What You Need To Know About Inheriting A House…

You have inherited a house from your parents or some other elderly relative. So now what do you do? The ultimate answer will depend on a number of factors such as whether you are the sole inheritor, if the home is nearby, the wishes and needs of your spouse or children, and your current financial situation. But you really have three options. You can live in the home, rent it out, or sell it.

Do you need to go through probate?

If received title to the house from the executor, you don’t have to worry about probate. That has already been handled by the executor. If you are the executor, then you will have to check out probate. If the home is located in North Carolina, the house will have to go through probate unless it is owned jointly with rights of survivorship or is owned by a living trust.

Probate is a process for handling an estate. The laws differ in each state. You will want to hire an attorney that specializes in probate law to assist you.

What is the value of the home?

To decide what to do about the home, you really should know the value of the home. Hire a home inspector to go through the house to determine its condition. Find out if the home is in good condition or if it will need substantial repairs to make it habitable.

You will also want to  consult a real estate agent or appraiser to determine market value. The agent will be able to tell you the comparable home values for the area. The agent will also know what rental income could be realized should you decide to rent the house.

What are the current expenses of the house?

You need to know what home expenses you are responsible for. If there is still a mortgage on the home, you will be responsible for the mortgage or you may choose to refinance the mortgage. It’s also possible the estate may have paid off the mortgage, in which case, you inherited the property mortgage-free.

There will also be other expenses: property insurance, liability insurance, electricity, water, sewer, landscaping, taxes, etc. These expenses will need to be paid regularly until you decide what to do with the property.

What do I face if I want to live in the home?

You inherit the home at its current market value, regardless of the original purchase price and subsequent appreciation or depreciation. If you inherit the home jointly with your siblings, living in the home becomes a trickier issue. You will probably have to pay rent to your siblings and work out the handling of expenses with them. Or, you will have to buy out their shares. Assuming you can all agree on terms, be sure to put everything in writing.

Living in the home has some advantages. You will have time to go through your parents’ belongings and decide what to do with them. Also you will receive capital gains benefits when you eventually sell it.

There can be some disadvantages as well. Often property taxes go up to reflect the current value of the home. You won’t receive any special tax breaks that your parents may have received as senior citizens. And if the home is in poor condition, you will have to spend more money on upkeep.

What happens if I rent out the house?

First, you will have to make sure that the home is in habitable condition to rent out. If you live nearby, you can handle the rental property yourself. If not, hire a property management firm to handle the details. You will need to change the insurance on the property to landlord insurance.

For tax purposes, you will be able to deduct depreciation on the property every year, but when you sell the property you won’t get the capital gains exclusion since the property will not be your personal residence.

You keep ownership of the property, but some renters can do a lot of damage, which may exceed the security deposit you get from them. Renting can be a viable option if you and your siblings are undecided about selling the home. You need some income to offset the costs that accrue even if you do nothing.

What should I know about selling the house?

If you can get past the emotional issues, selling the house is usually a good option. There will be little or no gain that will be subject to tax because you inherit the property at its current market value. You receive cash, which is the easiest way to divide the value of the home when there are siblings who inherit equally.

If the home has deteriorated over the years, you may have to put some money in the property to fix it up in order to sell it, or sell it at a low price to flippers who can put the property in good condition and resell it for a profit. Also, when buyers know that the house is being sold by family, especially when that family is not local, they will offer a lower price knowing that the sellers may be more desperate to sell. That home is costing you money while it sits empty, and buyers know that.

The decisions you make with regard to an inherited house can be emotional, especially if the home was a long-time residence of your parents and you have siblings to consider. Knowing what your options are will help you make these decisions.

If you are considering selling your inherited home, then send us a message below or give us a call at 252-631-6233.