Dealing With Inherited Home: Best Practices For Families

inherited-home
POSTED ON February 23, 2017

Dealing With Inherited Home: Best Practices For Families

BY: Joe Theriault / No Comments / CATEGORY: blog, probate property

All property, for example inherited home, has both economic and noneconomic value. In many instances, the former vastly outweighs the latter, because very few people have an emotional bond with a box of corn flakes. But that is not always the case; in fact, the opposite is sometimes true. There are people reading these words right now who have half-restored cars sitting under tarps in their garages, boxes full of half-forgotten memorabilia in their attics, vintage clothes in the backs of their closets, and the list goes on. Yet despite the fact that these items may have a substantial economic value to someone, they will stay where they are, because of the emotional value that these items have to their owners.

An inherited home nearly always has an emotional value that is almost equal to, or even eclipses, the economic value. Rather ironically, heirs that have not seen the house in decades often have the strongest feelings, because the first glimpse of the property brings back a rush of positive memories from childhood sleepovers, family gatherings, holiday parties, first kisses, and the list goes on.

When selling such property e.g inherited home, the first order of business should be to deal with the emotional ties. This process is not easy, because in many cases, the deceased owner was a parent whose funeral took place only a few days earlier. Adding fuel to the fire is that fact that disputes between heirs are extremely common; in fact, it is very rare for all the heirs to agree about anything. Moreover, these disagreements are sometimes rooted in unresolved sibling rivalry issues, and with no parent there to mediate these disputes, things can quickly get out of control.

A realtor who deals with these matters cannot resurrect the deceased loved one and cannot create family harmony, but such a person can help heirs work together to sell the property in a way that respects the wishes of the deceased, meets the needs of the heirs, and maximizes economic return.

Dealing with Family Disputes

Inherited homeThese matter may be inevitable, but that does not mean they are unmanageable. An overarching principle here is that litigation is a last resort. Legal proceedings nearly always divide the heirs even more and take away any peace they may have had. Litigation is also very expensive in terms of both time and treasure, and most people do not have extra money or time. Finally, contrary to popular myth, litigation hardly ever results in a final resolution, because in most cases, the emotional conflict that brought the action about in the first place still remains. So, another overarching principle is that an imperfect agreement is light-years better than no agreement.

Many times, one or more heirs want to retain the house while one or more want to sell it. If a cash buyout is not an option, for whatever reason, there are some options available. Assume A wants to retain the house and B wants to sell it. Depending on the provisions in the will, it may be possible for B to have a larger share of some other property, such as a bank account, in lieu of the house sale proceeds. Such a result is often possible because many wills state that the heirs will get an equal share of the property but does not stipulate how that division will come about. Or, A might make monthly payments to B to pay off B’s share; in some cases, B might receive a deed of trust that authorizes foreclosure if A defaults.

A related problem sometimes crops up in these situations, if one of the heirs is already living in the house. The new owner may well agree to allow the heir to continue living in the house at a reduced rent for a period of time. If the situation is more complicated (e.g. two heirs want to sell, one heir wants to stay for free, and the three are at an impasse), more aggressive legal action may be necessary.

Benefits of Selling inherited home

Selling inherited property has both emotional and financial benefits, and these points are often sufficient to convince reluctant owners to sell.

It may seem obvious, but it is important to remember that memories are memories and nothing can change them. So, to return to the examples discussed earlier, a new owner does not change the fact that Uncle Sam dressed up as Santa Claus and distributed toys to the nieces and nephews. If the heir has bittersweet memories about the house, which is often the case, a sale is normally a cathartic experience that offers release. Finally, there is a tradeoff. Retaining the house means taking time out to deal with the legal and financial issues, and telling your son that you have to cancel the trip to the ball game to meet with a plumbing contractor may not be an option.

As for the economic benefits, it is much easier to divide cash among the heirs than it is to divide legal interests in real property. There may also be some significant tax benefits, because under current law, the capital gains tax is calculated differently for inherited home. Some heirs have legitimate concerns about the cost of necessary updates and repairs, and in some cases, these expenses can erode a significant portion of the sales proceeds. But a realtor who is experienced in these matters is well-positioned to offer advice as to what repairs are absolutely essential, which ones are optional, and which ones are better left to the new owner(s). The answers to these questions vary greatly based on market condition, which your inherited home realtor is keenly aware of.

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