Costello's blog dedicated to sharing knowledge that supports the housing industry's vital mission.

Article | "The Real Deal" - When Residents Own Real Estate | Part 3 - Specific Real Estate-Related Scenarios

assets income calculations real estate Sep 06, 2023

Series Outline

Part 1 | Overview - Real Estate Value and Income
Part 2 | Verification
Part 3 | Specific Real Estate-Related Scenarios

Reverse Mortgages

NOTE: The real estate cash value on a property with a reverse mortgage is the market value less the outstanding reverse mortgage (this will generally decrease over time as payments are made).

NOTE: Payments received by the homeowner from the reverse mortgage are NOT considered income. They are the proceeds of the reverse mortgage against the real estate and simply decrease the cash value of the asset.

Contracts for Deed or a Deed of Trust

4350.3 5-7 G 6, Exhibit 5-2 A 10

A Contract for Deed is a transaction in which the seller finances the sale of a property and holds the deed until the buyer completes the sale. These transactions are also called “Land Contracts,” “Bond for Deed” or “Installment Land Contracts.

A Deed of Trust is a transaction in which the seller finances the sale of the property, but the deed is held by a neutral third-party trustee until the buyer completes the sale.

To Verify:

  • Obtain an amortization schedule 
  • The value to the seller is the principle balance that applies the day that the tenant certification is effective.
  • The income to the seller is the interest payments the tenant will receive in the certification year.


Foreclosure happens when the mortgagor fails to make their mortgage payments. The lender forecloses on the property.

Foreclosures are not considered to be “disposed of,” as the disposal is not considered an owner’s choice.

If a home owned by an applicant is in foreclosure, this is counted as an asset until the foreclosure is concluded.

NOTE: for a home in foreclosure, the actual cash value may likely (but not always) be $0 (zero) due to the outstanding mortgage.

Short Sales

A short sale is a sale of real estate in which the net proceeds from selling the property will fall short of the debts secured by liens against the property. The bank or lien holder(s) have agreed to receive less than the amount owed.

While the asset in a short sale is probably technically a “disposed-of asset” the cash value of disposed-of assets is counted, and this asset typically has NO cash value to the seller.

To verify:

Get the 1099-C; or

Third-party verify:

  1. The market value as determined by the lien holders and the applicant
  2. Commissions, closing costs, etc.
  3. The loan balance owed on the property
  4. Any cash proceeds from the transaction

NOTE: Any cash value is considered an asset. A negative value does NOT offset other assets.


Enjoy from the comfort of your office or home!
Convenient and cost-effective!

The above topic is just one of many to be discussed at this year's Compliance Summit Events.  



There is a very good chance that the topic of this post is covered in an online on-demand course at Costello University.


Stay connected with news and updates!

Join our mailing list to receive the latest news and updates from our team.
Don't worry, your information will not be shared.

We hate SPAM. We will never sell your information, for any reason.