Your choices when you inherit a property range from selling it to renting it to moving into it. What is the best choice for you? When someone passes away, his or her house is generally left to a family member. Figuring out what to do after inheriting a house can be confusing and overwhelming, particularly when it is unexpected or when siblings become joint owners. Frequently people rush to make decisions, or they put off making important choices. Either can lead to more financial costs and stress.
Determine the Property’s Condition
While you are taking some time to understand your choices when you inherit a property, you should assess its current condition. This will allow you to either maintain its current condition or stabilize it to prevent future deterioration. I have seen a number of inherited homes which had begun to suffer from delayed maintenance as the owner got older and less able to deal with repairs or has ignored needed repairs in order to conserve limited resources. This meant that the heir received a property after the owner’s death that needed some maintenance or real repairs. Leaking roofs, septic tanks that need to be cleaned or faulty electrical wiring will only get worse if left unattended. Even the best HVAC system needs to be serviced annually and the grass needs to be cut.
Have the house inspected by a professional so that you know what needs work and so you can make any necessary repairs. Next, contact the utility companies to have the accounts switched to your name. It’s also important to keep the heat and water turned on to avoid problems such as frozen pipes. In addition, keep the electricity working and have the yard and landscaping maintained in order to avoid making it obvious that the house is unoccupied.
You will probably have to have an appraisal done for estate tax purposes. This will give you a sense of the value of the property. You should also talk to a local Realtor who is knowledgeable about the community and its values. An appraiser will give you a value based on past sales but a Realtor will help you understand the value of the property in the current market. If you have questions about a property’s value in the DC metro area, please click here to start a conversation with us at the Lise Howe Group.
Clean Out the House
Invite family members to the house to take any items they want, provided they weren’t left to specific individuals in the will. Start with immediate family members, then branch out to allow others to choose things they would like. This can be an emotionally difficult task but putting it off will prevent you from moving forward and deciding what to do with the house. After everyone has taken what they want, contact local estate sales companies which can help you sell items of value and then donate the rest to GoodWill or a similar charity.
Your Choices When You Inherit a Property Include Selling, Renting and Moving In
Your choices when you inherit a property include moving into the property, selling it or renting it.
MOVE IN
If you want to move into the house, find out how much the mortgage (if any) and property taxes would be. If you and your siblings are joint owners of the house and one of you wants to live in the space, the future resident can buy out the others, pay them rent, or work out another arrangement.
SELLING
If you decide to sell the house, you will need to pay taxes on any increase in value between the time of inheritance and the time of sale. The good news is that the time of the inheritance (the stepped of basis) sets the new valuation rather than going back to the value when the home was originally purchased. If you own the home jointly with others, have a frank conversation with them about their attitude about how to handle offers on the property. In my experience, some sellers who have inherited properties are happy to sell at any reasonable price because the proceeds are not an asset they counted on so it seems like found money. They just want the problem of maintaining the property to go away. Other sellers want every last penny from the sale and since it is found money – they are content to wait to get the most out of the sale. It will be easier in the long run if you know what everyone in the transaction is thinking.
RENT
Renting is another option to consider. While you might be able to make money by renting out the property, you need to consider the potential costs that come with this option. In addition to being responsible for taxes and insurance, you would also be personally responsible for maintenance and repairs, unless you hired a property manager. Hiring someone to handle these tasks would cut into your profits, but it could also make renting the house less stressful. If you choose to rent the space, be prepared to thoroughly vet prospective tenants to avoid dealing with missed rent payments, damage and possible eviction proceedings.
Take Your Time to Think About Your Choices
The death of a loved one is an emotionally painful experience that can leave people feeling overwhelmed and struggling to make decisions. If you’ve inherited a house, it has likely created a host of financial and emotional issues that you weren’t anticipating. Talk to your family and ask professionals for advice so that you can make the right choices.
If you are in the DC metro area or Maryland and you are facing these questions, please give us a call at 240-401-5577 or email me at lise@lisehowe.com with any questions. I am happy to talk with you in more depth about your options.
