These sales often start with a son or daughter finding a servicer's letter in a parent's mail after a death or a move into care. This post covers what that letter means, how long you have, and who signs.

It covers HECMs, the federally insured kind of reverse mortgage and the most common type. It is general information, not legal advice. Where details matter, talk to a Michigan real estate attorney or a HUD-approved housing counselor.

Can you sell a house that has a reverse mortgage on it?

Yes. A living borrower can sell at any time, and heirs can sell after the borrower dies. Either way, the loan is repaid from the sale.

When you sell, you pay back what was borrowed plus interest and fees, and if the price is higher than the balance, you keep the difference.

If the borrower is alive and the loan isn't due yet, HUD's rules allow a sale for at least the lesser of the balance or the appraised value. So a house worth less than the loan can still sell at its appraised value, with FHA mortgage insurance covering the gap.

What happens to a reverse mortgage when the borrower dies or moves into care?

The loan comes due. Under HUD's rules, a HECM is due when the last borrower dies, sells the house or stops living there as a main home. Being away more than 12 months in a row because of illness counts.

After a death. The loan is due once the last surviving borrower dies and no other borrower lives in the house. A co-borrower still living there keeps the loan going. A spouse who was not on the loan may be able to stay if HUD's rules treat them as an eligible non-borrowing spouse. Otherwise, the servicer stops paying out funds and sends the estate a due-and-payable notice.

After a move into care. If your parent moves into assisted living or a nursing home and no other borrower lives there, the servicer can call the loan due after more than 12 consecutive months away, with HUD's approval. Your parent still owns the house, so they, or someone with legal authority to sign for them, handle the sale. Our page on selling a house for health reasons covers that side.

Michael's story shows the move-into-care case, though it is not about a reverse mortgage. He was already in assisted living, and his house still held his belongings. The contract came together within two days at his $125,000 asking price, and he left behind what he didn't want. Read Michael's assisted living story.

If the loan isn't a HECM. Some reverse mortgages are proprietary loans from private lenders, not insured by the federal government. HUD's deadlines and the 95 percent rule don't apply to them; the loan documents set the terms. Ask the servicer which kind you have.

How long do heirs have to sell before the lender acts?

Plan on about six months from the death, with up to two 90-day extensions if you can show you are actively selling or paying off the loan. The first deadline is shorter: the due-and-payable notice gives you 30 days to respond.

Here is the sequence for a HECM:

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The notice: After the last borrower dies, the servicer sends the estate or heirs a due-and-payable notice. It lists three choices: pay off the loan, sell for at least 95 percent of the appraised value, or sign the house over with a deed in lieu of foreclosure.
30 days: The notice gives you 30 days to pay off, sell or sign the house over. The CFPB says that can be extended to six months to sell or get a loan, so use the 30 days to tell the servicer your plan in writing.
Six months: If the loan isn't paid off, the servicer must start foreclosure within six months of the death, unless HUD approves more time.
Two 90-day extensions: The servicer can ask HUD for two more 90-day periods if you show you are actively marketing the house or working to pay off the loan. Keep copies of a listing agreement or a signed purchase agreement.
If nothing happens: The servicer forecloses. In Michigan, most foreclosures happen without a court case, through an advertised sheriff's sale.

Answer every letter from the servicer in writing the week it arrives. The extensions are for selling or paying off the loan, not for waiting on probate, so open the estate early.

Until the title transfers, property taxes and insurance stay the estate's responsibility, even with nobody living there.

What if the loan balance is more than the house is worth?

You can still sell, and you won't owe the difference. A HECM is non-recourse: the lender can collect only from the house. When heirs sell, the price has to be at least the lesser of the full balance or 95 percent of the appraised value.

Interest is added to the balance every month, so the debt keeps growing while the borrower lives there.

Say the balance is $140,000 and the servicer's appraisal comes in at $120,000. The house has to sell for at least 95 percent of $120,000, which is $114,000. The lender accepts the net proceeds as full payment, and FHA mortgage insurance covers the rest. The estate gets nothing from the sale, and owes nothing.

The appraisal sets the floor. The servicer has to order an appraisal once the loan is due, and you can ask for one when a sale is pending. Get a copy so you know the number any offer has to clear.
A deed in lieu is a real option. If there's no equity and nobody wants to manage a sale, signing the house over to the lender ends it. When that's the simplest path, we'll say so.

Any buyer, cash or financed, has to meet that 95 percent floor, and the servicer has to approve the sale. If the numbers leave nothing for the estate, ask the servicer about a deed in lieu before you spend money on the house.

How does selling to a cash buyer compare with listing on a reverse-mortgage deadline?

If the house is worth well over the loan balance and you have time, listing with an agent will usually net the estate more. A cash sale makes more sense when the house needs work, the clock is short, or nobody in the family can manage repairs and showings.

Price: We pay fair prices, but not always full market value, and for a house that needs work the offer reflects the repair cost. A house in good shape will often bring more on the open market.
Timing: We can close in as little as 7 days when the title is clear, or on the date the estate picks to meet the servicer's deadline. A listing usually takes longer, since it depends on a buyer and their financing. It does give you the marketing evidence HUD's extensions ask for.
Condition and contents: We buy as-is, with no repairs, no cleaning and no showings. Pack what you want and leave the rest.
Costs: We cover the typical closing costs, and there's no agent commission. A listing pays commission and seller costs from the proceeds.
Equity: When the house is worth less than the loan, the estate gets nothing either way. When there's equity above the balance, it belongs to the heirs, and that's when comparing offers matters most.

A fair way to decide: get a written number from us and, if the house is in decent shape, a listing estimate from an agent. Compare what the estate would keep after the payoff, the costs and the months of taxes and insurance. Our page on selling an inherited house explains how we work with estates and with heirs who live out of state.

Who signs when the borrower has died and the estate is still open?

The personal representative of the estate signs, once the probate court has issued Letters of Authority. If the house passed outside probate, the people who now hold title sign.

Letters of Authority: Michigan's standard letters let the personal representative do everything the law allows unless the court lists limits. One limit the form provides for is no authority over real estate, so read your letters before signing for the house.
Supervised estates: If the court is supervising the estate, the personal representative's powers are narrower and some steps need a court order.
Joint owners and trusts: Property owned jointly, or held in a trust set up outside a will, usually stays out of probate. Then the surviving owner or the trustee signs.

Probate does not pause the servicer's clock. For timing, see whether a house can be sold while in probate. For the wider picture, see what happens when you inherit a house in Michigan.

Frequently asked questions

Do heirs have to pay back a reverse mortgage out of pocket?

No. The loan is repaid from the house, not from the heirs' own money. Heirs can sell and let the sale pay the loan, or sign the house over to the lender with a deed in lieu. If the balance is higher than the value, a sale for at least 95 percent of the appraised value settles it. You would only use your own money to keep the house.

Can I keep my parent's house if it has a reverse mortgage?

Yes, if you pay off the loan, usually with your own cash or a new mortgage in your name. The CFPB tells heirs who want to keep the home to expect to pay the full loan balance. HUD's 95 percent floor is written for a sale, so get the servicer's payoff figure in writing before you decide.

What does the 95% rule mean for heirs?

It sets the lowest price that settles the loan when the house is worth less than the balance. If heirs sell for at least 95 percent of the servicer's appraised value, the lender accepts the net proceeds as full payment. On a house appraised at $150,000, that floor is $142,500. When the house is worth more than the balance, the rule doesn't apply: the full balance is paid and the estate keeps the rest.

Can the lender foreclose on a reverse mortgage?

Yes. If nobody pays off the loan, sells the house or signs it over, the servicer has to start foreclosure. That is generally within six months of the last borrower's death, unless HUD approves more time. In Michigan, most foreclosures go through a sheriff's sale without a court case. The loan is non-recourse, so the lender can't come after the heirs or the estate for a shortfall.

Does the house need repairs before a reverse-mortgage sale?

No. HUD's sale rules set a minimum price, not a repair list. We buy houses as-is, with no repairs, no cleaning and no showings, and the offer reflects the repair cost. If the house is in good shape and you have months before the servicer's deadline, a few small fixes before a listing may be worth it.

Do I need probate to sell a house with a reverse mortgage in Michigan?

Usually, if the house was in your parent's name alone. Someone needs legal authority to sign the deed, and for most estates that is a personal representative with Letters of Authority from the probate court. If the house was owned jointly or held in a trust, it may pass outside probate. Start early, because HUD's extensions are tied to selling or paying off the loan, not to waiting on the court.

When you're ready

If you're handling a parent's house with a reverse mortgage, we can give you a no-obligation written number to compare with the payoff and a listing. See how we work with families on our inherited house page, send us a message, or call (313) 217-9851.

Selling a House With a Reverse Mortgage in Michigan: Heirs' Deadlines and the 95% Rule