When it comes to inheriting a house, there are typically three long-term options on what you can do with the house. It’s important to openly discuss with the heirs of the property and family about what each member would most prefer.
In some cases, the heir or heirs would be best served by moving into the inherited property. If the house has a lot of emotional value to the heirs or a member has a need for housing like the property offers, this may be a good fit.
- Property stays in the family
- If you currently rent, this is a great chance to own a home
- If it becomes your primary residence, you can qualify for capital gains exclusions
- The house may need serious repairs to be habitable, and these can quickly become very costly and a burden to live with
- You’ll pay property taxes at the “stepped up” value, which is the current market value of the house. This may be a higher amount than what is currently being paid for taxes
- Are there other emotional considerations? Is the house suitable for your situation? Do you actually want to live in the house or feel obliged to do so?
Instead of moving into the house, the heirs may decide to rent the house out and become landlords. This can allow the property to become an investment property and also keep it in the family; however, there are many serious considerations to think through before deciding on this option.
- The property stays in the family, although it may be occupied by someone else
- Receive income from the property
- If the house is in a down market, this can be a great way to wait for the market to improve before selling
- Being a landlord can be incredibly difficult. This is especially true when trying to manage a property from afar
- The heirs will be responsible for additional maintenance and wear & tear on the house
- The tax rate could be higher as a rental, depending on where you live and the credits or exemptions that might be applied
- Inability to change your mind for the duration of the lease agreement
- Emotionally challenging as you see the decedent’s house occupied by somebody else
Many heirs find that selling the inherited property is the easiest and cleanest way to move forward after the death. The heirs will be able to move forward after the death, and will likely be able to receive proceeds from selling the house.
- Wash your hands of the situation
- Includes mortgage payments, insurance, taxes, upkeep and maintenance
- Can receive proceeds from selling the property
- Can sell in ‘as-is’ condition if you sell to an investor
- Great for homes that are in need of repair
- Can likely leave unwanted possession behind in the house
- Until house sells, you’ll need to continue to pay mortgage, taxes, utilities and upkeep
- No longer have the property, which may be emotionally challenging
- Wash your hands of the situation
There are two convenient ways to sell an inherited house. The first will be to work through a real estate agent, who is able to list the property for sale on the open market. Agents will be able to represent you in the transaction, offer advice on proper steps, and will hopefully help you find a buyer for the house.
The second option would be to sell to a real estate investor. If the house is in need of repairs or must be sold quickly, an investor may be the best option. Investors will likely not pay as much as an agent can help you sell the house for; however, they do offer speed and convenience, especially in regards to properties that need a little love.
Here are some things to consider as you choose how to sell your property:
What type of condition is the property in and does it need improvements? If the property is very outdated or in disrepair to the point that it might not be habitable, you’ll likely need to fix it up first or sell it to an investor. Remember, any improvements you’d like to make will need to be paid for out of proceeds from the estate or out of pocket.
Agents and Realtors
If the property is already in great condition or you’d like to do those minor improvements before selling the house, consider talking to a licensed agent. They will be able to provide an idea of what the house might sell for and if it is ready to sell. Remember, agents don’t work for free. They typically charge 6-7% of the sales price to represent you.
If you don’t know the condition of the house, consider getting it professionally inspected to look for serious problems. This will help shed some light on what you might encounter if you try to list the house with an agent, so there aren’t any major surprises when you take the house to market
If you’d prefer not to make any improvements and don’t want to inspect the house to look for potential problems, then selling the house is ‘as-is’ condition may be your best bet. Investors will typically buy properties in ‘as-is’ condition. You’ll be able to sell the house in the exact condition it’s in, and not spend any time or money on it.