3 Questions You Probably Have About Inheriting a Loved One’s Home
When a loved one passes away, their home is often the largest asset in their estate. And whether it once belonged to a parent, aunt, or sibling, it might feel overwhelming and perhaps even confusing as to what to do with it.
“At 24, I had no previous real estate experience, so I had no idea what to expect,” says Haley Ray, a North Carolina-based writer and editor who went through this. “Once I got the ball rolling and contacted a few Realtors, the task became less daunting.”
If you’ve found yourself in this position and you’re not sure how to handle it, or you’re simply preparing for the future, I spoke to experts to answer three common questions surrounding the inheritance of a home. Hopefully, with their wisdom, you’ll have a better idea of how to move through this moment as best you can.
What happens if there’s still money owed on the mortgage?
If there’s an outstanding balance on the mortgage, you have a few options, says Melanie Cunningham, a New York-based attorney specializing in serving entrepreneurs and freelancers. “You can assume the mortgage and continue to make payments,” she says. “But if you don’t want that burden, you can sell it, and if there’s equity left over, you’d be able to keep that.”
If the home is in disrepair, Cunningham notes that it might be a good time to consider selling, depending on what your living situation is. And, though it’s rarely done, she also shares that the person who is listed as the “heir” to the home also has the opportunity to disclaim the inheritance entirely.
To avoid having to answer this question at all, Cunningham recommends that anyone who owns a home and wants to pass it on consider how to address any outstanding liens or debts on it while they’re in good health. If you’re an adult child of homeowning parents, it’s also a good idea to ask about this sooner rather than later. Even though the conversation may be uncomfortable to start, it will hopefully create steadier footing in the future.
What should you do if you can’t afford the upkeep?
It’s not always easy to know if you can’t afford the upkeep of a home up front, especially in the era of income properties. Anne-Marie Wurzel, a Realtor based in Orlando, notes that some people might have more DIY skills and interest in fixing up a property whereas others might not. If you’re not someone who wants the hassle, she says to “consider selling it and taking the profits to reinvest in something more affordable.”
A more pressing layer to this answer is that the home will likely need to be cleared of existing possessions before any other work is done. How to distribute the home’s contents is commonly not specified in a will, which is yet another reason to have a conversation around who gets what while your loved ones are still alive.
“Items such as jewelry, books, photo albums, and art might’ve been passed along in a family through a verbal statement,” Wurzel says. “It’s worth writing those items down — even if it doesn’t seem like one of the bigger assets monetarily.”
Once the house is emptied, Glendale, California-based real estate expert Kendyl Young says heirs will want to be sure a thorough home inspection is done to evaluate things like the quality of the roof, possible termite damage, and any sewer issues. “With the help of a professional, you can assess which conditions need to be addressed immediately versus those that can be done in a step-by-step process,” Young advises.
From there, you’ll have a clearer financial picture of what it will cost you to maintain this home, and what the subsequent paths may be.
What if the home is located in a different state?
Inheriting a property in another state can be very challenging, says Wurzel. “You really have to rely on a local Realtor and possibly a local attorney, too, who can help guide you through the rules regarding taxes,” she continues. “Sometimes it’s best to just split the proceeds between family members.”
Each market is different, so connecting with an expert in the area, as well as a financial planner, might be helpful in terms of setting expectations. “You would definitely want to work with an attorney who can help facilitate the process,” says Cunningham. “Save yourself a lot of time and trouble by avoiding trying to do this on your own.”
Ray agrees. “What I took away from the experience is how important it is to ask questions,” she says. “I felt like some things slipped through the cracks because I assumed I should already know something, rather than just asking and clarifying.”