If the reverse mortgage balance is indeed under $100K, the winning bidder may have made a savvy purchase alternatively If the balance is significantly more, the winner could face unexpected costs, potentially diminishing the perceived bargain. Estimating the balance on a reverse mortgage in a foreclosure situation can be tricky, but here’s a general approach to help determine if the winning bid is a good deal: Since reverse mortgages accrue interest and fees over time, the original face value of $337K from 2006 could have grown substantially. Reverse mortgage balances grow as borrowers make no payments, and interest/fees are added to the loan balance over time. However, the interest rate type (fixed vs. variable) and any rate caps affect how much it has grown.

You could roughly estimate the balance by assuming an annual growth rate. Reverse mortgage rates often fall between 3% and 6%. If this mortgage compounded at around 4% annually over 18 years, it could theoretically double from the original amount or even exceed it, depending on fees and compounding.

Consulting a title company experienced with reverse mortgages in foreclosure contexts can reveal a payoff estimate. This is often possible in cases where the HOA has moved forward with foreclosure due to unpaid dues, and sometimes they have a general idea of the mortgage balance.

I suspect the winning bidder has access to what I suggest above and the old adage that knowledge is King applies here.

We have a reverse mortgage expert on staff here and I have reached out to him today to see if he can offer better insight than myself, so check back over the next few days to see his response.

The subject of reverse mortgages is full of so many variables it is hard to give concrete advice on any one tact.

Interesting. Thanks. Hopefully more input is on the way.

Hi Tom, and greetings to Tony as well! Thanks for your patience—I’ve been traveling, first to Morocco and now heading to Turkbuku. I wouldn’t call myself an expert on reverse mortgages, but I’ve dealt with similar situations enough to share some helpful insights.
Reverse mortgages can definitely be tricky to evaluate, especially in HOA foreclosures. Here are some steps that might help (just ideas, not legal or financial advice):

1. Identify the Foreclosure Case Early: Reverse mortgages often go into foreclosure for reasons like unpaid taxes, insurance, HOA dues, or because the borrower moved out. There can also be other breaches in the mortgage terms, so checking the details is helpful. If you’re tracking cases early, it’s worth reaching out to the heirs if the borrower has passed. Connecting with them might allow you to get the actual payoff or estoppel details, which will give you a clearer picture of the balance.
2. Work with the Heirs on Estoppel or Payoff Requests: You could collaborate with the heirs to request an estoppel or payoff. If you need support with the estoppel request, Property Onion can help. Once you have the payoff amount, you can assess if the balance works for your goals. You might negotiate with the heirs for the lesser of paying off the estoppel or completing a short sale at up to 95% of the payoff, plus any HOA dues.
3. The Rental Game Approach: Some bidders choose to bid with plans to rent the property, intending to negotiate down the mortgage later. In this case, it’s useful to pull a title report before bidding—either through a title company, Property Onion, or even a quick pencil search—to check for any active liens or lawsuits. If they win the bid, they could start renting out the property and later look into negotiating the mortgage. Property Onion can assist here too if mortgage reduction is the goal.
   So, whether the winning bidder got a great deal depends on their understanding of the mortgage balance and any other liens. If they did their due diligence, they might be onto something. Otherwise, it could be a challenging investment.
   I hope this sheds some light, Tom! Let me know if you have more questions—happy to help however I can.