Inheriting a home after someone passes away is always a difficult time. Your dealing with the grief in your family and the details that come along in this situation. Closing bank accounts, paying taxes, disbursing assets to family members are just a few of the tasks that the executor of the will must consider. If you or family members inherit a home in this situation, what should you do? Should you immediately sell the home or should you rent it out? What are the issues to consider in making this kind of decision? We will cover a few of them in this post to help you deal with your loss and make it a little bit easier to handle.
Review all of the Financials
One of the first steps is to review all of the financials. This includes bank statements, mortgage payments, property tax payments, utility payments and other miscellaneous payments. Take action to ensure that accounts are transferred and that money is available to pay these payments. Some accounts such as CATV, telephone etc. can be cancelled.
The estate usually pays for these fees up until the home is transferred. If you are inheriting the home, work with the executor to determine who will be responsible for payments and when. If you are sharing the inheritance, work out the details of joint accounts and how much money needs to be deposited each month by each person to cover all payments.
Hiring a Property Manager
In many situations, consumers either do not want to deal with the details of renting out a home or cannot because they do not live in the same area. If you decide to sell the home, you will only need a caretaker to look after the home and satisfy any insurance requirements. If you decide to rent, hire a professional who will screen tenants and manage all aspects from rental of the home to ongoing maintenance.
Set up a Budget
Whether you will be renting out the home or selling it, there will be expenses associated with maintaining the home. This includes paying utilities and taxes. Developing a budget will help you to understand how much money you need to set aside and/or collect from family members.
Cost to Sell
There is always a cost to selling a home. You may have to clean out the clutter and prepare the home to be shown. If there are repairs that need to be looked after, include these in your budget. Make a decision regarding how much money you want to invest in getting the home ready to sell and whether you want to try to sell the home yourself. There will be costs associated with preparation, social media distribution, quality pictures and listing agents fee to consider. Luckily, selling your home online has become significantly cheaper in recent years.
Market Conditions and Growth
Should you sell now or wait until market conditions improve? Work with professional agents to assess the market conditions and decide whether it is better to wait until house prices appreciate or sell now and reinvest the proceeds in other investments. If you decide to wait a year, should you rent the house during that time or keep it vacant. Your property insurance may require someone to check on the house on a regular basis to maintain coverage.
The tax man will not wait. Whether the home is still part of the estate or has been turned over to you to manage or inherit, property taxes still need to be paid. Late payments can generate penalties and fees.
Review all of the Options
With all of these options and issues to consider, take a few hours and review all of the options from a financial perspective as well as a life style perspective. Do you have the time to deal with a rental property or a vacant property while you wait until the market improves? Eliminate those options that are really non starters for you.
If you feel overwhelmed and would like to reach out to a professional, we can be contacted here.
Narrow the Options and Compare
Once you have reviewed all of the options and have forecasted all of the cash flows for a rental, it is time to compare them and make a decision. One option not discussed so far is to sell the home to another investor quickly as is. They will be interested in buying the home quickly at a reduced price, however the home is sold and the equity in the home is now yours to re-invest or pay off other debt.