What To Do With An Inherited Home

In South Florida alone, thousands of people are in the process of inheriting probate houses. Inheriting property can be a challenging experience, both financially and emotionally.  Amidst experiencing the profound grief over losing a loved one, family members inherit homes that require thoughtful planning.

Siblings often disagree about what to do with the property, leaving the family stuck at an impasse.  If you inherit a probate property, there are 3 options: sell, move-in, or rent.  Each option has its advantages and disadvantages.

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Sell The Property.  Families frequently sell houses they inherit.  Prior to sale, take these important steps:

  • Assess Condition – Understand the property’s condition. In addition to walking through the home yourself, hire a certified home inspector.  Professional hFor Saleome inspections cost several hundred dollars, but are well worth it.  A good inspector can advise on visible and hidden property issues.
  • Determine Value – You can estimate the value of a home by looking up the home and similar properties on websites such as Zillow and Redfin. These websites provide broad estimates that do not take into consideration home condition.  Contact a qualified professional for a Comparative Market Analysis.  House Heroes always provides Comparative Market Analyses free of charge.
  • Underlying Debt – Homes are regularly saddled with debt from mortgages, reverse mortgages, home equity loans, lines of credit, liens, and accrued violations. Find out early on if there is money owed on the property. Unsuspecting family members can waste months preparing to sell only to discover during lien searches the sale cannot be completed.
  • Search For Documentation – Search the inherited home for financial and vital documentation, including wills, trusts, life insurance policies, deeds, titles, bank statements, stock certificates, retirement benefits records, tax records, and birth certifications.
  • Look Through Personal Items – Inherited homes contain priceless family heirlooms: photo albums, videos, and personal effects. If you discover expensive items (artwork, gold, jewelry), contact the American Society of Appraisers to select an accredited appraiser.

There are two main routes to sell a probate home: sell to a cash investor or list on the local MLS.  Inherited homes commonly are in disrepair because elderly owners cannot keep up with maintenance.  Cash investors will buy your ugly houses fast for cash, fix it, and then re-sell on the open market.  If the home is in good condition, and you can wait 3-6 months, listing the home on the MLS may be a better bet and can yield top dollar.  Choose a trustworthy agent for listing on the MLS.  In Miami-Dade, Broward, and Palm Beach Counties, we recommend Cheri Kaplan.

Contact a qualified tax professional to understand the ramifications of the home sale.  In selling a home you do not reside in, homeowners pay “capital gains tax” – tax on sale proceeds above the original purchase price plus improvements.  When you inherit a property, however, you are entitled to important tax benefit called a “stepped up” tax basis.  This means you are only taxed on sale proceeds above the current market value at the time of owner’s death.  Some states have additional estate taxes (taxes paid based on the value of the estate) and inheritance taxes (taxes paid based on amounts inherited) – Florida does not have these taxes.  The federal government requires filing an estate tax return for estates with gross assets exceeding $5,450,000.

Moving InMove In!  If an inherited property is in good condition and you need a place to live, moving into a probate home is a great solution.  This allows more time to look through the decedent’s belongings.  If there are multiple heirs, the person moving in can pay rent to the other heirs.  Make sure to investigate property tax, homeowners insurance, utilities, wear and tear, and loss of potential tax breaks (i.e., senior citizen tax breaks).  Be prepared: home ownership is expensive.

Talk to a tax professional about the “capital gains tax exclusion” – a huge upside of making an inherited home your residence.  You are eligible to be taxed if you a sell a probate house outright.  However, if you own and reside at the property for 2 of the last 5 years prior to sale, you are eligible for a $250,000 tax exclusion ($500,000 for married couples filing jointly) on the home sale.

Rent It Out.  Renting a probate home sometimes makes sense.  Experienced landlords can turn inherited homes into profitable long-term rental investments.  Renting is a buFor Rentsiness – to be
successful you must budget for property management (either DIY or property manager), tax (on the property and rent profit), landlord insurance, tenant screening, leases, maintenance, vacancy, eviction, and accounting.  Incorrect math can mean losing thousands.  Zillow, Rentometer, and most preferably a local leasing agent, can advise on expected monthly rents.  If you’re in Florida, contact us free of charge to discuss rent budgeting.

Renting can save an inherited home from foreclosure.  Properties with mortgage debt (or other liens) more than the market vaue cannot be freely sold.  To prevent foreclosure you must make the monthly payments, but most people can’t afford to take on a deceased relative’s mortgage.  Renting can fix this problem.  If rent profits are higher than the monthly mortgage payment, rent the home and use profits to pay down the mortgage.

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Call Us (954) 676-1846 or Fill Out This Form For Your FAIR Offer.

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