by Minna Reid

June 23, 2025

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Connecticut short sales with a reverse mortgage (HECM)

A reverse mortgage is a special home loan for homeowners aged 62 and older that lets them turn the home’s equity into cash without monthly payments. The borrower can receive the money as a lump sum, regular monthly income, or in flexible amounts as needed. The homeowner remains responsible for making payments on the property taxes, insurance, HOA fees and any other assessments on the home. In a reverse mortgage, the loan and interest only become due and payable when the home is sold, or the owner moves out permanently or passes away.

Ideally, the balance of the loan would never exceed the home's value, and paying it off wouldn't be an issue whenever the loan became due and payable. However, sometimes the market value of the home may decrease; perhaps in a downward market, or due to property falling into disrepair.

Sometimes, the interest and fees grow so much, that the loan value becomes higher than the home could sell for.

What happens if a reverse mortgage home can't sell for enough to pay off the HECM?

Almost all reverse mortgages are backed by HUD. If you have a HUD HECM reverse mortgage serviced by Celink (Compulink Corporation), and the loan has become due, and the debt exceeds the value of the home, you have several options in this scenario:

Pay off the loan in full.
Complete a deed-in-lieu of foreclosure.
Let the home foreclose.
Sell the home in a short sale.

Reverse Mortgage (HECM) Short Sales

If HUD insures the loan, as would be the case with a HUD HECM reverse mortgage, the lender and ultimately HUD would have to approve the terms of the short sale (a short sale is the process by which a home is sold for less than is owed on the loan).

A reverse mortgage short sale is not very different from a traditional short sale and follows the same basic process:

The home is listed on the open market.

A buyer is secured subject to the short sale approval.

The short sale is initiated, processed, and negotiated with the lender.

Once approved, the sale closes like any other.

Pros and Cons of a Reverse Mortgage short sale:

Pros:

Reverse mortgage short sales do not require an arms length addendum and can be sold to family members or heirs.
Sales price can be at 95% of HUD's appraised value.
HUD allows most customary closing costs to come out of the proceeds of the sale, creating a sale with no out of pocket costs to the sellers.
Short selling the home is quicker and easier than having the home go through the foreclosure process.

Cons:

HUD HECM loan are non recourse, so a sale is not necessary to avoid a deficiency judgment.
HUD does not allow any delinquent taxes, home-ownership association dues, or attorney fees to be paid out of the sale.
No seller concession fees are allowed.
If the property sells for more than the 95% of the appraised amount, those proceeds cannot be distributed to the seller.

Need some help with your reverse mortgage short sale?

We've been specializing in CT short sales since 2008. We've helped hundreds of homeowners move on, and we can help you!

We are grateful to Minna for her knowledge, professionalism and expertise in short sales. She truly cares about her clients and it is evident in the manner she represents them. She has a strong work ethic and keen negotiation skills when dealing with financial institutions and buyers. We strongly recommend Minna and her company if you want immediate results.

T.G.

Last Updated on June 23, 2025 by Minna Reid

HECM Short sale, HUD hecm, reverse mortgage, reverse mortgage short sale