Case 3: How about a second retirement home?
You sell a home in south Orange County where a senior couple raised their kids for thirty years for net $750k. The couple plans to move to Murrieta, a very popular retirement community and you've found a great new single story home in a master planned community for $480k. Their financial planner has put together a plan for the next twenty years of their lives that requires prudent investment of the remaining $270k proceeds and does not allow for any monthly housing expense. The couple has planned on paying all cash for their new home to avoid a monthly mandatory loan payment obligation.
In getting to know them better you learn that they have kids in the Inland Empire that can afford to live there (instead of moving out of state like many of their friends) and hence why they are buying in Murrieta. But the couple is concerned about how hot it gets in Murrieta in the summer. You ask if they'd ever thought or dreamed of a second home - maybe a cabin in Big Bear?
They say that is a wonderful idea - and they could even have the kids and grandchildren up for weekends and vacations - but there is no way they could afford a second home unless they got a loan. After making mortgage payments most of their lives, they don't want to be strapped with monthly house payments for the rest of their retirement years.
Solution:
Instead of pouring the entire $480k into their new home in Murrieta, you suggest they put roughly $288k down (actual amount depends on age and is lower the older the age of the youngest client), have the Reverse Purchase finance the balance and still avoid a monthly mortgage payment. They can then use the cash they avoided putting into the Murrieta home to help buy their dream second home in Big Bear. You've helped them meet their retirement goals and created a new house purchase and additional commissions in the process!
