Inheriting a property can often come as a shock and may feel a bit overwhelming especially when this comes in the wake of a family tragedy or death. Being the executor of an estate can be especially challenging. The largest asset in an estate—and the most difficult to resolve—is typically the house.
While the specific issues at play after inheriting a home will vary for each person, many of the general considerations will remain consistent in most situations. As you face the difficult practical and emotional decisions at hand, this checklist can help guide your thought process as you determine what is best for you and your family.
As you work through the guide, answer each question that applies to you. There is no score to dictate how to proceed, rather this guide is designed to provide some structure to your thought process and illuminate any considerations that may have gone overlooked.
CONSIDER THE FACTS
- Does the house have a mortgage? If so, will the mortgage be paid by the beneficiaries or by the estate?
- What are the carrying costs for the home? (Mortgage, insurance, taxes, maintenance.)
- What is the real estate market like in this location? Stable? Growing? Volatile?
- If you were to sell the property today, what does a real estate agent estimate the market value is?
- Can you sell the home without major renovations or repairs? If not, what are the cost estimates?
- What is the rental market like in the area? What kind of rental income can you expect and how quickly could a tenant be found?
- What is your stepped-up basis in the home?
- Based on your stepped-up basis in the home (valued at the date of death) and the current market value of the property, what do you anticipate your share of the pre-tax gain (or loss) to be?
- Would using the home as a rental be worth the additional wear and tear?
- What is the home’s equity? (Current market value less the outstanding mortgage.)
- Are you the sole beneficiary? If not, who are the others?
- Are you likely to go into business with your co-beneficiaries?
- Are you in a much better financial situation than your other beneficiaries?
- What do the other family members wish to do with the home?
- If you keep the home, who will take on the responsibility of being the point person on the home’s care and maintenance? Would they receive additional compensation for their role?
- If you use the home as a rental, who will be responsible for the logistics?
- Is your relationship with the other beneficiaries a good one?
- If it is a destination property and all the beneficiaries intend to use the home periodically, how will you resolve conflicts during popular vacation times?
- If you wish to buy out the others, do you have the cash available to do so?
Ultimately it comes down to 5 key questions which the executor will face:
Keep, rent or sell? Competing interests among siblings can make the right decision difficult. Caught in the middle, the executor has to ask the heirs to keep their emotions under control and lay out the rational facts to help reach the best decision for the beneficiaries. Selling is often the best decision if medical bills, tax issues or other reasons require cashing out, and it produces a specific amount that can be divided equally.
Can you manage a property investment? When considering keeping the property in the family, the executor needs to be objective about the beneficiaries’ dependability. Would you choose the other beneficiaries to be your partners in any long-term investment? Could they get divorced, go bankrupt or bring other entanglements? If you decide to rent the property, there are issues to consider, such as the local market for rentals, the greater economy and where home values are trending, as well as your ability to maintain the property and keep it rented and profitable.
Establishing value of the property. If one heir or beneficiary wants to buy the house, the estate must determine the market value and get a fair price for the heirs and beneficiaries. One way is to get two appraisals, and or multiple CMAs from local Realtors. Alternatively, the executor can put the property on the market with the expressed provision that one of the heirs has the right of first refusal to match the highest offer.
If you are the party that wishes to purchase the property, there are some questions you’ll want to ask yourself.
PRACTICAL + FINANCIAL ISSUES
- Do you have sufficient cash flow or other liquid assets to cover the additional ongoing expenses and maintain a safety margin?
- How does owning this home fit into the rest of your financial goals?
- Will the associated expenses of the house disrupt your other savings strategies? (Retirement, education, travel, and so on.)
- How will owning this home impact your lifestyle, both financial and otherwise?
- What are your short and long-term plans for this property?
- Are you (or a co-owner) able and willing to care for the property? If not, are you able to hire someone?
Repair and renovate? The executor must make sure the house is maintained in good condition, necessary repairs are carried out, and that it’s kept insured. An executor can be personally liable for failure to maintain a property that results in losses for the heirs. How much work is worthwhile before putting a home on the market? That’s a big question that depends on the property and circumstances. It’s best to speak with a local Realtor to determine what improvements will offer the best returned and are required to sell the home.
Furnished or unfurnished? It’s not unusual for an inherited home to be filled with a life time accumulation of stuff. In most cases, when the property goes on the market, thinning out the furnishings will help it show better, and ultimately result in a higher sales price. The decision of whether or not it makes sense to stage the property largely depends on the market, the inventory of homes, how quickly properties are selling, the property’s price point and the condition and style of the property.
Being an executor is a time-consuming, high-responsibility, often thankless job that people are forced to take on while grieving. It’s up to the executor to assess not only the physical assets of an estate, but also the people and emotions involved.
If you’d prefer to simply sell the property and avoid the hassles associated with listing and selling the home we have a solution. For a property in probate, or an inherited property: contact us today and we will assist by REFERRING YOU TO INVESTORS WHO WILL BID ON, AND BUY YOUR HOME “As-Is” and offer you fair market value for the property. There is NO CHARGE to you for this service, and rather we benefit when after renovating and remodeling the home, the investor that purchased your home lists, and sells it with us. Let us provide you with the best home selling service available in Columbus, Ohio.
The Opland Group Specializes in Real Estate Sales, Luxury Home Sales, Short Sales in; Bexley 43209 Columbus 43201 43206 43214 43215 Delaware 43015 Dublin 43016 43017 Gahanna 43219 43230 Grandview Heights 43212 Hilliard 43026 Lewis Center 43035 Marysville 43040 43041 New Albany 43054 Pickerington 43147 Powell 43065 Upper Arlington 43220 43221 Westerville 43081 43082 Worthington 43235