The real estate world is highly unpredictable. There are times when things happen suddenly and it is hard to deal with them. For example, if someone dies and leaves the property for you, it can be difficult. It could take months to transfer the property because many laws need to be followed. And when you finally do inherit the title, it might be in dire need of repairs, and you might not know what to do at all.
Common challenges when selling an inherited property
Restricted finances for the repairs
In an ideal scenario, you could fix up your home whatever way you want. But in the real world, you might not have enough money to do this. If this is true, then you can’t buy new things for your home. In general, people want to buy a house that has been fixed up already and they won’t pay more for it than it costs new. So if you don’t have money to fix up your house, then some people will only buy it if they get a discount on the price of what new homes cost.
The burden of the carrying cost
If you keep the property for a long time, you have to pay carrying costs. You have to pay taxes, insurance, and other expenses every month. The payments are much higher than if you sell the property right away. It is better for your finances to sell your house as soon as possible so that you don’t have big bills later on. Thinking that not making repairs saves money is an illusion as you lose that money later on in carrying costs.
Inheriting a property that is in dire need of fixing
A lack of funds might put you in a tight spot to sell the house in its current condition. You give up the responsibility of the home’s improvements and it can be a problem for many reasons. If buyers don’t want to fix anything, your buyer pool will get smaller. Not many people have enough money for a down payment on the house, let alone make any changes. The only people who might buy your home are investors or other people looking for a discount. If you inherit a house, it is possible to make money off of it. But there are many expenses and fees that will come with an inherited property that need to be paid before getting the total profit. Houses with no equity will most likely not make much money because they may not get many offers.
No Knowledge of the industry or the local market
You can inherit property from someone who is in your extended family. You might be the only one they could have chosen. It would be ideal if the property were located where you live or near where you live. But what if it is on the other side of your state or even on another side of your country? You need to have a different strategy depending on what you want to do with it. If you have money, make sure that it is used wisely because if not, it would be like throwing away money. To make maximum profit from your sale, you need to research what improvements will be best for the market. By studying online for a bit and talking to people who work in the field, you can learn more. Talk with at least three different contractors and real estate agents before deciding who you want to work with.
The best period within which sales should be made of the inherited property?
The probate can take a long time. You need a will to be done. When you have the house, it is hard work. It takes a long time to do repairs and other things. If there are many improvements, you can choose two options. One option is to fix the house now because it might take months or years if you wait for an offer from someone else who wants to buy your home. Another option is to take the first decent offer that comes your way, else it could be a while before another offer comes your way.
How much say does a sibling have in the sale of a property?
A properly drafted will/trust will have a chosen executor, but if that is not the case, then it would be ideal if the heirs agree about what to do with the property. If that is not possible, a buyout can be arranged, or the siblings can file for a partition.
Tax calculation on the sale of inherited property.
Capital gains under the usual scenario are charged against the difference between the sale price and the buying price of the property. With inherited properties, the home is appraised after the owner’s death and given a market value. If you bought a house for say $100,000 and sold it for $250,000, your tax basis would be $150,000. But that isn’t how it works for inherited properties. If the property’s value is, say, $500,000 and it was sold at $600,000, then the tax basis would be $100,000 and not the amount that the owner bought it for. This is called a “stepped-up tax basis.”
A lot of this hassle that comes with inheritance is because it comes along with a lot of paperwork. To make your life easier, try out Docupile. Docupile, a cloud based document management system can be used not only for inheritance based paperwork but for much more than that including but not limited to accounting, HR processes, and much more.