When You Inherit a House – Things That Can Go Wrong

Think you might inherit a house soon . . . perhaps you already have? Are you ready to make the decisions and deal with the family issues that might come up? 

So we want to share a few things that can go wrong when you inherit a house.

When You Inherit a House

What Can Go Wrong When You Inherit a House

The Tax Man Wants More Taxes Than You Thought

Well, there are inheritance taxes that you might not have thought about.  Talk to a CPA about the estate and the taxes. This would be the best way to determine in advance what you might owe.

And what about the house? Real estate taxes might be owed, and your loved one could have fallen behind on payments. We sometimes work with sellers who discover that Grandpa hadn’t paid his real estate taxes for several years. These back taxes must be paid when the house is sold. Be sure to check with the county to see what is owed. Also, keep an eye on your loved one’s finances to help ensure they don’t fall behind.

And there are transfer taxes in some areas.  A local title company can tell you what those fees might be when you sell an inherited house.

The Mortgage May Be Bigger than You Thought when you Inherit a House.

Back in the day when an elderly relative passed, they had paid off their mortgage years earlier.  Today, it is quite common for older people to get a mortgage to buy a new home. You will also see them getting a reverse mortgage to pay their bills in retirement.

You need to be aware that heirs who inherit a house can often take over the typical purchase money mortgage. Just remember to talk with the lending company to learn the process to take over and start making payments.  However, with a reverse mortgage, heirs cannot take it over; they must pay it off, usually by selling the home.

But what if the heirs do not want the house and the amount owed is more than the house is worth?  We have come across a few sellers in this situation and unfortunately, there are few options.  With the reverse mortgage, let the lender sell the house and get what they get.

But in a more traditional mortgage, there might be a few options.  By far the easiest is to let the bank foreclose, sometimes there is just no other choice.  Other times you might be able to move in and start making payments or you might find an investor buyer who would take over the payments.

The House May Need Repairs and Upgrades when you Inherit a House

This is by far the most common problem that comes up when families inherit a house Older relatives sometimes live in the home they have always lived.  They maintained the house, keeping the roof and furnace in good condition, but the interior remains outdated.  Other times they just didn’t keep the house up at all, they didn’t have the physical capability or the finances to keep it up.

If you plan to keep the house and live there, you’ll either have to endure living in a run-down home or use leftover funds from the estate to make repairs and upgrades.  But if you plan on selling it, you may need to make the repairs and upgrades to get top dollar.  We work with many sellers who have inherited a house that stepped out of 1975 with the wallpaper, the gold and avocado and the shag carpets.  They don’t want to make any updates or repairs, they just want it gone.  That’s where we step in to help.

Just be aware of what it will cost in time and money to replace the roof, the furnace, the air, to upgrade plumbing and electrical.  On the average house, we buy that is about $20,000.  Then there are updates to the kitchen ($15,000), the baths (5,000), new windows ($10,000), fresh paint inside and out ($6,000), new flooring ($5,000 to $8,000), lights, fixtures, doors appliances and more.

You May Have Problems with Relatives and Joint Heirs Who also Inherit.

Another big problem is when you have to share.  What if you want to sell, another wants to move in and another might want to fix it and sell it after that.  So what can you do?

In most states, joint heirs of a home are considered tenants in common, and one heir can force a sale if it comes to that. The process, however, is expensive, and the emotional and familial consequences are likely to be highly unpleasant.

We once worked with three siblings that all agreed to the sale, however, the sister was concerned that if we bought the house her brothers would not pay her the 1/3 of the proceeds.  We had to work with them to find a solution so she was willing to sign the legal documents.

We’re ready to help you reach your real estate goals when you inherit a house and will be glad to answer any questions, contact us today.

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Kim Tucker

Kim Tucker along with husband Don and son Scott have been buying houses across the Kansas City Metro since 1999. They specialize in solving problems, renovating homes, and fixing up the neighborhood. If you need help selling give them a call they make cash offers and because they are also licensed Realtors, they have a few other tools in their tool box.

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