How a reverse mortgage payoff nearly derails a probate purchase, and how the mechanism actually works

$450 of cushion isn't a plan, it's a coin flip that landed. If that appraisal comes in at $160,000 the threshold moves up around ten grand and your $142,000 contract is dead on the spot, and by then you're already three months in and the heirs are exhausted.

So what was your walk-away? Did you have a number where you'd have gone up to keep it alive, or was 142 the ceiling because of the rent?

Dumb question because I'm starting from zero. What is a personal representative and how did you know which person to mail? Is that the same as an executor?

Five months and 214 letters for one deal. I do that volume in three weeks and I'm on the phone, not waiting for a callback. But I'll say this, your $18,400 of work on a 1958 house is a better outcome than most of what crosses my desk, and you got a payoff negotiated by the servicer that I'd probably have fumbled. Different game, fine.

Went through this a couple of times to be sure I had it right. When you say the payoff was less than the balance, does the estate then owe the rest to someone later? Or is it just gone?

$375 a month on a 67 year old house with a roof you only partly replaced is a thin number, and you already know that or you wouldn't be reserving most of it. First furnace, first sewer surprise, and you're negative for the year.

I'd still take this deal. You bought below market and the cushion is in the basis, not the monthly. Just don't let the $375 start feeling like income.

Worth working out whether probate points an investor at holding or at flipping. Quill held, yet the appeal most often described is heirs wanting speed, which reads like a wholesale setup. The source channel sets the entry price and timeline, and the exit is a separate decision. Quill, did the channel push you toward holding, or was that preference set beforehand?

@aaron_fitz10 it's just where you sit. The channel gives you a motivated seller and a discount, and what you do after that is your business model. Quill wanted a rental and bought a rental. @bmoreno23 a personal representative is the person the court appoints to handle the estate, executor is what a lot of states call it when the will names them. The docket entry names them and usually names the attorney too, and the attorney's office is who you actually want to be polite to.

$18,400 including a roof section, flooring through most of it, and a bathroom means something got skipped. What did you leave? I ask because inherited houses in that vintage tend to have a plumbing story hiding under the vanity you just replaced, and the second you open one wall in a bathroom the number doubles. If you cut in at $18,400 and it held, tell me what your contractor's scope sheet actually said, because that's the part beginners can't see.

Water heater and a roof section on the same invoice always makes me ask who was up on that roof. Was the section a patch to the same plane or did somebody tie into old shingles at a different pitch? The tie-in is where you get the call two winters later.

Still working on the mechanics before I do anything else. Were the 214 letters hand addressed, and did you mail to the personal representative's own address or to the property? I've been stuck on that exact question for weeks which tells you everything about my progress.

The servicer timeline is the part to underline for anyone reading. A reverse mortgage payoff that drags eleven weeks past what everybody said it would take is far from rare, and at that point the contract expiration becomes the whole negotiation. Quill, did your purchase agreement have a written extension mechanism or were you re-signing addenda every few weeks? If the heirs had received one better offer at week nine you would have found out fast how loose that contract was.

This is the kind of post that should get anyone to actually open their county's docket instead of reading about opening it.

A 1958 build in most markets means a cast iron waste line, possibly cloth wiring on a few runs if nobody updated it, and a panel an insurer will have opinions about. Did you scope the lateral before closing or take it as is? @omar_haddad is asking the same thing from the reno side, and the safe bet is that you got lucky on at least one of those three.

How long after someone dies is it not gross to mail their kids? You said six weeks between your two letters but I don't know where you started from. I keep drafting something and then deleting it because I can't picture the person opening it without wincing.

@jessreyes12 the case doesn't hit the docket until somebody files to open the estate, which is already weeks or months after the death in most places. By the time you can even find them, they've usually had the conversation about what to do with the house at least once. That's the honest reason the timing works out.

Following up on my own question since nobody bit. I looked it up and the answer seems to be it depends entirely on the loan documents, which is what quill said. Second question then: does the buyer's title insurance cover you if a third heir shows up later saying they were never notified?

I want the actual first-deal cost since that's my whole thing right now. From your post I count $180 postage, $3,100 closing, $18,400 work, and $28,400 down at 20%. That's about $50,080 of cash out before the first rent check, minus whatever the bank let you roll. Did you finance any of the rehab or was all $18,400 out of pocket? And what did the earnest money have to be to get the heirs to take you seriously?

@aliyah_b earnest money is where a lot of first timers underbid themselves. I put up more than I need to on estate deals because the heirs read it as proof you're real, and the attorney reads it the same way. For contrast, I assigned a probate contract last quarter for a $9,400 fee, nine days from call to assignment, and I'll never see that house again. Quill's version pays for thirty years. Mine paid the mortgage in April.

Anyone building a probate list hits the same fork. Free docket scraping every week versus paying for a feed that delivers the case number, the attorney, and the heir relatives already matched. The paid data is obviously better data. What is much harder to know is whether it is better data that forty other people in the same county also bought that same morning, and that question decides whether the subscription earns its keep.

A point worth making plainly for anyone newer to paper. A reverse mortgage is still a lien recorded against the house, and the estate cannot convey clean title until it is satisfied. That is the whole reason the payoff quote was the deal, and it is why the balance on one of these tends to exceed what the heirs expect, since interest accrues onto the loan every month rather than being paid down.

Between @samantha_ruiz and @joe_delgado5 the answer is on the table: the sourcing is the same and the exit is a capital question. An operator without $50,000 of cash on hand knows which one comes first.

One thing worth adding. Inherited houses have a specific deferred maintenance pattern, because the last five to ten years of ownership were somebody elderly living on a fixed income and not calling anyone. Everything cosmetic looks tired and everything mechanical is at the end of its life at the same time. Quill's water heater came out at the same time as the roof section for a reason, and the furnace belongs on a calendar rather than in the surprise column.

@samantha_ruiz thank you, that clears it up. Quill, would you post the shape of the letter? Not the exact words, just what the two paragraphs did. The tone is the part I can't imagine getting right.

I had never come across any of this before, and I still followed all of it, which I did not expect.

@kevin_lombard title insurance is the right thing to be poking at and the answer isn't clean. Whether a later-appearing heir can unwind a sale, and what notice the court required before it, is state law and fact specific, so that's a question for an attorney licensed where the property sits rather than for us. What I will say as a diligence matter is that I want to see the order or letters authorizing the sale, and I want the title company to tell me in writing what they're insuring over. Quill, did your closing agent raise any exception around the heirs, or did it come through clean?

Curious whether the estate had anything besides the house. The ones I've looked at seem to turn up a vacant lot or a strip behind the property that nobody in the family thinks about, and it gets thrown in for very little because it isn't the asset they're arguing over.

The number worth circling is 14 weeks with the money committed and no idea whether the servicer would say yes. If that cash had been needed for something else in month three, the only option would have been to walk and eat the earnest money. So how long until this deal gives the capital back? At $375 a month the rent is not doing it, which means a refinance at some point, and the bank's position on seasoning is the thing to confirm before calling the capital recycled.