Inherited Properties

Before any real decisions on the future of the property can be made, one thing must be established: Who has legal claim to the property? Coming to this conclusion can range from a straightforward answer to a complex, lengthy process, depending on a few factors.

If the decedent (previous homeowner who has passed) left behind a valid will, establishing who has claim can be straightforward. There may be a sole heir or several heirs, such as in the situation of a parent leaving a property to be split amongst their children. The heir(s) will then decide on how to proceed with the property.

However, it is very common for this to not be the case. Some estimates approximate that around 55% of American adults don not have a valid will or an estate plan established. In such situations, establishing who the claimant of the property is can sometimes be a messy ordeal. Things like joint tenancy, a large family tree, multiple marriages, and already deceased heirs typically further complicate the situation. In these cases, disputes over who has rightful claim to the property will be settled by a probate court according to the states “intestate succession” laws. Basically, the court will establish a list of people potentially eligible for inheritance of the property such as spouses or domestic partners, children, and other blood relatives. They will then decide on who has the rightful claim to the property or how it will be divided. Before a rightful owner has been established, the title of the property is not considered “clear” and it may not be sold.

So, you’ve established that you are the rightful claimant of the property. What responsibilities have you also inherited?

• Existing Debt Obligations
  Along with inheriting the property, you also incur any existing debt that is owed on the property such as a mortgage, delinquent property taxes and/or any liens. Knowing what type of mortgage the previous owner had is important. An assumable mortgage is one that can be assumed by the inheritee. This means that the new owner of the property can pick up where the decedent left off and continue paying the home off if they choose to keep it. Other types of loans, such as a reverse mortgage, may require the unpaid debt to be paid when the mortgager passes. This will often require the new owners to sell the property within a short period of time after inheriting it to settle the debt. Additional debt complications include the existence of any property tax liens on the property which will need to be paid off to be current or if the house is to be sold, to be paid off before the property can be sold. To avoid paying out of pocket, this debt can be applied as a reduction of your profits from the sale of the home if you choose to sell; but if you choose to keep the home, delinquent property taxes and any penalties need to be paid in full.
• Property Maintenance
  As the new owner, the task of property upkeep falls to you. How large of an endeavor this is, depends on how well the house was maintained by the previous owner. If the decedent failed to keep the house in good condition, it may require expensive repairs and renovations. The condition is often a key factor when deciding on what your future plans for the property are. You will also assume responsibility for paying the property insurance, taxes, and any necessary ongoing maintenance.

After inheriting a home, there are several options on how you can proceed with your newly acquired property.

• Taking up Residence
  One option is to move into the property yourself. This can be an appealing option in certain situations. For example, if the property was your childhood home that you also hoped to raise a family in, or if the property simply offers a better living situation than where your presently reside. When considering this option, however, it is extremely important to consider all of the financial aspects. Can you afford the property taxes and insurance on your new home? Will you be able to repay any outstanding debt? Do you have the funds to make any necessary repairs and renovations? Failing to fully account for these changes in your financial demands is a recipe for disaster.
• Converting the Home Into a Rental Property
  Owning a rental property is a great way to generate passive income. It also allows you to retain ownership of the property without living there if you were interested in keeping it for sentimental reasons. Additionally, the value of the home may appreciate over time if you choose to sell in the future.

  As appealing as those benefits are, there are other things to consider before deciding to rent out your property. Renting a property to tenants can be a hassle at times, especially if you’re unfamiliar with the process.

  As a landlord, the maintenance of the property still falls to you. This means repairs to household appliances, HVAC systems, and the like are your responsibility. You’re also responsible for general upkeep such as repainting when necessary or perhaps repairing a broken fence if the need arises. If a storm sweeps through and knocks down a tree in the backyard or if the toilet breaks at 1am, you can expect a call from your tenants with the expectations that you will fix these issues promptly. Of course, in addition to these more minor issues, any problems that arise with the roof, windows, any appliances, or anything structural are your responsibility as well and can, in some cases, be very expensive. Some of these more minor requirements could potentially be outsourced to a property manager. Choosing to hire a third party though will, of course, cost money. Depending on all of the other financial factors associated with the property, this option often isn’t the most lucrative, unless you’re outsourcing the work for several rental properties.

  It is a very common misconception that a maintenance company covers all repairs. No. Maintenance companies charge 8% – 12% of monthly rental payment to collect monthly rent and answer the phone should the tenant need something or request a repair. If tenant reports an issue, maintenance company arranges the service, but sends you the bill. So if tenant reports a broken furnace, the maintenance company will arrange for an HVAC company to come, provide an estimate and do the repair, but the invoice is then sent to you for payment.

  To make matters worse, you may have the unfortunate luck of renting to undesirable tenants. Anything that they break will need to be repaired at your expense. If the tenants choose to stop paying rent, the eviction process can take anywhere from 2-7 months and, in some cases, even longer. That means you may go months without receiving any rent but will still need to fulfill your financial responsibilities on the property like paying all utilities, insurance and property taxes as well as pay an attorney to handle the eviction process.

• Selling Your Home on the Market
  If you have decided that you neither want to take up residence in the property or rent it out, the only option left is to sell it. Opting to sell your property on the market will require a few things. First and foremost, the home will need to be desirable to attract buyers. Depending on the condition of the property, getting the house to “show well” will require varying amounts of money. To fetch the highest value, most houses will require some upgrades. This might mean minor things like repainting and installing new carpets, or it may require more serious improvements like a new roof. Aside from looking ‘nice’, the home will have to be safe and up to code. Before being sold any major defects that are uncovered will have to be disclosed to potential buyers. Some large-scale issues may scare away potential buyers, or they may instead request that they’re repaired at the seller’s expense. In other situations, the buyers themselves may be willing to deal with the uncovered issues, but the lenders that they are using may refuse to lend them the money due to the homes condition. Buyers lender or bank issuing the mortgage will require:
  • House must not have any safety issues – broken steps, holes in walls, water leaks, certain damages, mold, etc.
  • House must have all mechanical systems working – utilities must be on
  • FHA and VA mortgages require move-in condition:
    • All utilities must be on
    • All mechanicals in working order with at least 2+ years of life expectancy
    • Roof and siding in good condition
    • Absolutely NO peeling paint inside or outside of the house
    • House may be outdated, but must be move-in ready

  Assuming that you do get the home into tip-top shape and ready for the market, it may still take a while to sell. Homes on the market typically sell in around 3-6 months, although it may be longer than some people wish to wait. Once the buyer is found, buyer will do a home inspection; if any issues are found, buyer will be asking for seller to fix the issues. Once those nuances are taken care of, buyers lender will order banks appraisal that must appraise that house at or above purchase price. And if the appraiser cites any repairs, the seller must complete those repairs prior to closing. To add to the situation, if something happens to buyers financing (and it does more often than realtors care to admit), the buyer can be denied the loan right before closing and you, the seller will be back at square one, marketing the home, accommodating showings and looking for a new buyer. These issues can make the selling process difficult, time consuming, and expensive.

  Should everything go well, there are significant selling fees when selling on an open market, there are seller-side title company costs and county recording fees as well as realtor commissions and if buyer requests a credit towards their closing costs, your bottom line gets reduced even further.

• Selling Your Property to a Cash Buyer
  An alternative selling option is to sell your home to a cash buyer. By choosing to go this route, rather than the conventional market route, you can avoid some of the unwanted hiccups of the selling process. To begin, we will buy your inherited property in as-is condition. This not only greatly reduces the out of pocket expenses, but also reduces the time that it will take to sell the property. That means no paying contractors, no waiting for various companies to give you price quotes, no commission fees, and no stress managing these issues. We also aren’t going to walk out on the deal because of any issues uncovered at the home inspection (which we do not do). We are prepared to deal with those issues so that you don’t have to, and we aren’t subject to the rules and regulations of lenders.

  If that weren’t enough, the selling process is noticeably faster than the traditional method. Traditionally, when placing your home on the market through a real estate agent, you’ll first have to put the time into getting the home market ready. Then you’ll likely wait several months for the right buyer to come along. With us, we view your property in as-is condition once or twice and then we get you an offer within 24-48 hours, in some cases, even the day of! Once a price has been agreed upon, we can close in as little as 7 days. That makes the entire process take less time than it may take to find a contractor to do any necessary repairs. Choosing to sell to a cash buyer can effectively allow you to save time, money, and stress.

  We understand that dealing with an inherited home can be a daunting task. Our goal is to help you manage your newly acquired property as easily and profitably as possible. If you have an inherited property that you’re interested in selling, please reach out to us!

  We buy any house, As-Is, in any condition at no cost to you. You choose your closing date and we will assume all selling expenses. In some cases, we can cover all debts associated with the house – delinquent property taxes, contractor liens, or an outstanding mortgage. We are here to help, lets chat and see how we can help you!