A Bay Area house a parent owned for decades is often worth well over the loan balance. Then the sale pays the servicer in full and the heirs keep the rest. California probate usually runs longer than HUD's window, so plan the timing early.

This covers HECMs, the federally insured kind most borrowers have. It is general information, not legal or tax advice: talk to a California real estate attorney or a HUD-approved housing counselor about your case.

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

The loan comes due and the servicer stops paying out funds. The servicer then sends the estate or heirs a due-and-payable notice.

The notice lists the ways to settle the loan: pay it off, sell the house, or sign it over to the lender with a deed in lieu of foreclosure. HUD's handbook sets the lowest sale price at the loan balance or 95 percent of the current appraised value, whichever is less. When the house is worth more than the balance, the sale pays the balance and the heirs keep the difference.

A co-borrower who still lives in the house keeps the loan going. A spouse who was not on the loan may be able to stay as an eligible non-borrowing spouse, though the CFPB says qualifying may be difficult.

The payoff will be larger than what your parent borrowed, because interest and fees are added to the balance every month until the sale closes.

The loan can also come due if the last borrower spends more than 12 months in a row in a care facility. Your parent still owns the house then, so someone acting under a power of attorney, a conservatorship or a trust signs. Our page on selling a house for health reasons explains how we work with that person and their attorney through escrow.

Ask the servicer whether the loan is a HECM. The CFPB says proprietary reverse mortgages, which are not federally insured, are usually designed for higher home values. HUD's deadlines and 95 percent rule don't apply to them; the loan documents set the terms.

How long do heirs have to sell or pay off the loan?

Plan on about six months, plus up to two 90-day extensions if HUD approves them. The first deadline is shorter: the notice gives you 30 days to answer.

The notice: The servicer reports the death to HUD, then has 30 days to send the due-and-payable notice.
30 days: Federal rules give you 30 days from the notice to pay off, sell or sign the house over. The CFPB says that may be extended up to six months, so tell the servicer your plan in writing.
About six months: If the loan isn't paid off, the servicer has to start foreclosure within six months. On older loans that runs from the death; on loans with FHA case numbers from September 19, 2017 on, from when the servicer reported the death to HUD.
Two 90-day extensions: The servicer can ask HUD for more time if you show active marketing, a signed sales contract waiting on closing or payoff, or work toward paying off the loan.

California's courts say formal probate typically takes 9 to 18 months, and open probate is not on HUD's list of reasons for more time. Get the personal representative appointed early, and keep a copy of every listing agreement and purchase contract.

Property taxes and insurance stay the estate's responsibility until title transfers. When a sale is pending, you can ask for an appraisal: HUD's handbook has the servicer get one within 30 days, send you a copy, and pay for it once the loan is due.

Who can sign the sale: the trustee, the executor or the heirs?

The person with legal authority over the title signs: the successor trustee for a living trust, the court-appointed personal representative in probate, or the heirs if the house passed to them directly.

California's courts say a living trust names a successor trustee to manage the assets, which go to the beneficiaries without probate court as long as they were put into the trust. Gary's father's house was in a living trust, so probate wasn't an issue; his contract was in place within about two days and the sale closed in about 30 days. His story is not about a reverse mortgage, but Gary's sale shows how a trust sale ran.

If the house was in your parent's name alone, a judge appoints a personal representative, often the executor named in the will. The appointment takes effect when the court issues letters. The order for probate then sets what that person can do alone:

Full authority: The personal representative can sell without court supervision after giving notice on the court's Notice of Proposed Action form. If someone entitled to notice objects, the sale needs court supervision.
Limited authority: There is no power to sell real property without court supervision. The sale goes to a confirmation hearing, where higher bids may be presented.

Read the order before signing a listing or a purchase contract. Our guide to selling a house in probate in California covers the court steps.

Some houses pass outside probate. In joint tenancy, the surviving owner gets the house. With a transfer on death deed, the named beneficiaries record an Affidavit of Death of Transferor. Everyone on title then signs.

How does Prop 19 affect heirs who keep the house?

To keep the house, the heirs pay the reverse mortgage off in full, as HUD's sheet for heirs says, and the CFPB notes they might need a loan of their own. Prop 19 then sets the property tax, and the parent's low tax base carries over only if an heir moves in.

The Board of Equalization says the parent-child exclusion covers a family home that was the parent's principal residence and becomes the child's. The child files for the homeowners' exemption within one year, and an heir has to keep living there. A rental does not qualify.

The value limit is the parent's factored base year value plus $1 million, adjusted every two years: $1,044,586 for transfers from February 16, 2025 through February 15, 2027. An inherited house transfers on the date of death, and market value above the limit is added to the taxable value.

Say your mother's factored base year value is $300,000 and the house is worth $1.6 million. The limit is $1,344,586, so $255,414 is added and the new taxable value is $555,414. If no heir moves in, the county reassesses the house at market value.

Ask a tax adviser to run those numbers early. The servicer's clock keeps running while you decide.

How is the payoff handled in escrow?

The escrow holder asks the servicer for a payoff demand and pays the loan from the sale money at closing. What is left goes to the seller: the estate, the trust or the heirs on title.

You give escrow the servicer's name and loan number, and escrow requests a demand for payoff from the lender.
The payoff statement is accurate as of a set date. Federal rules give most servicers seven business days to send one, but a reverse mortgage servicer only needs to answer within a reasonable time, so ask as soon as escrow opens.
The title company brings the title search up to date and escrow records the deed. Escrow then prepares the closing statements, prorates property taxes and pays out the funds, the servicer included.

Interest keeps adding to the balance, so an early demand may need an update before closing.

As our inherited house page says, a reverse mortgage "adds a payoff deadline the estate should not ignore, so mention it early and we will work to that clock." A dedicated transaction coordinator handles each sale.

When is a cash sale better than listing for a house with a reverse mortgage?

If the house shows well and the servicer's window leaves room to list, an agent will usually net the estate more. A cash sale fits when the house needs work, the heirs live far away, or the deadline is close.

We pay fair prices, but not always full market value. For houses needing repairs, we calculate fair prices by subtracting repair costs. At Bay Area prices that gap is real money: on a $1.4 million house, each percentage point is $14,000.

Speed is where a cash sale helps. We can make an offer within 24 hours. We can close in as little as 7 days when the title is clear; 30 to 60 days is typical. A listing waits on a buyer and the buyer's lender, though the listing agreement doubles as marketing evidence for HUD's extensions.

Older Bay Area houses often have unpermitted work or open code issues. We take those on and account for them in the offer, where a listing would meet them in the buyer's inspection. We cover the standard closing costs and there is no agent commission on our side. A listing pays commission and seller costs from the proceeds.

To decide, get a written offer from us and a listing estimate from an agent. Compare what the estate keeps after the payoff and costs, and count the months of carrying the house. Our page on selling an inherited house covers how we work with estates.

Frequently asked questions

Do heirs owe the lender anything out of pocket?

No. Federal rules let the lender collect a HECM only through the sale of the house, with no deficiency judgment. Usually the sale pays the balance and the heirs keep the rest. If the balance is higher than the value, a sale for at least 95 percent of the appraised value settles it, and FHA insurance covers the gap. You use your own money only to keep the house.

Can we get more time from the servicer?

Sometimes. The servicer can ask HUD for up to two 90-day extensions if you show active marketing, a signed sales contract waiting on closing or payoff, or work toward paying off the loan. Ask in writing and attach the listing agreement, purchase contract or loan application. Open probate alone is not one of HUD's reasons. A proprietary loan follows its own documents.

Can we rent the house out while we decide?

You can, but a tenant does not stop the servicer's clock, and HUD's extensions are for marketing the house or paying off the loan. A rental also falls outside Prop 19's parent-child exclusion, so the tax base resets. If someone already lives there when you sell, that does not rule a sale out: we handle tenant-occupied properties regularly. See selling a house with tenants.

Who should we call first?

The servicer. Its name and phone number are on the loan statement. Report the death, ask whether the loan is a HECM, and get the payoff figure and deadline in writing. The CFPB points heirs to a HUD-approved housing counseling agency or an attorney. If the house needs probate, a California probate attorney comes next. Then call us if you want a written offer to compare.

What if the house needs repairs to sell?

HUD's rules for an heirs' sale cover the price and the payoff, and they don't require repairs. We buy as-is, including unpermitted work and open code issues, and account for them in the offer. If the house is in good shape and the window leaves months for a listing, a few small fixes may pay for themselves. More on selling a house as-is in California.

Does the estate have to go through probate first?

No. A sale can happen while probate is open, once the court issues letters and the personal representative has authority to sell. A living trust, joint tenancy or a transfer on death deed passes the house outside court. For deaths on or after April 1, 2025, a simpler petition covers a main home worth up to $750,000. A house above that in one name alone may need formal probate.

When you're ready

If you're handling a parent's house with a reverse mortgage, we can give you a written offer to compare with the payoff and a listing estimate. Tell us the servicer's deadline early and we will work to that clock. See how we work with families on our inherited house page, send us a message, or call (510) 283-9871.

Selling a Bay Area House With a Reverse Mortgage: The Heirs' Timeline