Using a Reverse Mortgage for Purchase, with Ted Butler of Mutual of Omaha

0:01 One of the reasons I launched this podcast six months ago, eight months ago, I was shocked. I've been in real estate for a long time. I've done a lot of transactions. I was shocked to realize that I qualified if I wanted to purchase a property using a reverse mortgage to either supplement my cash purchase or instead of using up cash. I didn't know that. I'm a Realtor® and I when I looked into it, I realized that we should be doing 10 times more reverse mortgage for purchase than we are as an industry. That's my thesis. I've spent months interviewing top originators across the country. And today we have I'm really excited to have back Ted Butler of Mutual of Omaha, who's not just reverse mortgage specialist, but specifically is involved with helping people use the equity in their home to buy a home or to buy a home and conserve cash. Ted, let's talk a bit about using a reverse mortgage for purchase. Thanks for joining us today.

0:55 Very happy to be here, Bill. Good to see you again. Thank you so much for the opportunity and yeah, I think we just have to take a bit of a step back and take a look at the overall real estate market to really appreciate some of the substantial trends that are happening. And people like you and I have been talking about this for years, but it's really starting to manifest itself. And you know, particularly for the Realtors® out there, I'm going to encourage them to pay attention to a lot of the materials that they get from the National Association of REALTORS®. They have recently published some very compelling articles describing what they're talking about as the silver [clears throat] tsunami and the aging population in America and its direct impact on all things real estate. And when we get into the details, you and I, we're going to be able to highlight a special version of the modern reverse mortgage, what Mutual of Omaha calls the lifestyle home loan that allows that boomer and older buyer to purchase a home instead of using cash and instead of using a conventional mortgage, using something that really combines the best of both.

2:14 I did a training just Monday of this week. And I think I've trained over 2,000 Realtors® so far this year. It's been a busy year doing Realtor® training. And two things have struck me. Number one, as you were mentioning earlier, the lack of awareness and we really need awareness so people can become educated and whether it's the Realtors® becoming educated, fellow reverse mortgage loan officers being educated, conventional loan officers being educated, you know, personally I spend 50% of my time educating financial planners and financial advisors. And quite interestingly, here's a little golden nugget. 50% of my purchase business today is now coming not from Realtors® but coming from financial planners

3:06 Who are understanding the power of using this program in retirement. But what was what was interesting was number one how many people don't know the program exists. You know, let's just stop there for a second because I think this is really important

3:21 Understanding. For those of us who are watching this now, how many people don't know exists would shock you. I'm one of them. I was I was talking to mortgage originator about a deal where the borrower had passed and was, you know, trying to help avoid foreclosure and some of the service issues. At the same time, I happened to be separately shopping perhaps to buy a new home in Florida. I live in California and I had some cash. Didn't want to sell a house here. We have grandkids nearby and so on. I'd like to establish residency in Florida for tax reasons perhaps. Love to go to Florida. Go there once a year with the family. And you know, I could buy a condo. Can't buy a house as nice as this without selling my house, but I have enough cash to buy a lower-end condo. And I'm talking to an originator, and it wasn't you, but one of your colleagues who talked about how I could qualify perhaps for a purchase. And then instead of paying at the time I was shopping, I think for 600,000, maybe I could have been shopping for 900,000 with no more payment. And I thought, well, hold on for a second. How do I not know that? And if I don't know that, who else doesn't know that? And so, I think for real estate agents and mortgage originators, attorneys, financial planners looking to make a distinction in the marketplace, looking to get people's attention, giving them good and useful information is important. And I'm telling you, and I'm sure I've been to reverse mortgage presentations, I've met originators. How did I not know this?

4:41 I'm not a stupid guy. It's this is not commonly used. And I'll tell you this. I've not had a purchase request done in my area with a reverse mortgage because I live in Los Angeles. I don't live in a area community, but there are people who really should know this who live in those areas. So, I'm sorry, Ted, to interrupt you, but I just want to put a bookmark here. People don't know. And if you think you know this, great. There's your opportunity to shout to the marketplace and put yourself as the expert in this area. Yeah, great point. Well illustrated, Bill. It is, you know, it's tragic on one hand, but it's also very exciting on the other. I love the idea of opportunity. I love the idea of fostering opportunity. One of my greatest joys is helping other financial professionals be successful. And of course, at the end of the day, helping those we serve be successful. You know, it's evident the numbers are dictating to us what's happening in the real estate market. We are getting older as a population.

5:46 What? We've seen it in What? What are you saying, Ted? What do you think about Can you believe it?

5:58 We're not We're not anymore. And everybody you know, we're staring in the face the same statistics that happened to countries like Japan and Italy and Greece where they're having significant issues with their aging population. So being prepared for it is one thing, but what we can do today is equip ourselves with the information so we can be better stewards of those that we serve. The, you know, be a better shepherd of our flock and learning about tools that we may have overlooked in the past. And I'm just I'm just going to say this. We have to bring up the R-word, okay? The R-word reverse. And many times when people hear the word [snorts] reverse, they just kind of gloss over whatever else is going to come after it because [snorts] they think they know about the program. Particularly Realtors® because unfortunately our program for many years was the program that kept inventory off the market. Instead of, you know, grandma selling the house and moving into assisted living, oh my gosh, now grandma can stay in the house for another two to five years. That disappointed some Realtors®. We've seen a shift though. We've seen a number of the Realtors® that I'm training today. Not only are we seeing a growth in the S sur designation, but so many of these Realtors® today are members of organizations like the National Association of Aging in Place Council. I mean, wow. Never did I think that we would be seeing Realtors® becoming accredited in learning about aging in place because aging in place doesn't necessarily mean the home that they're in today. It certainly can mean the home that they're going to spend the rest of their lives in. And we also have to be careful that it's not necessarily downsizing. You know, and this is from NAR statistics. Only 51% of home buyers 65 or older buy a house smaller

8:03 Than the house that they're selling. Only 51%. 38% of that demographic actually buy a house larger than the house they're selling. So, we as professionals have to scrub from our mind that preconception that it's automatically going to be a downsize for that older homeowner. We've got to think in terms of especially baby boomers coming into this part of their lives wanting to literally live their best lives possible. So they want to maximize what they have. Like you said, discovering that you can go from a $600,000 home to a $900,000 home and still not have to make a monthly mortgage payment. Oh my goodness. Not only does that make the home buyer happy, but it certainly makes our Realtors® happy and it makes our financial planners happy because the last thing financial planners want to do is have that home buyer decide to pull money out of some of their investment accounts to close the gap on the house that they really want. You know, we want them to keep as much of their assets working for them for retirement income as possible. But you know it so it become it starts with awareness and then awareness leads to education. When I do my trainings particularly when I do my classes for financial planners we start with a with a very simple little exercise that I call practicing open-mindedness.

9:25 And we have a discussion about how important it is to understand that knowledge is evolving and that it's constantly growing and it grows because we accept new information. We replace old outdated information and we correct things that may need correcting. And if you have an open mind and are willing to learn and grow, then the world is marvelous. But unfortunately, sometimes we come across people who believe they know an awful lot and are not willing to have an open mind to consider alternatives. And I usually raise my hand as an example, somebody who was like that because we talked in our earlier conversation that I was a financial adviser before I got into the reverse mortgage industry. I oh my goodness, age has a couple of benefits and one of them is a little bit of perspective. I used to think I knew a lot about a lot. Today I realize that I know far less than what I don't know and I'm okay with that and I'm constantly working toward growing my knowledge. But we will work with some people who literally sit in the in the conference with their arms crossed thinking that they know already. And that was me, you know, 25 years ago [snorts] thinking that I didn't need to hear anything more. But if we can get people to keep an open mind, we're going to find that we have a tool available to us that is going to do a number of things. Most importantly, it's going to best equip that senior home buyer to more successfully navigate this last chapter in their life. For most retirees, success in retirement comes down to liquidity and income. As long as we have enough income to overcome our expenses, life is going to be great. When life becomes not great is when because of limited or reduced income and increased expenses, now we are under financial duress and then people are starting to have to make

11:30 Decisions that might not be as positive for them otherwise. So if we can help guide people to a solution where a they can keep more of their assets in their retirement accounts, eliminate what for most people is their largest single monthly expense, their monthly mortgage payment, and then in many instances allow them to end up with hundreds of thousands of dollars of additional equity that they could put back into their retirement plans. I mean, we have a real win-win-win situation for the consumer. I mean, literally from a financial planning perspective, [snorts] even though paying cash can be popular for somebody at this point in their lives because they'll sell a house that has a tremendous amount of equity, they don't want to have a monthly mortgage payment, so they think fine, we'll just pay cash. Probably the most expensive way to buy real estate and the most expensive way to hold real estate. And it's important that, you know, people look at it more than just for the fact that you don't have a monthly mortgage payment. We can provide a solution where they don't have a monthly mortgage payment, but they get to keep much more of their assets, much more of their equity. At that point, you know, I was referencing NAR and some of the articles that have recently come out. They had one come out at the end of October called the silver tsunami and real estate. Are you ready? And one of the quotes that I found very interesting was from NARS deputy chief economist Jeff Jessica Lutz who said that baby boomers are really holding the cards in the real estate market. I mean this is just a reality and this is straight from NOR's NAR's report. Another article that I recommend people look at from NAR is their 2025 profile of home buyers and sellers report. Yeah, it's lengthy, but it has some great nuggets of information. Some of which are a little bit sad. For instance, do you know that firsttime home buyers

13:35 Have sunk to a record low? We have never had so few first-time home buyers ever recorded in the real estate industry. And that happens for a number of reasons. Number one, yes, we know that we had a strong run-up in home values over the last 10 years. We saw interest rates go down and then come back up. So very difficult for somebody just starting out to get into the property ladder. So that business has almost all gone away. We're seeing record number of cash buyers. Yes. Because that demographic has moved over higher down payment amounts. One interesting thing that this article highlighted was that real estate agents remain essential. The overwhelming majority of buyers and sellers are still using real estate agents. And I think a lot of that has to do with that more mature buyer and seller. They're not as prone perhaps to use online tools as those younger buyers, you know, those millennials. So, very interesting that it's encouraging that at least for the time being, the real estate agent is pretty secure. For sale by owners have also hit a record low, which I think can be signs of encouragement for the real estate industry. And re repeat buyers. People are buying that second or third home. 64 of them are age 55 or over. Also going hand inand with that older home buyer fewer homes households with children are buying homes and people that are buying their homes are planning to stay in their home longer. We're not seeing people buying a house, living in it for a couple of years, and then buying something more. It's just impossible.

15:24 And what I also found very encouraging in that article was that NAR actually referenced the reverse for purchase. Which I thought was incredibly impactful that you know the industry is really starting to pay attention to it. Another group that is paying attention to it is FINRA. FINRA the organization that manages certified financial planners. When I got into the industry what almost 23 years ago FINRA stance was reverse mortgage use it as a u last resort. Today FINRA requires their advisors to incorporate a discussion of housing wealth in their retirement plan.

16:12 Why not? I mean, just an incredible 180 degrees. But you know, it's interesting. I

16:21 I encourage those that I work with, particularly the professionals that I work with, to cross-pollinate wherever possible. It is critically important as we shift our focus to this new demographic that we learn as much as we can about what's important in their lives. And many of these folks are either retired or pre-retired. And that is going to be a major focus for them. So, becoming more adept about what concerns there are going into retirement. Building key relationships with financial planners and financial advisors can be very strategic in a number of ways. Number one, not only is it educational and let's face it, you and I are both headed that direction anyway. So this is good information for many of us in our industry as well. But it gives us the opportunity to look at what our potential clients are going to be looking at through their eyes. What's important to them in retirement and developing those relationships with financial planners serves two purposes. Not only are you going to be educated and you'll be able to be a better resource for those that you serve, but I find it equally important that my financial planners that I work with develop strong relationships with Realtors® because we're talking about one of the most significant financial events in any person's life, the purchasing or selling of a piece of real estate. And those two parties really should be talking to one another, making sure that they're strategizing to find a solution that's best for that client. So, I love getting Realtors® and financial planners together. I do a lot of education for attorneys, estate attorneys in particular, but sadly we're seeing a very strong uptick in divorce.

18:14 Something called you know the silver and how to equitably distribute what for most people is one of their largest assets, their house. Our program becomes vitally important. Not as usual as it used to be where they would use a reverse mortgage on the existing property. So, one spouse could pay out the other. But today, what we're seeing is they will sell that departure house, each of them take the proceeds and then use the reverse for purchase to then buy equal value homes again without having a monthly mortgage payment. A really a really beautiful little solution for a not so beautiful situation. And if you don't know that situ that tool exists as a divorce attorney, you can't propose that, right? You might think that, wow, you know, my client's going to get, I don't know, half a million dollars in a market where, you know, house is sell for a million, but because he or she's divorced and the finances and this and that, they're not going to qualify for a loan for the difference, maybe. Well, here's a chance. Well, they can qualify based on their age and based on the equity, and they can get a house for a million dollars or whatever the numbers are. But if the attorney doesn't know that's even a tool, then they can't even propose that as a possibility. I think I think the take away from a lot of things you've talked about, you know, all the tremendous pace of change of direction and the increasing velocity I think of the change is that we as professionals have to really just roll up our sleeves and learn more and be able to bring more value to our customers in our lane. You know, I used to be an originator. I did I did three reverse mortgages of what I call the 1.0 no version pre208 and interesting factoid all three I had a chance to go in a listing presentation and compete to list the property I was a newer real estate agent having been an originator and unfortunately didn't list any of them true you know to be honest about it but I realized was that I should have instead of doing the loans perhaps found an originator to have a relationship with because over five or 10 years I could have got helped

20:18 Them with their clients and they could have helped me as well and so I think all these are areas you talk about that are worthy of, you know, continued education. You mentioned you educate a few times. How would somebody who wanted to learn, whether it be a Realtor®, an attorney, a financial planner who wanted to get with you to, I guess, I don't know, listen into you. Is it online? Is it local? How would somebody how are you available to the marketplace? How you serve the marketplace with your education?

20:40 Well, I think the simplest way is just to go to my website, thevoiceofreversemortgage.com. That's the reputation that I've gained and it's the easiest way to find out what educational opportunities I have scheduled. I have both consumer-facing and professional facing trainings and then I'm always available for any type of educational opportunity. I love to teach. I've told the principles at my company a number of times that if they could figure out a way to replicate the income that I make as an originator and just be an educator, I would be a very happy individual. But it's I'm I do too good of a job as an originator. And but the most important thing is that [snorts] availing yourself of the opportunities to learn with an open mind is key. You know we I mentioned it earlier and I say it only halfway in justest using the rword because I really think that is analogous of what happens to many people. They hear the word reverse and they hearken back to olden days. Yes.

22:02 And they believe they know about it. And most of them once that word starts to come out of somebody's mouth, they basically close down anything else that they're about to hear because most people think in terms of the reverse mortgage only as a refinance tool, only as a way to keep an older homeowner in their current home and fail to realize that way back in 2009, the Department of Housing and Urban Development approved the use of this program as a purchase mortgage. And oh my gosh, we I was part of a team back then that were kind of the spearhead in presenting this alternative to the Department of Housing and Urban Development. We saw that there should have been no reason why not to have it as a purchase. Yeah, it was just as sound as an FHA refinance for somebody in an existing home. And finally, HUD acquiesed and said, "Okay, yes, this there's no reason why not to have this." Same parameters, same principal limit factors, same down payment or cash out percentages as you would with a refinance. So, it's very safe, very conservative. But we thought that the floodgates would open that the Realtors® would open their arms to us but no because again most Realtors® were thinking in terms of just reverse and reverse being for a refinance keeping somebody in their home keeping inventory out of the marketplace. But today, what we're finding is that our word is actually opening up inventory because we have so many older homeowners that are that are deciding not to list their property today for some very compelling reasons.

23:55 Number one, economic uncertainty. There's a lot of storm clouds on the horizon. And so, people are just kind of settling in for the long haul. Some of them that dramatic jump in interest rates. A lot of folks don't want to go from a 3% mortgage interest rate to a 6%. And then it's just the fact that they don't know that this option exists. And once they're exposed to it, one of the things I teach in my classes to Realtors® is how to build lists on discovering potential home sellers. People that have that have been in their family home, you know, for 30, 40 years, and they don't need a four or five bedroom house, 2500 to 3,000 square feet on a quarter acre lot. They don't have kids at home. They it's, you know, they're closing off rooms in the wintertime to save on heat. And so this gives that home owner permission to go ahead and list that property today knowing that they've got an alternative where they're not going to have to incur a monthly mortgage payment and they'll be able to retain much more of the proceeds from the sale of that house to bolster their financial standings. And this is really kind of fun. This is kind of where it kind of layers back in with other professional areas. For instance, this is where financial planners become very engaged, realizing that they have a client that could sell the house and move into a much more beneficial home to them and actually turn around and put a few hundred,000 back into their retirement account,

25:34 Right? Retirement accounts dev take out of it. I think that's another opportunity where people can, you know, move and in my world people move closer to their kids and grandkids

25:45 Perhaps a lower in lower price home area and can pocket some of the equity while they make that keep it the same or avoid a payment but you know pocket it.

25:54 Look Ted you the voice reverse mortgage. I appreciate that. And also for podcasts there's his podcast. Oh wow. And he has a an episode with me on there as well. I didn't know that. Just kidding. [laughter] But appreciate having it. But again, he has a great he has a wealth of information on the on the subject. Obviously, a subject matter expert, I think a lot more to learn. Also, if you go to his website, if you want to speak to him individually, there's a link there for free assessment to talk about your situation as well. Ted, I appreciate your time so much today. I have on down below your contact information. Thank you so much for educating the industry. I think most importantly raising the standards. My star in this quest. It was my thesis that a we should be doing 10 times as much and b to do that we need to raise the standards both of the reverse mortgage professionals which I think you're at the height of that as well as raise the standards of the other professionals who work with that space work with that tool to be more effective with I think you've really done that. I really appreciate you as an industry colleague and want to thank you so much for your support today.

26:53 Oh gosh, Bill, I just enjoy our time so much. I could talk to you forever. And you know, again, I'll just encourage anybody who's listening today, if you feel like picking up the phone and giving me a call, I'll be more than happy to share with you any experience, strength, and hope that I can. I think we have a golden age ahead of us, and there is going to be far more opportunity than any of us that are currently in our industry are going to be able to fulfill. And so we need educated professionals to make sure that people are getting good, accurate information so they can make informed decisions. We don't have to be a solution for everybody in every situation. But my goodness, it certainly benefits everybody if they know what all of their options are. And I really appreciate the platform that you've given us to provide some insight. And yeah, thank you very much.

27:52 Thanks. Thanks so much for being on here. For the rest of you, this is a Reverse Mortgage Podcast. We get together every week, usually with a reverse mortgage originator, sometimes management, sometimes vendors. I really do. But just to echo, this is the best time ever to be building a business in real estate or real estate finance. I think there's incredible opportunities. Reverse mortgage being one of them. Whether you're going to originate them or work with them as a real estate agent or an attorney or financial planner, a terribly unused tool with fantastic resources. That's why I do this podcast. If I can help in any way, please reach out at Bill Gross Probate. If you have any questions, comments, or you want to be interviewed for this podcast as well, let me know. As always, make today your best day ever. Thanks so much.