Congratulations! You’ve inherited a house! But wait—if you’re like many heirs, you may not feel like celebrating just yet.
An inheritance, especially something as involved as real estate means decision time for you and possibly joint-heirs. If you’re standing at the front door of your inherited home and wondering what to do next, this post is for you.
We’ve put together information we hope helps you learn a little more about the next steps to take when inheriting property. Read this before you decide whether to move in or move on and sell the home.
The Business Side of Inheriting a House
First, try to separate the emotional side of your inheritance from the business side. Taking care of the previous owner’s house-related business is now up to you.
Read Also:
- Can Praying Really Help You Sell Your Home Fast? Let’s Find Out!
- Home Improvement Ideas to Increase the Value of Your House
- 7 Simple But Proven Ways to Increase the Value of Your Home
- 7 Easy Home Upgrades That Will Add Value to Your House
- How Can I Sell My House Fast for Cash?
- Hidden Cost of Selling a House
Insurance
One of the first things you should do is update the homeowner’s insurance policy. If the person you inherited the home from passed away, the policy is no longer valid. You’ll need a new policy to avoid any lapse in coverage.
Utilities
Next, take care of all utility accounts. Cancel things like cable and internet, but make sure you keep the lights, heat, and water running.
Lawn Care
Unless you plan on caring for the lawn and removing snow, you may want to arrange for lawn care. If you decide to sell the home, curb appeal will help get it sold quickly.
Next, we’ll talk about another business item—the mortgage.
What If You Inherit a Home with a Mortgage?
In a perfect world, when a person dies and they have a mortgage on their home, they also have enough liquid assets to settle the remaining mortgage. If not, the heir or heirs inherit the mortgage.
First, does the previous owner’s mortgage have a due-on-sale clause? If so, you may receive a notice of foreclosure when you inherit the house.
It’s possible, in some cases to assume the existing mortgage. You’ll need to evaluate your current financial situation and decide if you can afford to take on an additional expense.
The other option is to finance the home with a new mortgage. A new mortgage only makes sense if you can’t assume the current mortgage, or you can qualify for a lower interest rate and reduce the mortgage payment.
Get a Property Evaluation
Whether you decide to keep the home or sell it, have the property evaluated. Knowing the market value of your home just makes sense regardless of your decision.
It’s possible to get an idea of market value by using online home valuation tools. Unfortunately, those tools aren’t always accurate.
Talk to a few realtors and listen to their ideas about the value of the property. Or, hire a professional appraiser.
An appraisal can help you determine your listing price if you’ve decided to sell the home. Also, if you end up taking a mortgage out on the home, your lender will require an appraisal.
Did Somebody Say Something About Taxes?
Yes, you’ll deal with taxes even on your inherited home. The taxes we’ll discuss here are property tax and capital gains tax.
Property Tax
The first tax you’ll deal with immediately is property tax, and you’ll pay the property taxes on your inheritance for as long as you own the home.
The shock most heirs get is when they realize the state reassesses property tax at the current market value of the home. Be aware that certain states offer an exemption from reassessment.
Capital Gains Tax
You won’t deal with capital gains tax until you sell the house. At that time, you’ll pay tax on your profit.
The formula for calculating capital gains tax is to subtract the home’s market value when you inherited it from the value when you sell.
You can subtract some things from your profit such as the real estate agent’s commission. Also, if your adjusted profit amount is less than the home’s value when you inherited it, it’s possible to claim a tax loss.
You could also bear responsibility for other inheritance taxes. To avoid tax confusion, consider talking to an accountant.
Love it or List It
After taking care of the business tasks associated with inheriting a home, you’ll need to figure out if you want to keep it or list it on the real estate market. Consider these points when making decisions about your inherited property.
- Potential property tax increase based on reassessment.
- A home inspection could reveal unexpected maintenance or safety issues.
- You already own a home you love.
- The possibility of leasing the home long-term, or converting it to a vacation rental.
Don’t forget about co-heirs. If you have siblings or other relatives who inherited the home, they’re joint owners with you. Joint owners must agree on what to do with inherited property. Also, if you’ve inherited the home with your siblings and decide you want to live in it, you’ll need to figure out compensation for them.
I Inherited a House and Want to Sell It
If you’ve mulled over your options and decided to sell the house, you’ll start the listing process.
You can either sell the home as a for sale by owner (FSBO) or work with a local real estate agent. Whichever path you choose, you’ll come up with a marketing plan and plant that for sale sign in the front yard.
Another thing to think about is whether you should invest in home repairs or renovations. If the home hasn’t had any updates for several years, you may want to make a few small improvements. Consult with a real estate agent and get their opinion first—no need to waste money on things that won’t affect the home’s value.
Enjoy Reading Articles Like This One?
If you’ve inherited a house, hopefully, this post helps you as you make major decisions about your next steps.
Taking care of things like utilities, insurance, property taxes, and a mortgage can feel overwhelming. Take things one step at a time and don’t hesitate to ask for professional help where needed. Once you’ve worked through the details, you can decide whether you want to keep the home, or sell it and let someone else enjoy living in it.
If you’ve enjoyed this post, check our archives for more articles on homes and how to enjoy living in them.
