Did you know that the wealthiest families inherit nearly $1 million on average? Although this could come in the form of cash, jewelry, etc., it often comes in the form of property.
Interestingly, many people are not quite sure what to do with an inherited house. We put together a brief guide outlining what you should consider if you find yourself with this type of real estate.
Let’s get started.
How Do I Know if I Should Sell an Inherited House?
The first step is to ask yourself whether or not you want to keep the property. If it’s a burden or you simply don’t have the time or money to invest in it, then selling might be the best option.
You should also take into account any sentimental value attached to the house. If it’s a family home that’s been passed down for generations, you might want to keep it for sentimental reasons. However, if it’s a property that you have no attachment to, then selling might be the best option.
Other Reasons to Sell Your Home
If you can’t decide whether or not you should sell your home, there are certain factors to consider. These will help you determine if this is the best choice for you.
Listed below are some of the most notable.
You Don’t Want to Maintain the Home
One of the most significant reasons to sell your home is that you don’t want to maintain it. This can be a time-consuming and costly endeavor, especially if the property is in need of repairs.
If you’re not handy or don’t have the time to invest in the upkeep of the house, then selling might be your best option. This is important to consider, as maintenance can quickly prove to be a substantial expense.
For example, you may discover one day that your home is a new roof. This is something that could easily cost over $10,000, an amount of money that not everybody has on hand.
You Need the Money
Another key reason to sell your home is that you need the money.
If you’re inheriting other debts along with the property, then selling a home can help you pay these off. This is especially helpful if the debts are significant.
Additionally, if you have other financial goals that you’d like to achieve, the money from the sale can be used to help you reach these. A common scenario could also involve someone using the money from the sale to upgrade other areas of their life, such as purchasing a new car.
You Want to Invest the Money Elsewhere
Another reason to sell your home is that you want to invest the money elsewhere.
This could be in another property, stocks, or even a business venture. By selling your home, you’ll have the opportunity to use the money to generate even more income.
For instance, you could use the money that you get from the sale to create a diversified investment portfolio.
Over time, this could likely provide greater returns than keeping the house would.
Reasons to Keep Your Home
Of course, there are also several reasons why you might want to keep your home. These should be taken into account when making your decision.
Here are some of the most important.
You Want the Value to Increase
One of the main reasons to keep your home is that you want the value to increase. If you’re patient, this could happen over time. Additionally, if you make some improvements to the property, you can help speed up the appreciation process.
This is a great way to build equity in your home and see significant gains down the road.
You Want to Live in the Home
Another reason to keep your home is that you want to live in it.
This is especially true if you have fond memories of the property or if it’s located in a desirable location. By living in the house, you’ll be able to create new memories and enjoy all that the area has to offer.
The house might also be in a prime location. For example, could be very close to your city’s local attractions, your job, etc.
You Want to Rent It Out
If you don’t want to live in the property but don’t want to sell it, another option is to rent it out. This can be a great way to generate income and offset the costs of ownership.
Additionally, if you eventually do decide to sell, the rental income can help increase the value of the property. This is due to the fact that many buyers are looking for properties they can purchase to use as a passive income stream.
If they see that the house is able to be rented out to tenants and generate income, they will be likely to pay more for the property.
You Want to Avoid Capital Gains Tax
Many people are unaware of the fact that you can mitigate capital gains tax by living in the home for at least two years after you inherit it. This is a great way to keep the property without having to pay taxes on the sale.
In many cases, this could prove to be tens of thousands of dollars.
How Much Do I Have to Pay in Capital Gains Taxes?
This depends on a few different factors, such as your tax bracket and how long you owned the property.
To clarify, if you sold the house less than a year after inheriting it, you would pay short-term capital gains taxes. These are taxed at your marginal tax rate, which could be as high as 37%.
If you owned the property for longer than a year, you would pay long-term capital gains taxes. These are taxed at a lower rate, which is either 0%, 15%, or 20%, depending on your tax bracket.
What Are the Challenges You May Experience When Selling?
One challenge you may experience when selling your home is finding a buyer. This can be difficult, especially if the property needs repairs or is located in a less-than-desirable area.
Additionally, it can take some time to find a buyer who’s willing to pay your asking price.
Another challenge you may face is finding the right real estate agent. Not all agents will be able to meet your needs, and it’s important to spend your time researching so you can find the one who’s best for your situation.
While an agent can be a great resource, they will also take a commission from the sale. This is typically around 6%. This means that you’ll have to raise your asking price by 6% in order to account for their commission.
Finally, you may deal with the value of your home decreasing if you aren’t able to sell it right away.
Of course, this will depend on your local market and the economy in general.
These are just a few of the challenges you may experience when selling your home. It’s important to be aware of them so you can plan accordingly.
What Are the Challenges You May Experience if You Keep the House?
If you decide to keep your inherited property, you’ll need to be prepared for the added responsibility.
This includes things like paying property taxes, maintaining the home, and having insurance. Additionally, if you live in the home, you’ll need to be prepared for the costs associated with ownership, such as utilities, repairs, and renovations.
Another challenge you may face is dealing with unwanted memories. If you inherit a home that belonged to a loved one who has passed away, you may find it difficult to be surrounded by their belongings and memories.
This is something to keep in mind if you do decide to keep the property.
Finally, you need to be aware of the financial implications of keeping the property. If you’re not able to generate rental income, you may find yourself struggling to keep up with the mortgage payments and other costs.
Additionally, if you eventually do decide to sell, you may not get as much money as you would if you sold right away.
What’s the Best Way to Sell My Home?
The best way to sell your home will depend on your individual circumstances.
However, there are two primary ways in which you can go about it: hiring a real estate agent or listing your home for sale by owner (FSBO).
Let’s take a closer look at each.
Hiring a Real Estate Agent
As mentioned above, an experienced real estate agent can be a great asset when selling your property. They can help you determine the right asking price, market your home to potential buyers, and negotiate on your behalf.
They will also take care of the paperwork and handle most of the details involved in selling a home. Of course, hiring an agent does come with some drawbacks. You won’t have as much control over the sale process if you hire an agent.
This is the reason why it is so crucial you work with a qualified professional if you choose to go this route. Since they are primarily in charge of the nuances of the sale, you will need to find someone who is able to sell your home quickly for the price that you want.
Listing Your Home as For Sale by Owner
If you decide to list your home for sale by owner, you’ll be in charge of the entire process. This includes things like marketing your home, handling the paperwork, and negotiating with buyers.
While this can be a lot of work, it does allow you to have more control over the sale. However, not everybody is cut out for this job. It will require a substantial amount of time, and you may even encounter obstacles you could have avoided by choosing a different path.
How Can I Sell My House Faster?
One of the best ways to sell your home quickly is to work with a cash buyer. These are investors who are interested in buying properties for a variety of reasons.
One of the biggest advantages of working with a cash buyer is that they’re usually willing to close on a deal quickly. This means you can sell your home and move on with your life without having to wait around for a traditional buyer.
Finding a cash buyer is also easier than it seems.
You can start by searching online for companies that specialize in buying homes for cash. You can also visit local auctions to see if you encounter anyone who’s willing to buy your home.
When working with an established company, be sure to research its reputation. This will go a long way when it comes to getting the results you need.
You should also ensure you know how to recognize fake reviews so that you can avoid potential complications. Not all feedback you encounter will be genuine, and it’s important to know what’s real and what isn’t.
Dealing With an Inherited House Doesn’t Have to Be Complicated
Inheriting a house can be a blessing or a burden. It’s important to carefully consider your options before making a decision. If you need money quickly, selling might be the best choice.
However, if you want to live in the inherited house or avoid capital gains taxes, you might want to keep it. Ultimately, the decision is up to you.
Want to learn more about what we can do? Be sure to reach out to us today and see how we can help you.