Many times, when a loved one dies and leaves real property behind, the family has made property disposition arrangements in advance, especially if another family member is still living in the house. Usually, a brief addendum to a will is more than enough to get everyone on the same page when it comes to inherited property.
But in lieu of such specific instructions, the new owners have some decisions to make, and they must make them fairly quickly, because a vacant house is bad for almost everyone involved.
Renting Inherited Property
In some cases, renting the property may be the best option, especially if the lease period is less than a year and an owner remains close by to supervise the property. But for the most part, renting is not the answer.
Many renters take very good care of their property and even make upgrades out of their own pocket, but many other renters do not have this caretaker attitude. Even if the renter took very good care of a prior residence, that’s often because a property owner was nearby. And as the old saying goes, “If the cat’s away, the mice will play.”
Other new owners rent their inherited property because they cannot afford the capital gains tax. But basis is calculated differently for inherited property. Assume Oscar Owner bought a house for $100,000. Over the years, mostly due to some upgrades, the home’s value increased to $200,000. After Henry Heir takes over the property when Oscar dies, Henry makes another $10,000 in improvements. If Henry sells the house, he pays the capital gains tax not on $110,000 (total appreciation) but on $10,000 (the appreciation since he took over the house)
Inherited Real Estate Sales Options
The sheer number of possibilities, along with their relative ease, usually makes selling inherited property a much better idea.
There are several options:
- As-Is Cash Sale: A home investor may pay up to 65 percent of the home’s value without even performing an inspection. Additionally, these transactions often close within two weeks. Not all of these companies are reputable, largely since there is no licensing requirement, so make sure you do your research and find experts with a solid reputation.
- Auction: Selling the house at an online or live auction often results in a higher sales price, even when considering auction fees. The same benefits apply: there is no home inspection and any furniture or other items left in the house are the new owner’s problem.
- Listed Sale: Listing the home usually provides maximum financial return, and in most cases, the house will be on the market for less than two months; however, there are repairs and upgrades to consider and an inspection to pass.
All these options also result in emotional closure, and that’s what many families really need at this juncture. Reach out to us today to learn more about the inherited real estate sales process.