Earlier this year seniors were offered the opportunity to use a Reverse loan if they wished to purchase a property. A brilliant idea, in that unlike a regular loan where the borrower has to qualify on their credit scores and income, that would not be necessary when using a Reverse loan to buy a property.
Not too many have been done at this point and the problem seems to be the continued decline in property values. This of course is affecting the entire Real Estate industry on all types of loans, making it difficult if not impossible to do a refinance on an existing property or to sell it and buy something else.
If the owners are counting on receiving enough equity from the sales of their home after all costs have been backed out, they are sometimes stunned to find out that there home didn’t appraise enough to meet their sales price.
At this point, everything becomes unraveled. and goes “south”. Killing deals, creating stress and a myriad number of issues that go along with that “bomb”.
Appraisers are having difficulties with finding comps to support the value of the subject property and in addition to this, is also the problem with HVCC, the Home Valuation Code of Conduct.
I really don’t want to go into describing the serious issues with the newly implemented “code”, other than to say it could have serious consequences for the recovery of the housing sector and will cost consumers in the form of higher interest rates and delays in closing their transactions.
You may want to read up on HVCC via the Internet. Everyone needs to know about it and hopefully a purposed moratorium will be placed on it for 18 months until the issues with it can be rectified.
In any event, due to the question about values, it is making is difficult for seniors to move forward in selling their current home and moving to another. Using a Reverse loan for a purchase may not be an option for awhile but it’s nice to know that it’s available when things improve.
At this time, all we can do is to continue to wait and hope that the housing market will begin to start to turn around. I believe eventually all of the problems with mortgages and Real Estate will come to an end. Nothing lasts forever and this won’t too.