Inheriting a home or property from a parent, other relative or friend can present unique challenges. It can be difficult to remain objective while deciding how best to proceed.
The urge to retain the property is sometimes very strong, but doing so may not always be in your own best financial interests over the long term.
If you have recently inherited a home or property, the following considerations may help you decide what decision is best for your situation.
Take Some Time
Important decisions should normally be delayed for a period of time, if possible. That time will allow you to refocus and get past emotions that might otherwise cloud your judgment, thus lessening the chances of making decisions you might later regret. At the same time, however, there are some actions that will need to be taken immediately regardless of whether or not you will keep the property.
These immediate actions include:
- making sure the property is safe and properly secured
- checking for any existing repair or maintenance issues that must be addressed immediately, such as plumbing issues or a leaky roof
- switching the utilities to your name and ensuring the home is properly winterized
- if the property is located in another city or state, finding someone in the local area to assist for a short time is imperative, perhaps a trusted family friend, relative, or real estate professional
- having the deed changed on the property to reflect your ownership
Gather All Important Information
Once you feel ready to move forward, the next and most critical step is to gather information about the property and assess how inheriting it will affect your family financially.
This includes determining:
- whether there are any existing mortgages or liens on the property, and options for dealing with them
- whether any title issues, boundary disputes, potential claims from others, or other problems could affect the future of the property
- Have the title searched by a reputable title company or real estate attorney
- how the property is affected by existing estate taxation laws and the effect on your current and future financial situation
- Work closely with your tax professional to understand how taxes will affect your decision-making
- the present condition of the property and the estimated cost of repairs, maintenance or upgrades needed
- Have the home professionally evaluated through an in-depth home inspection, and obtain contractor bids to address any pressing issues that are found
- the current market value of the home or property -- in both existing condition and after any anticipated repairs or maintenance were done
- Work with a reputable real estate professional who would develop a comparative market analysis, providing insight into the current real estate market and expected trends
Consider All Options
When inheriting property of any kind, the most common options are to keep it and live in it, keep it and rent it out for income, or sell it. Even though the property may have great sentimental value, especially if you have fond memories of growing up in the home or visiting, it's wise to remain objective as to which option will best meet your needs now and in the future.
As you weigh the possibilities, be sure to consider all the information gathered about the home, especially financial and tax details. If there is a large outstanding mortgage or lien or another ownership claim, or if the tax burden is prohibitive, selling the home may be necessary to avoid out-of-pocket expenses.
If you plan to retain the home as an investment property or put it on the market for sale, working closely with your real estate professional can help you manage the property successfully or sell it for maximum profitability.