Reverse Mortgages: How Do They Fit Into the Puzzle?

Part Four of Four


This is it.  My last column about  “reverse mortgages.” At least for awhile. They’re  one of those things most people love to hate even though they don’t really know much about them.  I’m not even sure why I’m even talking about them since they don’t have much to do with helping people Buy and Sell homes.  

But  they can make a huge difference when it comes to helping some people to stay in their homes while enjoying much happier, healthier and longer lives.  So stay with me on this. You might not think it’s important right now,  but the whole point of these columns is to introduce relevant info you might need in the future.

The long, wandering ramble I’ve been on the last few years has been my attempt to give voice to the things I see and hear out there in the real estate trenches everyday. The things so many people seem to be wrestling with in the privacy of their own homes at the moment.  

How does selling a house fit into the giant puzzle of retirement planning, long-term health care, estate planning, property tax and capital gains tax issues,  social security payouts, pension distribution –  not to mention just the simple, everyday questions most of us have about maintaining quality of life as we age?

The longer the discussion continues, the more convinced I am that no one past the age of 50 should even think about selling a house without learning more about all of the above.  It is all of these factors combined,  in conjunction with your largest asset and most important bastion of security (a.k.a. Home),  that create the wholeness out of the sum of the parts of our lives.

If you believe that’s true, then I’d like to posit that Reverse Mortgages are one possible tool you can use to help design the kind of flexibility your life is going to need in the future.  Here are a few ways they can help:

Social Security: Consider them as a way of delaying the start of social security benefits –  which can mean higher monthly payments later.

Delaying Pension Distribution: They might allow you to push back the age you start taking your pension distribution (which could also have tax advantages.)

Increase Cash Flow: In situations where retirement assets aren’t quite enough to make life comfortable, they can supplement your income.

Growing Line of Credit:  Reverse mortgage equity lines can grow at a compounded rate of 5% per year and provide an ongoing safety net that actually gets bigger as you age – not smaller.

Long Term Health Care:   A reverse mortgage equity line can act as a defacto long-term care hedge, specially if you can’t stomach the ongoing expense of a standard long-term care policy.

Protect Portfolio Performance:  If you rely on your portfolio for your living expenses, there’s nothing worse than selling equities during a down market cycle. Reverse mortgages can help hedge against the possibility

Buffer Cash Reserves:  Every financial plan on the planet calls for a reasonable amount of cash reserves as an emergency buffer.  Reverse mortgages can help maintain a comfortable level.

Homeownership: Best of all,  in cases where people have no choice but to sell their home to get to their equity,  reverse mortgages do offer a choice to consider that may keep them in their home.


Reverse Mortgages: Can the Fonz Make Them Cool?

Part Three of a Four Part Series


Week three. Talking about something we’re not supposed to talk about in polite real estate circles. Something ‘The Fonz’ (Henry Winkler) talked about for years as a celebrity spokesperson. It goes without saying: If  Fonzie can’t make this cool, I don’t stand a chance. But here goes…more on Reverse Mortgages.

Why do so many people hate reverse mortgages even though most have very little knowledge about the details? Last week we covered the common complaints. The ones you’re likely to read when you google Reverse Mortgages.

We also noted the biggest challenge and the greatest opportunity the future holds for reverse mortgages: The world is getting older. More people are living into their 80s and 90s.  And a huge swath of aging baby-boomers is coming up behind them.  As the population ages, the big question for more and more people is:  “Can we afford to grow old?”  Traditional notions about how much is enough are changing. People are looking for better answers.  

Of course, members of the Silent Generation and Greatest Generations (born before 1946) have very different world-views from their kids (born between 1946 and 1964.)   At the risk of gross exaggeration and blatant stereotyping.. most people who grew up during the hardships and uncertainty of the Depression and WW2 see the future security mostly in terms of eliminating debt and staying self-reliant. Avoid situations where others can exercise control. Don’t owe anything to anyone. Pay off the mortgage. Live frugally on a fixed income.

(One of the hallmarks of aging is the increasing need most of us have to control our immediate surroundings and everyday lives. Precisely because things feel more out of control as the realities of age unfold.)

Younger, but still getting older, baby-boomers who grew up during the longest period of economic expansion the planet has ever seen, share the same illusion that control over the vagaries of life is possible, but they tend to grok the notion of future security in decidedly different ways.

We all know someone grappling with a version of the following:  

Mom and Dad paid off their mortgage. They have a modest retirement nest egg. Social security. Small pension. Medicare. But what happens as they age? Knees start to go. Stairs get harder. Frequent health challenges arise. Kids and grandkids are scattered across the country.  Life continues to happen and that small, perfect world they envisioned at 65 is suddenly challenged in ways they never really could have imagined back then.

As more boomers watch more of their elderly parents struggle and have a chance  really see what life planning at 65 really looks like twenty or thirty years down the road they are reframing their notions about the future:  Instead of using the assumption that once everything is paid off and a little nest egg of security and comfort is locked in, nothing is ever going to change,  planning for an extended future should be based on the knowledge that things will certainly change.  In ways we don’t expect and cannot know ahead of time.  And the best way to retain as much control as possible is to create options that  adjust to whatever challenges life decides to dish out.

So cue the notion of reverse mortgages. Next week we’ll look at some of the ways they can help you stay flexible and better prepared to meet the changes ahead.


Reverse Mortgages and The Generation Gap

Part Two of Four


Continuing the discussion…on a tricky subject known to have a somewhat dubious reputation out there in real estate land.  A  “Voldemort” kind of topic in the minds of many.  One that must not be named!   Or considered. Or even talked about out in the open.

 But guess what.… we’re talking about Reverse Mortgages anyway and rather than rejecting them out of hand let’s see if everyone can relax into the discussion a little bit.  I’m not trying to talk anyone into anything. (Reverse mortgages mostly offer ways older homeowners can stay in their homes rather than sell them so there’s no selfish reason why a Realtor would be promoting them.)

That’s a job for an impressive array of celebrity spokespeople that the reverse mortgage industry has trotted out over the years.  Hallmark Heartthrobs Robert Wagner, Tom Selleck and Henry Winkler have all tried to rehabilitate the image of Reverse Mortgages at one time or another.  Which begs the question:  What could be so wrong with Reverse Mortgages that even The Fonz himself couldn’t make them seem cool?

Here’s a list of the common complaints about them, along with a few of my own editorial comments:

Too Much Temptation:  Goes something like this… no sooner do those old timers get their hands on a chunk of cash than they suddenly want to go hog wild and start to live a little. You know, Geezer Spending Sprees on round-the-world cruises or wild bus junkets to Chukchansi Casino!  * Obviously reasonable discipline is required with all forms of financial planning.

Family Issues:  What happens when the kids are already counting on inheriting the home free and clear (on a stepped up basis?)  Aren’t entitled kids entitled to the keys to the house with no strings attached? More aging boomers are coming to the conclusion that they shouldn’t sacrifice their own quality of life for the next 30 years just to pad their millennial kids’ expectations.

Worries About Spouses: What about Dad’s new younger wife?  Will they keep her off the loan and off title to the property too? What happens when Dad dies? Is she out in the cold?  Relax, new protections for surviving spouses have been written into the loan regs.

Who is on Title?:  It is simply not true that the lender receives title to the property.  No one quite knows where that false notion came from. (Probably a disappointed kid who didn’t get the inheritance they were expecting.)  Fake News!

Desperate Borrowers = Foreclosures:  If people who borrow the reverse mortgage money can’t pay their property taxes and insurance, then they will lose the property to foreclosure… Well yes, but if they can’t pay their property taxes in the first place they are going to lose their properties anyway.

High Upfront Costs  Costs have come significantly down on Reverse Mortgage Products. They can be paid upfront, wrapped into the loan or paid on the back end.  Borrowing money costs money. No way around that. Check what that last refi cost you.

Generational Aversion to Debt:  Now we’re getting down to the real issue behind the image problem of reverse mortgages.  My sense is that there is a growing generation “gap” between how aging baby-boomers and their greatest and silent generation parents view the issue of debt and what financial freedom and control really mean.  

We’ll talk more about that next week.


That Which Shall Not Be Named


Ready for today’s topic?  It doesn’t take a mind-reader to know how most of you will respond when I tell you what it is. Some of you will say:  “ Wait, I thought they were bad?”  Others:  “Thanks, but no thanks”.  And still others:  “Not on your life! I wouldn’t touch one if my life depended on it!!”

Our topic du jour is Reverse Mortgages.  And  even if some of you don’t want to hear about them because you think you already know all there is to know about them or you have it on good authority that they are a huge rip-off,  maybe  it’s time to revisit the subject again.

Let’s paint the big picture. Today more than 10,000 people in the US will turn 65.  They’ll  join millions of other aging baby-boomers out there who are wrestling with the complex and confusing questions that are part of planning for the last third of their lives. In retirement and old age. In sickness and in health.

Since generations are living so much longer these days, aging-boomers are finding themselves blessed (and cursed) with lots more opportunities to care for their aging parents and observe first-hand, the challenges of  living into one’s 80s and 90s.  Many of those experiences are poignant. Life-affirming and thought-provoking.

And a powerful reminder that it’s incumbent upon each of us to do the best we can to envision our own lives at 80 or 90. Caring for parents should be considered one of the last great teachings we receive from them.

Just a friendly reminder: We all exist somewhere along the great continuum of life. We are all headed towards the same place, sooner or later.   It’s common to hear people say:  “I don’t want to be a burden to my children.” At the same time it is disconcerting to hear how little in retirement savings, the average American has stashed away.

Which begs the question: Can we really afford to grow old these days?  Are we as a culture wisely preparing to finance our own longevity?  Which in turn brings us back to a more mindful consideration of any topic that has the potential to promote better quality of life in the years ahead.  Including Reverse Mortgages.

What are Reverse Mortgages?  In simple terms they are federally-insured loans for qualified people over the age of 62, that allow homeowners to access some of the equity in their primary residences without having to make monthly mortgage payments  until they die, sell the house or move out of it.  At first glance, sounds too good to be true doesn’t it? Way better than an equity line. If you can even get one of those these days.

But since everything in life has a price – most assuredly money – we’ll remind ourselves that unlike conventional mortgages where the loan balance is paid down in regular monthly installments, it’s the opposite with Reverse Mortgages: The size of the loan increases as deferred interest payments are added on to the principal amount over the life of the loan.  It all gets paid at the end.

Hmm. Now that’s a trickier proposition. There are reasons why Reverse Mortgages developed such a bad rep early-on in their history.  Just as there are reasons why more and more solid financial planners are beginning to view  them as a valuable long-term planning tools for aging-retirees.  We’ll explore more next week.

Old Myths Die Hard


      We’re talking about Home Inspections….Last week’s column included a list of reasons why anyone thinking about selling their home in 2017 should begin scheduling their inspections now.

I can already hear the faint chorus of squawks coming from Sellers-to be out there who aren’t keen on the idea of paying for inspections this far in advance:  I don’t want to waste the money! They won’t be any good by the time I get ready to put my house on! Won’t a Buyer want their own inspections?  Doesn’t the house get tented anyway? I want an as-is sale!  I don’t want to fix anything!  

Sometimes old real estate myths die hard. They hang around way past their useful shelf-lives to confuse new people entering a process that’s very different from the one they remember. Here’s an example of some of the left-over baggage still rattling around out there:

A surprising number of people still think a house has to be termite-tented before it closes escrow.  They honestly believe the big circus tent has to go on before the calorically-enhanced lady can sing.  But that fractured bit of history hasn’t been true since the early 1990s when lenders often insisted on it, before standard language in the real estate contract changed.

So, back to those inspections you really should be ordering… Why? Because if you don’t, you’ll almost certainly pay for it later on. And you’ll be fair game for every Buyer and Buyer’s Agent that comes along.  Here’s how to think about it…

Virtually no sane Buyer has been happy about what they’ve had to pay to buy a home in Santa Cruz over the last four years. The market is at an all-time high and Buyers are kicking themselves for not getting in when prices were at their lows in 2011.

Most Buyers are stressed to the max these days or stretched to the limits of the qualifying ratios on their loans.  They’re looking for ways to redress the balance and right the wrongs of this kind of Seller’s Market. So how can a Buyer leverage some degree of power when they’re competing against other Buyers who may have more money than they do?

The answer is simple: By promising whatever a Seller wants to hear when they make their offer. And then by utilizing the inspection process to squeeze concessions out of them later on.  True, Sellers are in total control during the offer process. But once escrow is open, Buyers have control for as long as their Contingency Period lasts.

Contingency periods are a get out of jail free card for Buyers. They can get out of any deal if they change their mind or have a change of heart before their contingencies are released.  All they have to say is: “I don’t like the school district the house is in.” Or, “I never knew there were that many registered Republicans in this neighborhood.”  Virtually anything is fair game.  That’s why they’re called  “contingencies”.

So why would any Seller want to wait until the middle of escrow to figure out what inspection issues are going to come up for the average buyer?  Why would they allow a future Buyer the opportunity to control the information about their house and spin it in a direction that was useful in gaining them extra concessions.  What happens when a “bad inspection” gets generated?  Or a property falls out of escrow and has to be put back on the market?

Next Week: Control the information before it controls you.


Part 3:  Dialing It In For Dollars  (Listing Your Home in 2017)


This Week: Beginner’s Mind

   Picking up where we left off. Drilling down on the details. Getting your house ready to sell in 2017. Hopefully in about four or five months when the best window to list opens up.(Reminder: The window closes quickly. Don’t make the mistake of procrastinating like some unfortunate folks did this year. Put March 1st on your calendar!). Go to to join the conversation.

  All of this is based on a simple premise: If you want to sell your house for the most money possible, you have to do everything right.  And everything right means: Right timing. Right preparation. Right presentation. Right pricing. Your house will still sell even if you don’t do everything right. It just won’t sell for as much.

  So whaddaya do now? If you actually put March 1st down in your calendar (give or take a week or two) you’re already off to a great start.  No matter what anyone else tells you,  that’s unequivocally the best time to get up and on the market – for reasons I’ve outlined before and no doubt will again. If you blow it on timing, it’ll be hard to make it up with better preparation or presentation. Odds are it could affect your pricing.

  Next, you should wipe away any or all preconceptions you have about how all of this is supposed to work while you also let the following sink in with a healthy dose of Beginners Mind. Wipe the slate clean and push the reset button because there have been some interesting developments during the rapid run-up real estate experienced over the last four years. Good news/bad news kinds of things that have fundamentally changed how the whole process unfolds. As a Seller you should be aware of both the good and the bad.

 For instance:  As prices have risen to record highs in recent years, so has the average Buyer’s expectations about what they are getting. The level of scrutiny Buyers engage in these days is way more exacting than it used to be. Their customary attention to detail is now magnified to the nth degree. They’ll pay more but only after they’ve looked harder. If your house doesn’t pass muster? It’ll come back to haunt you during the inspection contingency period.

  Also for instance: The speed at which houses sell(or don’t sell) has dramatically increased. (Helped by the pervasive influence of technology and the speed of all things internet-driven of course.) The maximum level of Buyer interest on any new listing is now generated in the first few days or weeks it is on the market. The radically condensed timeline creates more multiple offers and more sales that exceed their list price way quicker than it used too.

  The down side? If your property doesn’t sell in the first few weeks, then the pressure on Buyers to step up and make offers is off. Generally speaking,  the longer a property is on the market,  the less it is going to sell for. No offers is almost constitutes de facto proof that a house isn’t worth what’s someone is asking for it.

   Keep this in mind. It’s a hard concept to grasp. In the old days it took 30 or 60 days for just to get the marketing message out on a new listing. People expected to sell their places in the first two months, not the first two weeks.

Next week: Inspections – which ones and why….

Cognitive Dissonance


Part Two: Dialing It in for Dollars in 2017

  Let’s pick up where we left off. Before I was so horribly sidetracked by an overwhelming urge to put a Real Estate of Mind spin on Santa Cruz’ favorite hometown holiday – Halloween.  Go to if you missed it.

   My previous column ended with a simple observation:  Sellers always want the best outcomes. The most money. The fastest escrows. The longest rent backs. But they aren’t always prepared to do the things that will give their listings the best chance to succeed. If you want top dollar, you have to do everything right.

     Let’s spend a little quality time together exploring the whole notion of doing everything right and giving yourself the best chance to succeed.  No matter what else you say, think or do from this point on, understanding the relationship between what you put in and what you get out of selling your home is what will determine how closely  the results track with the lofty expectations you probably already have.

    This is the crux folks. The thing that’s going to decide your relative success or failure in the near future. When you take the plunge into the great unknown of the marketplace.  If you are already worried about selling your house and the possibility of blowing it… here’s an opportunity to cull out any of those insidious little failure mechanisms hiding in the cluttered recesses of your own inner closets, drawers or basements.

  There’s a special brand of cognitive dissonance that happens in real estate, way more often than it should. Specially when it involves the largest asset most of us will ever own. And specially when it involves all the core comforts that home represents – privacy, security, nurturing – to name a few.

   Wikipedia defines cognitive dissonance as: the mental stress experienced by an individual when they hold two or more contradictory ideas at the same time or when they perform an action that is contradictory to their ideas.

   Like, when a person wants the most money possible when selling their home but doesn’t think they have to do (or isn’t actually willing to do) all the things necessary to make that happen. Cognitive dissonance! It’s stressful!! Don’t fall victim to it!!!

   The real estate market has been a fabulous one for Sellers for most of 2016.  But looking back, I can still see the littered remains of more than a few situations where Sellers were their own worst enemies. Where they shot themselves in the foot by being too greedy or too loose with their timing or too lazy in their preparation or too cheap on their staging or too consumed with their own difficult emotions. Or some or all of the above of course.  

   They were proof positive that it’s always possible to blow it, even when it’s a perfect market to list a house in.  Great outcomes aren’t a matter of luck. Or fate. Or even good karma. Wishing doesn’t manifest higher sales prices. The best results happen when a Seller’s effort is aligned with expectations.

      We don’t quite know yet what kind of market we’ll have in 2017. Sellers Market? Buyers? Or something in between? The jury is still out. But good, bad or so-so market in the coming year, it’s not too early to begin dialing it in and getting yourself and your house ready to address for success.

  The concept seems so simple.  So easy, right?  And yet…

Next week we’ll start drilling down on the details. Making a list of what you can do to own the process of selling the home you own.