Inheriting a house may provide financial gain, but it also comes with legal and financial responsibilities. In addition, it will likely include an emotional element, especially if you share the inheritance with siblings or other heirs. Navigating the process of either taking ownership of the house or selling it can be challenging and it’s important you that you do your homework and educate yourself about how the process works.
The first thing that has to be done when a house is inherited is to make a short-term plan for home maintenance for the duration of the time it takes to settle the estate. This is the time when discussions need to happen with other heirs to determine what the long-term goal is for the property.
Here are some issues that may come up when you inherit a house:
- Expenses
Right away you will have to plan for the ongoing expenses involved in the upkeep of the house. These expenses include the mortgage, utilities, property taxes, homeowners’ insurance, repairs, and maintenance.
When the homeowner passes away, the insurance policy for the home should be rewritten. Most insurance companies will allow the current policy to remain intact for a certain number of days to give you time to find your own coverage, as long as you continue to make the payments. However, it’s important to know that if the property goes into probate, you won’t be able to assume ownership during that time, and therefore won’t be able to get insurance in your name until that period is over. If you want to make sure the house is covered, have the executor of the estate contact the current insurance company to ask what the coverage options are. It is possible that you can get some short-term coverage while the house is in probate, but it might be very expensive. But it is vital that you maintain coverage until you can get a policy in your own name.
When you inherit a home, you are responsible for paying the mortgage. Payments must be kept up on the existing mortgage or you run the risk of foreclosure. If you aren’t sure if there is an outstanding mortgage on the property, you will want to check the home’s title, which should list the lender.
It’s a good idea to run a title check on the property to find out if there are any liens or other outstanding debts on the home. Examples might be unpaid contractor bills or second mortgages. As the new owner of the home, you also inherit these debts.
What Can You Do with a House You Inherit?
- Move In
One option is to make your inherited property your primary residence. This is a great choice if you can afford it. You may be thinking “Yay! Free house!”, but you really must think through all the expenses you will be incurring. In addition to the mortgage, you must think about property taxes, needed repairs, insurance, maintenance and more. If you inherited with other people, you also might have the expense of buying them out of their shares of the home.
If you can’t (or don’t want to) live in the home full time, but you still want to keep it, renting it out is an option. Depending on the property you may want to find long-term tenants, or you may want to turn it into a vacation rental. Investing some money into creating a marketable rental could result in a nice source of income for you. Just keep in mind that being a landlord is a lot of work and responsibility.And it may become complicated if you own the home with siblings or other heirs. You will also want to consult a tax advisor to determine the tax ramifications of owning a rental property.
- Sell It
Whether you inherit a house on your own or share the inheritance with others, it may be in everyone’s best interest to sell it. Selling may be necessary for numerous reasons. Maybe you can’t afford the mortgage and maintenance, or maybe you simply don’t want the headaches that come with renting it out or owning it with others. Selling it puts it behind you, so you don’t have to worry about it anymore. If you’re going to sell, it’s important to plan out how you are going to cover the expenses for preparing it and while it is on the market.
As stated above, inheriting a home can be great, but comes with a lot of responsibilities. Be sure to research and understand your options financially while also keeping in mind the emotional toll it will take. Reach out to experts who can help you navigate the process so you can make the best decision for you and your family.
If you are in the market to buy or sell a home (or both), let me, Sandra Nickel, and my Hat Team of Professionals assist you with all your real estate needs! Call us today at 334-834-1500 and check out https://www.homesforsaleinmontgomeryalabama.com for more information.
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