Wondering if you should sell your parents’ home?
Figuring out what to do with the home that your parents left to you can present you with financial and emotional issues. There are three options you can take. You can sell the house, move into it, or rent it out.
It’s normal to feel uncertain about which path to take, especially while grieving. There are a lot of financial, legal, and technical issues to consider during this particularly difficult time.
Making the wrong decisions upon inheriting a house can lead to problems down the line. It can cause serious financial hardships or even lead to family feuds.
Here are some things to consider before deciding to sell your parent’s home:
Find out about the mortgage
You are most probably inheriting a house that’s paid for. However, even if the original mortgage has been paid off, your parents may have taken out a reverse mortgage. A reverse mortgage is a loan available to older homeowners, 62 years or above, that allows them to convert part of the equity in their homes into cash. The funds will be received funds in the form of a fixed monthly payment or a line of credit.
If you’re going to live in the house, then you can assume your parents’ mortgage. However, if you decide to rent it out, the bank may require you to refinance in your own as reverse mortgages can’t be assumed by heirs.
Learn about Tax Consequences
An inherited property often comes with different state and federal taxes. Depending on the circumstances of the property, it can end up being a burden on heirs.
The sale of an inherited home is treated as a capital gain or loss for income tax purposes. If you decide to sell the home, you’ll owe income taxes if you make a profit. However, a loss could allow you an income tax deduction.
Assessing your gain or loss on the sale will depend on when the decedent died and how you used the property. It will be helpful if you will also consult with a tax professional.
Discuss your plans with other members of the family
An inheritance has a cruel way of creating conflict between even the closest family members. What if you want to sell the house and your sibling wants to rent it out, or live in it himself?
In most states, heirs who jointly inherit a property are “tenants in common”. This means that specific areas of the property are not owned by any one individual, but rather shared as a whole. In a situation like this, one sibling can force the sale of a property. However, this can have damaging effects on the family.
Before making any decision, discuss your options with concerned family members to avoid unpleasant scenarios.
Perrin, Rene. "Should I Sell My Parents House." Realty Times. 25 November 2017. https://realtytimes.com/advicefromtheexpert/item/1007258-should-i-sell-my-parents-house.