Putting It in Reverse

       So, the house you bought way back when is now worth a pile of cash. Trouble is, you are struggling to keep up the monthly mortgage payments. Or, you own the house free and clear, but your income isn’t adequate to keep you in the style in which you feel you deserve.

       You have a couple of choices. You can sell your house and live off the proceeds. Or, if you’re over 62, you can ask Uncle Sam for a handout in the form of a reverse mortgage, and stay put.

      “Most people want to stay in their houses,” said Pattie Romanzi, the chief executive officer of Par East Mortgage Company in East Hampton. “They tell me, ‘I’m going to die there.’ ”

Ms. Romanzi arranges about two reverse mortgages a month, and that number is growing. “We’re getting busier with them all the time.” Though, she admits, her colleagues “farther west” up the Island do many more.

       “There are a lot of people who are house rich and cash poor,” said Hilary von Maur, the branch manager of Guaranteed Rate in Southampton. “If you can’t meet your monthly nut, but are sitting on a house worth a million, you’re the perfect candidate.”

       Actually called Home Equity Conversion Mortgages (H.E.C.M.s), these loans are the Federal Housing  Administration’s way of allowing homeowners of retirement age to “convert a portion of the equity in your home into cash,” according to the Department of Housing and Urban Development website. It is like a traditional mortgage, according to Ms. von Maur, but instead of the owner making payments, the owner receives payments (either in installments or in one lump sum). According to HUD, “Borrowers do not have to repay the H.E.C.M. loan until [they] no longer use the home as their principal residence.” Alas, that point usually comes when the owner dies. 

       The size of the loan depends on the homeowner’s age and the value of the property, but is capped at $625,000. It’s a fairly complicated set of equations, according to Ms. von Maur, which are based on an “insurance table of your projected lifespan.” There’s no pussyfooting about it: These are end- they got $20 million, why can’t I?’ ” Ms. Desiderio said. Many sellers want to test the market. “There are always people who say, ‘If you can bring me $20 million I’ll sell.’ ” Otherwise, there’s no rush. “If you want to test the market, we’ll test it with you,” she said. “But if it doesn’t go, don’t shoot the messenger.”

       Sometimes overpricing can work, she believes. If you reduce your price a couple of times, by the time it’s back to where it should have begun in the first place, a buyer can feel good about his astute deal-making: “ ‘Oh, I bought an $18 million house for $12 million,’ ” Ms. Desiderio said.

       It’s not only greed that fuels the Hamptons overpricing phenomenon. “It probably happens a little more out here [than elsewhere],” said Mr. Shaheen. The reason being, “It’s not a primary housing market.” The significance of that is that second-home owners often don’t need to sell.

       “There are an enormous amount of overpriced houses that have been on the market a long time,” Mr. Pellman said. “A lot are in the high end . . . people can sit and hope the market comes up to their number.”

       There are two prominent examples. One in Bridgehampton that started at $75 million has been on the market for more than 10 years and is considered grotesquely overpriced by industry cognoscenti. The other, in Wainscott, has been on and off the market also for many years — currently on. Instead of lowering the price, the owner has consistently raised it, missing last decade’s boom market and continuing to miss the current upswing.

       The vast majority of houses, of course, are not overpriced. “I think what we saw this year is prices coming down to meet the market,” said Nanette Hansen, an agent at Sotheby’s. “I believe that properties are being priced closer to the bone than ever before.”

       When it comes to a property’s selling quickly, she has noticed that it happens when priced within 5 to 8 percent of the asking — “a price a buyer feels he can come into striking distance of and not insult the seller.”

       The sad truth is that “a lot of agents will take a listing — even if overpriced,” according to Mr. Shaheen. It helps the agent, if not the seller. “It might draw phone calls” so that an agent can then direct customers “to a house at a price that’s realistic.” But this is not something he would do, he said.

       As Ms. Desiderio said, “No matter how good a broker is, the broker can’t make the market. The market tells us where the market is.”