What do we do with this house 500 miles away from where we live? This was the question my wife and her sister asked when they inherited their mom's house. We didn't know anyone in the area and, even with twenty years of real estate sales experience, I lacked clarity on exactly how to handle an inherited house.
We knew we needed to start with the basics and get a few questions answered. Once we were able to answer these questions, then we were able to make an informed decision on what we should do next. This gave us the ability to put together a plan of action that limited the emotions and allowed us to find a united resolution.
The following are the 5 questions to ask when you inherit a house.
1. What is the probate policy for the local area?
Unless there was advanced estate planning, the house and the estate will have to go through the local probate process. The first place to start is with an attorney that specializes in probate law. The attorney will answer any questions you have and guide you through the probate process.
If you become the executor or personal representative of the estate, the attorney will guide you through the necessary steps to correctly pass all assets (including the house) to the rightful heirs.
Once you know the process, you can begin asking questions about the home that will bring clarity on the direction to move.
2. What are the monthly expenses?
Is there a mortgage? Are there association fees? How much will electricity, water/sewer, landscaping, insurance, taxes, and general upkeep cost? These are all questions that will help you identify any ongoing expenses the house will have.
Even if the house has no mortgage, there will be expenses and general maintenance needs. Compiling a list of monthly expenses reduces the chance that you will have surprise expenses.
Once you answer the question about monthly ongoing expenses, then you can move to the next question.
3. What should I do with the house?
You have three options with the house. You can keep the house for your personal use, rent it or sell it. Each option has advantages and disadvantages. Keeping the home for your personal use gives you the ability to own a home that more than likely will have equity. Renting the home provides passive income and selling the home allows you to convert the home into cash.
The best way to decide what to do with the inherited house is to take three pieces of paper and draw a line in the center of each. Pros on the left and cons on the right. Once you have done the pros and cons for each of the three options, the answer should become clear.
4. What is the house worth?
No matter what you decide to do with the house, knowing the value is helpful. Whether you are dividing assets for multiple heirs or trying to decide about selling, it is hard to move forward without knowing the value of the asset.
Most Realtors™ will be glad to give you a free, no-obligation comparative market analysis of the value. The analysis will include recent sales of properties that are similar to the house you have inherited. It will also include similar properties that are currently for sale. They will then provide you with an estimated market value.
If you have multiple heirs, you may want to have an appraisal done by a state certified appraiser. The state certified appraisal will usually cost between $300 and $600 depending on your location and the value of the home.
5. When can I sell the house?
Due to the expenses of maintaining the home or the fact that the heirs are not located in the area where the property is located, most inherited homes are eventually sold. Since the ongoing expenses can mount quickly, some heirs wish to sell the home as soon as possible.
Once the personal representative or executor is designated by the court, he is either given limited or full authority to sell assets. If he has full authority, he can sell the real estate at any time after his appointment for any price he deems appropriate. If he is given limited authority, the property can still be sold, but the sale may require court approval.
Either way, the property can be sold once the personal representative is appointed by the probate court.
The biggest mistake most people make
Very few things in life are as difficult as grieving the loss of a loved one. Emotions run high and the additional stress of settling an estate can become overwhelming. This is why choosing professionals to help with the process is one of the most critical decisions you will make.
Find an attorney with extensive probate experience that you feel comfortable working with throughout the process. If you decide to sell the house, find a Realtor™ that knows the market, has a track record of success and will communicate with you throughout the process. Don't be afraid to interview multiple people before choosing a professional.
If you will ask the questions above and choose high quality professionals to work with, you will be able to make the best decision for your situation.
Photo Credit: Flickr/welcometoalville