry in general and how we can move forward together. Thank you so much.

30:12 Yeah, thanks for having me. It was great. I love talking about it. So, I definitely have a heart for it. So, thank you so much for letting me have a platform. My pleasure. You can tell she really enjoyed that. This is a Reverse Mortgage Podcast. We get together every week and have a new episode often with mortgage originators and talk about the reverse mortgage product and service and how we can better serve our customers together. Hope you found it interesting. Like this or don't like it. Let me know. Send me a comment. Reach out if I can help in any way at Bill Gross Probate. As always, make today your best day ever. Thanks so much.