At the risk of giving our loyal readers (both of them) to many number to deal with too soon, there are basically three steps in selling inherited property, but only two of them are financial.
Step one is to recognize the emotional ties that the heir probably have to the property, and deal with them. Consider having a backyard barbecue with homemade ice cream just like the old days or, if circumstances warrant, stay in the house for a few nights or even a few weeks. Because older houses deteriorate so quickly, real property shouldn’t be vacant, so the stay is also a good idea for financial reasons.
Once this catharsis phase is over, bring in a realtor or other professional to go over the financial aspects. The focus in the initial meetings should be on information and options, because it is almost impossible to have too much of either. Go over issues with the house, and prioritize repairs as essential (structural or code-related), necessary (plumbing or climate control), and cosmetic (everything else). Then, look at overall market trends and a few comps in the neighborhood. This information gives the heirs the foundation to make a good decision in the third area.
Keep the House
This option generally requires almost no effort, and it is even more attractive if family is already living in the house. Be realistic about the situation and keep a close eye on the occupant, at least for a few months. If Cousin Ernie doesn’t pay the taxes well before the due date or lets the grass get too high, consider charging a negligible rent and hiring a property manager.
As discussed in a previous post, auction sales can be arranged with a few phone calls or mouse clicks and closed within two or three months. Personal items do not have to be cleared out, because they all are property of the new owner. Sometimes that fast pace is a good thing, and sometimes it is not. Financially, the house will most likely sell for below fair market value, but not substantially below FMV.
As a rule of thumb, a cash buyer will pay about 60 percent of FMV, and in most cases, that means tens of thousands of dollars. The good news is that, like auction sales, the property is sold “as is” and closing normally occurs within a few weeks. Another rule of thumb is that the worse market conditions are for sellers, the more attractive auction and investor sales become.
For Sale By Owner
Serving as your own realtor is a very hard way to make 6 percent, which is the percentage of the sales price that you’ll save in commissions. In exchange, you must do all the legwork and paperwork, market the house, show the house, negotiate the sales price, and probably attend the closing.
This option is very good if market conditions are favorable, the house needs little work, and obtaining top dollar is a priority. Listing with an agent also means that you have a professional in your corner who can advise you every step of the way. Even in the best of times, it may take several months for the house to sell and the closing to happen, so be prepared for a wait.
To deal with the financial and emotional aspects involved in selling inherited property, contact us today. We also invite you to fill out the form at the right to stay abreast of the latest news on inherited property.