Although it can be a result of a rather unfortunate life event, inheriting a house can change your life forever. If you are in a position to determine what to do with the property, an inherited home can be a cornerstone of your long-term financial well-being. We understand that such a sudden change can be overwhelming, and you may have many factors to consider when you're deciding what to do with this inheritance. With this in mind, Our REALTORS® have five pieces of advice they give all of our clients to help them decide whether it's in their best interest to sell it, rent it, or keep it as a primary residence.
- Accurately Assess the Debt Situation
It can be difficult to process this when you're going through a period of grieving, but in some cases, an inheritance can be more of a burden than a helping hand. Before you make any plans for the disposition of the property, you need to get a handle on any debt that you inherited along with it. Does the property currently have a mortgage, or is it paid off? If it does have a mortgage, does it have sufficient equity to make a sale profitable? Were any financial instruments such as a reverse mortgage used to leverage this equity? Can you afford the mortgage payments every month? The answers to these questions will be crucial when you're deciding what to do next.
- Make Arrangements With All Stakeholders
This may be the most difficult step to take before you decide whether you're going to keep a property or list it with other Mansfield homes for sale. There may be other relatives you jointly inherited the property with, or a bank could have a financial interest that must be represented. You need to coordinate with all entities involved in the ownership of the property to avoid any potential legal entanglements. If you decide to rent or sell, the full proceeds may not be yours to keep.
- Understand the Tax Implications
Whether for good or ill, inheriting a home will have a huge impact on your taxes. The inheritance will have an immediate impact on your net worth, and you'll be responsible for all property taxes associated with the home unless the ownership is shared. You will also need to determine the market value of the property at the time of the death of the person from whom you inherited the property. This will be important if you decide to sell, because it will be the tax basis for capital gains even if the value changes before you sell it.
- Seek Out Expert Advice
Getting a full picture of your debt and tax situation may require you to hire both an appraiser and an accountant to determine the fair market value on the date you inherited it. However, if you decide to keep the property and assume residence, this may also entitle you to significant tax breaks if it's your primary residence. In any case, you should seek out expert advice to ensure that you aren't blindsided at tax time.
- Make Your Decision With A Cool Head
You shouldn't make a hasty decision but rather take the time you need to make the right decision for you and your family. You may have sentimental feelings that don't align with what is ultimately best for you, or you may need to come to an accord with others in your family.
If you need any help making these tough decisions, we're here for you. Contact us at Haring Realty for assistance with your inherited property.