A Real estate transaction, even under the best circumstances, is an emotional time for most people. When you add making decisions over a recently departed loved one, a real estate transaction can be especially stressful. There may be mixed emotions, confusion, and even disputes between multiple heirs that could potentially make the whole process take longer than necessary.
Below are a a few tips that may help guide you if you have recently inherited a property.
- Educate yourself on the existing property.
Learn the terms of the existing mortgage for that can help you determine a time frame in which you should or need to make your decision. For example, a non-family member who inherits a property with a due-on-sale clause may need to sell quickly to cover the cost of the loan whereas a client who inherits a property with a reverse mortgage may have more time. Generally speaking, they will have about six months to decide whether to sell the home or get a new loan to pay off the existing mortgage.
2. If there are multiple heirs, know your options.
If there are multiple stakeholders in the property issues may arrive when an agreement on how to handle the property cannot be reached. It is best to know your options and try to reach an amicable solution. For example, if one client wants to keep the home but the other wants to sell, options include an immediate buyout or a long-term promissory note. Another option could be that the clients may be interested in renting or selling the property and splitting the profits. Whichever choice is made, it is best to know what the options are before confrontation occurs.
3. Perform a Comparative Market Analysis (CMA) and an appraisal.
It is extremely important to know and establish the value of the home at the time of the owner’s death for probate inventory purposes. It is typically required by the IRS to get an appraisal of the property for assessing capital gains or inheritance taxes. There is no inheritance tax in Arizona but If you have a loved one who lives in another state, you should check the local laws.
4. Decide to sell, rent or move into the property and what comes with that decision.
Each option comes with its own costs that should be reviewed and understood. The following are just a few of the options and related costs:
- Selling — Listing, staging, and closing costs
- Renting — Property management and maintenance costs.
- Moving In — Maintenance and HOA fees.
Each option discussed also comes with potential state, federal and capital gains taxes. Know your options and educate yourself. At Team TLC we are here to help guide you and give you the best possible advice when dealing with matters of property ownership.