Selling a house in probate is a decision we will all have to make at some point in our lives. A parent has passed away and left the family home. Now, the heirs are faced with the uncertainty of what to do. Should it be sold? Rented? Or should one of the heirs keep it for themselves?
At this point, a wrong decision can lead to hardships down the road. Family disagreements, or financial difficulties, are just a couple things to consider when looking at the overall picture. If you have inherited a house from Probate, below are some things to consider before making any final decisions:
1) Existing Mortgages:
In many cases, homes in probate have been paid off for some time. But this is not always true. Frequently, homeowners may refinance a house to cover living expenses or repairs on the property. Sometimes Social Security or pension benefits are not enough to cover costly expenses like doctor bills or a new roof. A cash-out refinance is common. The same is true of a reverse mortgage. This is structured to give the homeowner payments for some of their equity over time, usually to cover expenses for lack of income.
An heir can only assume a parents’ mortgage if they plan on living there as a primary residence. If the plan is to rent the property, banks will almost always require the heirs to refinance the property into their name.
Solutions: If the house does have an existing mortgage, the heirs can simply pay it off in full. This can be done by either pooling cash or selling the house. At this point, the pressure from the bank is removed, and the heirs can either decide at their leisure how to proceed or split the proceeds.
In the past few years, real estate taxes have had a significant exemption. Moreover, the “step-up” provision allowed for properties to be assessed lower than their current market value for tax purposes. For example, your parents bought a home 35 years ago for $20,000, and now the home is worth $90,000. With the “step-up” provision, the heirs only have to pay real estate taxes on the difference between the current value at the time of inheritance and the new sale price. Without the “step-up” however, you would pay taxes on the full amount of the gain-In this example, $70,000.
Solutions: Visit a tax professional and ask about the tax consequences–or benefits–of a sale. Tax laws frequently change, so what was law last year may not necessarily be law today.
3) Assess the Condition:
The condition of the property is very important to future decisions to move forward. Many times inherited properties may have outdated systems or other problems. This can make a house unsuitable for sale or renting. When a prospective home buyer purchases a house, there are certain inspections by the bank that must pass. This is especially the case with FHA or VA approved buyers, which is the majority of buyers these days. These buyers cannot buy a home as is if these conditions exist. The roof, mechanics, and foundation are just a few items that must be in working order for the bank to finance. Selling the house as is may be very difficult to these types of buyers.
Solutions: If the house has not been upgraded in a long time, consider making the repairs yourself. Or, if funds are not available for repairs, consider contacting a home investor to buy the house as is.
4) Consult the Other Heirs:
Certainly these decisions will all depend on the agreement of the heirs involved. Some heirs may need cash right now. Others may want to keep the house for other family members. Still others may want to rent it or live in it themselves.
Sometimes, heirs who inherit a property jointly are considered “tenants in common.” In these situations, it is possible for one heir to force a sale of the property. However, this can be damaging to relationships between siblings. Otherwise, the Personal Representative can sell the property with the agreement between all parties.
Solutions: Communication is the key here. The family members should consider all options before making any final decisions. But also consider that a vacant house can deteriorate if left unmaintained for too long. Also, depending on the location, vandalism is possible. Decisions should be discussed sooner rather than later.
If you or someone you know is selling a house in probate, call us today and find out how we can help you. We offer a free consultation to homeowners, and we can help you with solutions for selling your house as is. Call us today at 405.259.2488
We buy houses in the Oklahoma City area for cash. Contact us today for a free estimate.