Wholesaling Reverse Mortgage Properties in Texas

The short answer

What happens to a Texas reverse mortgage when the borrower dies?

The loan becomes due, and the heirs typically get a limited window to pay it off or sell.

Most reverse mortgages are federally insured Home Equity Conversion Mortgages, or HECMs. Heirs are usually given about 30 days to tell the servicer their plan and up to six months to sell or pay, with possible extensions if they are actively marketing the home. If they do nothing, the lender can foreclose, and in Texas a reverse mortgage foreclosure needs a court order first.

The opportunity

Why reverse mortgage houses come up for sale

Reverse mortgage balances grow every month because interest is added to the loan. By the time the borrower passes, the balance can eat most of the equity, and heirs are left with an older house, a deadline and a servicer sending letters. Many simply want a quick, clean sale that pays the lender and leaves them something.

Lead sources

How to find reverse mortgage properties in Texas

• Recorded reverse mortgage deeds of trust. Reverse mortgages are recorded in county property records. Combine with obituary checks to find loans likely to be due.
• Probate and heirship records. Many estates hold a house with a reverse mortgage. See Texas probate properties.
• Rule 736 applications. Reverse mortgage foreclosures start with a court application in Texas, naming the property and heirs.
• Senior move transitions. When the last borrower moves into care for more than 12 months, the loan comes due. See senior downsizing.
• Estate attorneys. Lawyers handling estates often need a buyer who understands HECM timelines.

Your exit

Pricing around a HECM payoff

Get the payoff from the servicer, not an estimate. If the balance is close to or above the value, the heirs may sell for 95 percent of the appraised value and the insurance covers the rest, which can still leave room for a fair deal.

Buyers want to know the closing deadline set by the servicer. Share any extension letters, and choose a buyer who can close well inside the window.

Step by step

How to start wholesaling reverse mortgage properties in Texas

1. Identify the heirs and authority. Confirm who can sign, whether an executor, heirs or a trustee.
2. Contact the servicer. Have the heirs request the payoff and the deadline in writing.
3. Order an appraisal if needed. For the 95 percent option, the servicer relies on an appraisal.
4. Price the deal. Compare the payoff with the ARV calculator result.
5. Sign and disclose. Use a purchase contract and the written assignment disclosure Texas requires.
6. Request an extension if needed. Send the signed contract to the servicer when asking for more time.
7. Close through title. Title pays the servicer and sends any remaining equity to the heirs.

After their mother passed, two sons in San Antonio received a letter from the reverse mortgage servicer saying the loan was due and payable. The house needed a roof, a kitchen and paint, and neither son could carry it while they worked through the estate.

You helped them ask the servicer for the payoff and for a timeline extension while a sale was pending, which servicers commonly grant when heirs show a signed contract. With a balance near $148,000 and an as-is value around $205,000, there was real equity. You signed at $158,000 with the written assignment disclosure and confirmed the heirs had authority through the probate process.

A rehabber paid $169,000 for the assignment. Title paid the reverse mortgage in full at closing, and the brothers split about $10,000 after costs instead of watching the servicer move toward foreclosure. They mostly cared that their mother’s house went to someone who would fix it up.

Texas rules to know

The 95 percent rule and non-borrowing spouses

Federal HECM rules let heirs satisfy the loan by paying the lesser of the full balance or 95 percent of the current appraised value. That means an underwater reverse mortgage can still sell cleanly, with FHA insurance covering the shortfall, as long as the sale meets the servicer’s requirements.

If a spouse who was not on the loan still lives in the house, special protections may let them stay. Ask early. Texas also restricts how reverse mortgages are made and foreclosed under its constitution, so let title and the servicer confirm the path.

Learn it with a mentor

Work your first reverse mortgage deal with us

HECM deals run on federal rules and deadlines. Mentorship students review payoffs and timelines with a mentor before they offer.

FAQ

Reverse Mortgage Properties in Texas: common questions

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