Can't deduct the mortgage payoff from the sales price but you can deduct selling expenses. But updates aren't deductible if they're fixup expenses.

Lets start with the reverse mortgage.  Since you inherited the house with a reverse mortgage, you would increase your basis in the house by the amount of the reverse mortgage on the date you inherited it.  It has the same effect as reducing the sales proceeds.     Real estate agent fees, and other costs to see the house will be a reduction in the sales proceeds.  While you were using the house as a second home, any repairs or maintenance can be added to the basis.  If you made additions or renovation, those will be added to your basis.  For example, if you had the kitchen painted, it's a non deductible expense.  If you had the kitchen renovated (new cabinets, flooring, appliances, etc.) that is a renovation that is added to your basis.  If you painted to get the house ready to sell, that would be a selling expense.