In this article, you’ll find a breakdown of your options should you inherit a property. Information includes not only what options you have available but also what unexpected costs you may face.
Keep reading to make a fully informed decision about what to do with your inherited property.
Understand Your Available Options
“I’ve just inherited my parents’ house, now what?” — it’s common to feel confused about what happens when you inherit a property.
There’s a lot to think about, so it’s best to create a short-term plan while you consider your options.
This plan should take into account the immediate expenses you’ll have to pay, including:
- Mortgage
- Homeowners insurance
- Property taxes
- Utilities
- Maintenance costs
You’ll also need to think about what you want to do with the property. There are three primary choices — sell it, rent it out, or live in it yourself.
For example, if you’ve inherited your grandmother’s house, the nostalgia may want you to make it your own.
However, if it needs serious updating or repairs, or even has a tax lien on it, you may want to consider other options.
No matter what, the decision is very personal, even if it will require some effort to get to your ultimate goal.
3 Alternatives to Consider After Inheriting a House
1) Sell the House
Selling your parents’ home after death is an ideal solution if you can’t afford to keep it, especially if the house in probate can be foreclosed on because of delinquent payments.
Home ownership cost is more than paying the mortgage, since there are a lot of other expenses associated with ownership.
You’ll have to pay the annual property tax and get homeowners insurance. You’ll also have to pay monthly utility bills. Add in costs for potential maintenance and upkeep.
When all the numbers come together, it may be too great of an expense.
Before you are allowed to sell the property, normally, you should start a probate procedure first. Read our article on selling a probate property to understand how this process works. But in short, if a property is in probate, it can be sold during or after the probate procedure.
However, there are cases where you can sell a house without probate. For instance, often, a wife can sell her property after her husband’s death.
If you decide to sell, there are three primary ways to do it:
- Hire a real estate agent who will help establish a sale price, stage the home if necessary, and get the house sold.
- Market the home as a ‘for sale by owner’ property where you’ll manage all the staging and sale details. For Sale by Owner websites offer you various tools to do it.
- Connect with a real estate investor or a company that buys inherited property fast — they are highly interested in giving you a cash offer on your inherited home even if you inherited a house that needs work.
We discuss these ways in a more detailed article on selling an inherited house.
But in short, selling your house to an investor is the fastest and least complicated route.
What happens when you sell a house you inherited to an investor is that they buy your property fast and for cash, unlike most buyers who need to get approved for a mortgage first and to whom a realtor would advertise your house.
Also, investors buy properties in their current condition. Even if you inherited a hoarder house, you don’t have to worry about cleaning the property when selling an inherited house as is to a cash buying company.
However, an investor’s cash offer will reflect their costs for repairs and maintenance they’ll need to do after the purchase, as well as a discount letting them make their purchase profitable.
Selling to an investor will be even quicker if you can sell an inherited house before probate.
Keep in mind that you may have to pay capital gains tax when you sell an inherited house. The good news is that you can avoid it in some situations.
Read about how to avoid capital gains tax when selling inherited property. This offers a wealth of knowledge when it’s time for you to report the sale of your inherited home.
2) Rent Out the House
Based on location and local housing laws, renting the property may be a solid option to keep the home without living in it.
For example, if you’ve inherited your parents’ house, and this property is located somewhere with a beautiful view, it may make a perfect vacation rental.
If the property is somewhere more central, it could be a great long-term rental.
Although renting out the property allows you to keep the house without having to move into it, this choice does come with extra financial and time commitments.
To get the house in rental-ready condition, you may have to pay for repairs. There will also be moving costs upfront to remove personal items.
As a landlord, you’ll be financially responsible for repairs while the property is rented as well.
This could include fixing small things and replacing large appliances. You’ll also need to get landlord insurance, pay property taxes, and figure out how to pay taxes on your rental income.
If you hire a management company to save you time on the day-to-day with your rental, you’ll also incur fees for their services.
This may sound complicated and time-consuming. But if you can’t move in, this is probably your best option.
After all, if you do nothing with the house, it will stay empty and useless, deteriorating, losing its value, while requiring you to keep paying property taxes and utility bills for it.
We analyze the pros and cons of this option in more detail in our article on whether it is better to sell or rent an inherited house.
3) Move In to the House
If you can afford to keep the property you inherited, moving in yourself is an alternative to renting it out.
If you’re currently renting, you may just wait until your lease expires. But if you own the house you are living in, you are running into the same problem: what to do with it? Sell it or rent it out?
As with renting out the property, you’ll want to have a clear idea of the costs associated with living in the new home.
These include the loan (if you inherited a house with a mortgage), property taxes, insurance, and utility bills. You may also want to factor in any repairs or renovations you may have to do to the home as well.
When you’re taking over the existing mortgage on the property, you’ll want to work with the current lender to get your name added as the borrower.
You can also reach out to the lender if you’re able to pay off the mortgage entirely (you’ll still have to pay property taxes, though.)
If the home has a reverse mortgage, you’ll need to pay the lender back and refinance the home with new terms.
This type of mortgage is where equity in the home is used to avoid making monthly payments.
Final Words
Inheriting property from a loved one can provide you with a great opportunity. It can give you a place to live or become an additional source of income.
Or, you can sell the house that you inherited and get a lump sum of cash, which would be very helpful in accomplishing your life goals.
Lastly, the choice between these options may depend on whether or not you are sharing this inheritance with other heirs.
If so, this will need to be a collective decision. If they don’t agree with your plan, you can try suggesting that you buy them out of the property.
This process may require applying a loan with a probate lender to refinance an inherited property to buy out heirs.
Oftentimes, however, an executor can sell property of the estate without all beneficiaries approving.
It’s crucial to have a plan and acknowledge that the process could take a little more time than you expect.
There’s no wrong decision, though. Whether you sell, rent out, or live in the property yourself, you need to make the choice that works best for you.
