Inheriting real estate can be a daunting idea to think about. There are many legal and financial responsibilities to think about on top of dealing with the loss of a loved one. Being a beneficiary of real estate has a lot of moving parts.
Here are the steps to take if you happen to find yourself in this position.
Step 1: Meet with a probate attorney
First thing to do is to get together with a probate attorney to determine who has assumed the rights associated with the property. This will help give a full picture of what you have inherited so you can fully asses the situation.
You'll want to know if there are any past due taxes, liens, HOA dues or any other debts attached to the property. You are assuming the property, so these liabilities will be your responsibility. Also, find out if there are any specific covenants regarding the property and its future use.
Step 2: Hire a property inspector
It is recommended that you treat inherited property as if it were a home you were purchasing for yourself. This means having the property inspected. This will typically cost between $400-$600 but will save you from potential future headaches. Ask your real estate agent for a good recommendation.
Step 3: Find out what obligations, if any, are attached to the property
In a perfect world the property you inherit will be free and clear, meaning it is paid off and there are no outstanding liabilities tied to it. This is not always the case. Making yourself aware of any obligations is crucial. You will obviously be curious to know the value of the property, however, what you need to know (ASAP) is whether there are any ongoing obligations or imminent obligations. These can include payment of assessments or property taxes, or landlord-related obligations.
When inheriting property that holds a mortgage, it really depends on the loan terms. First you want to find out if the death of the borrower triggers a default on the loan or if it is required that the loan be repaid immediately. If you decide that you want to hold onto the property, then you need to know whether you can pay off the loan or have the ability to refinance.
Step 4: Decide whether to sell or keep the property.
As soon as you gather all of the information above, you can decide what you would like to do with the property. You'll want to determine the property's value for the sake of selling or renting it. Owning a property that has been inherited can give you a significant boost when it comes to building wealth. You may want to liquidate and sell the property for a lump sum payment but consider the long-term potential of renting it out. You'll want to discuss these options with your Realtor to see what works best for you.
Many times people who inherit properties are not local to the property itself, so they opt to sell.
What should you do if you inherited a property with other people?
Sometimes multiple people inherit a property through a will. If this is the case, there are three options: 1) You can keep and all own the property together. 2) One person can buy out the others and take ownership. 3) Everyone can decide to sell and split the profit. Typically, people go with option #3.
Becoming a partner in real estate through inheritance can be complicated. If you do decide to keep the property jointly, it is highly recommended that a written agreement is in place and clearly states each person's responsibilities and right to the property.