What to Consider When Trying to Sell an Inherited Property
Hey guys, this is Mike from Mike Buys Houses and I was recently speaking with a homeowner who inherited this property. He told me he was trying to just find out what options he had as well as what things he had to consider. He was basically just trying to find a guide to selling an inherited property, and so we spoke a little bit about what options he had and what things he would have to consider.
Before we get into that, I’d just like to offer my condolences. We started this process of buying homes due to this situation in fact, as my partner’s mom inherited property and she had no clue what to do. So we wanted to offer the options to homeowners who are facing this situation who inherited property that maybe they can’t deal with and they just need to get rid of. So if that’s something that you are considering then please reach out at 267-984-4765 or below.
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Selling an Inherited Property Checklist
So when trying to sell an inherited property, there’s a lot of things to consider. You’re going to want to make a rough list of all the assets that the deceased had as well as any bills and liabilities that you know of and you’re going to want to tally them up and just have an idea of the overall financial picture.
You’re going to want to collect any paperwork that you can such as any will paperwork that you can find or estate planning or a death certificate. If you have that at this point, just make sure you keep everything organized as well.
Start looking for some retirement account info and bank account info as well as any password lists that you can find because you’re going to want to be able to access all this account information. Then, also start thinking about in your head what options you have as far as paying for this property. You want to think through if there are monthly expenses associated with it, you’re going to have to reach out to the bank if there’s a mortgage and just let them know what happened. Typically, they’ll work with you to help you start making payments to make sure that it doesn’t fall behind.
Finally, you’re going to want to consider the taxes. So if you do sell an inherited property, the taxes that are due are going to be due on the amount that you sell the property for minus the fair market value on the day of death of the deceased. So you’re going to be taxed on that amount, but the actual tax burden will still be dependent on how the market goes as far as appreciation/depreciation on the property.
Take Time For Yourself
When selling an inherited property, there’s a few other things you’re going to want to also consider. First off, I always tell homeowners to consider themselves.
One of the philosophers that I follow always teaches the golden rule which everyone knows is doing to others as you’re doing to yourself. However, that also means to treat yourself like you deserve to be treated. A lot of us take great care of our pet to make sure that everything’s all well and good, but then we forget to do that for ourselves.
So the first thing I want you to consider is taking care of yourself because there is a grieving process. As I mentioned, we’ve all been through it and it takes time. Take some time caring for yourself if you’re going through this first.
Regarding the house, you’re going to want to consider the condition of the property.
- Are you going to have to do a lot of repairs before you fix it up or do you just have to clean it up?
- Do you need to rent a dumpster? How much does that cost?
You’re also going to want to consider the monthly payments.
- What’s the mortgage?
- Have you reached out to the bank already like we talked about?
- Also is it a reverse mortgage?
A lot of older homeowners opt for a reverse mortgage, which is where they collect money in exchange for their equity over time. If you’re inheriting a house with a reverse mortgage, usually you have less than one year to pay off the balance after death due to the terms of the reverse mortgage.
Another thing you’re going to want to consider is the house underwater?
- So is the mortgage more than the house is worth now?
- So are you gonna have to pay to sell the property?
So, say you owe $100,000 on the house but it’s only worth $75,000 now, due to perhaps there was a second mortgage that was taken out or maybe just changes in the market, it could be multiple things.
On the other hand, even if there’s just not a lot of equity in the house, it’s the opposite situation where you owe $75,000 and the house is worth $100,000 but it needs roughly $10,000 to $15,000 worth of work. Like I mentioned, if you’re going to list with a realtor you’re going to have to pay that 10% of commission. So you might be breaking even after you do the work, you may even lose a little bit of money.
So those are some of the things to consider when going through the mortgage.
Lastly, consider the other monthly payments you’re going to have to pay. The utilities, the taxes, the insurance, and you start planning out how you’re going to pay for all that stuff. Remember, you need to pay for these along with your current monthly payments that you already have.
So if you consider all that and you are determined to sell the property, what options do you have?
Options to Sell
There’s really three ways to do this.
You can list with an agent.
You may have to do a little bit of work to get the house ready. Typically, the agents don’t want a listing that has a house that’s dirty or needs a lot of work. So they may give you a list of things that need to get done before they’re going to list the property for you. Additionally, you’re going to need to consider the numbers. As we just talked about, it’s going to cost you money to list with an agent. You can refer back to some of our other articles where we talked about this, but we show the benefits of working with an agent as well because they’re going to bring you that big pool of buyers, they are experienced in negotiating and they’re going to be on your side.
The primary thing you are going to want to consider is how much money you’re going to make when selling the property. You can ask your agent for a Seller Net Sheet, which is going to show you how much money you’ll walk away with at the end.
If your agent can’t provide you with that Seller Net Sheet, then find another agent. This is a pretty simple and basic request and a lot of them aren’t willing to do this for you. If they are willing to do that, ask them if you’re guaranteed to make this money? If the house sells for the estimated sales price, then it should be obvious, but if the home sells for less, will they be willing to lower their commissions to make sure you walk away with that amount of money?
It’s very important when listing with an agent to try and figure out how much money you’re going to walk away with and when you’re trying to figure that out, you’re going to want to account for paying for closing costs, paying for commissions, paying for any repairs or fixing up the property. Then you’re also going to want to account for how much is still owed against the property versus how much you’re going to sell the property for.
If you sell it for $100,000, assume you’re going to pay about $10,000 in closing costs, commissions, fees, etc. and that way if you owe more than $90,000, know that you’re probably going to have to pay money to sell property. If you’re anywhere in that $80,000 to $90,000 range on a $100,000 house and it needs any work, then again you’re going to be breaking even.
Second option is to sell for sale by owner
Obviously you’re going to save on those commissions, those closing costs and most of the repairs. However, you’re going to exchange that for having a much smaller buyer network and you’re going to have to do a lot of the work yourself. You’re going to be marketing, you’re going to be doing the showings, you’re going to be doing the contracts and the negotiations.
Last option is to sell to a home buyer.
The house I live in is actually one of these situations. I bought the house as is and they were able to leave everything in the house that they didn’t want to take. So it was no work for them, as they didn’t have to do any repairs.
In this instance we did use an agent as that was what they were more comfortable with, so there were some costs for that, but typically when dealing with homeowners there’s no commission and no closing costs.
It’s Easy and “as- is”
Super simple sale with no repairs.
Selling an Inherited Property via Terms
The other option that I’m able to provide for them is to sell their property on terms, which means that they’ll collect money every month via installation payments and make interest on their money. A lot of homeowners like to do this because they like the residual paycheck and it’s basically like being the bank and collecting the mortgage.
So if that’s something that you’d like to explore then reach out to me at 267-984-4765 or below.