Dan, I would like to clarify some mortgage terminology. A Mortgagor (Borrower) gets a mortgage from a Mortgagee (Lender). The Borrower does not sell his/her property to the Lender and therefore is not the "seller". Instead the Borrower signs a mortgage and a note. The mortgage is filed as a lien against the property.
As Ardra says the devil is in the fine print
I agree that the devil is in the fine print especially with a reverse mortgage. Reverse mortgages are very complicated and even very experienced Mortgage Loan Officers are not familiar with all the criteria. Most reverse mortgages now require counseling from an approved Housing Counselor.
Are all reverse mortgages bad? In my opinion I would say that a reverse mortgage is usually not a good option for most seniors. HOWEVER, I have been involved with reverse mortgage transactions that allowed low income senior homeowners to remain in their homes.
(BTW: I spent 35+ rewarding years as a Community Reinvestment Act Mortgage Loan Officer, Financial Literacy and Credit Counselor, Reverse Mortgage Counselor, and the Manager of a large HUD-approved Housing Counseling Agency.)
On the surface I do not agree with your "friend's" use of the RM funds to purchase a DP however we don't have all the details.