4 Questions to Ask When You Inherit a House
Inheriting a house is never a simple process. Not only does it often get complicated, but it may also take place during an emotional time after a loved one has passed away. We’ve seen that when someone has inherited a home from their parents, there’s often so much that the heir doesn’t know that they don’t even know where to begin to ask.
To help you through this process, there are four questions you should begin asking (Google, yourself, and anyone involved) to start you off. This will help create a clear guideline for navigating through this emotional and stressful time in your life.
1. “What will I do with the house?”
The first thing you need to ask yourself, and possibly anyone involved (i.e. siblings, spouse) is what to do with the house once you’ve inherited it. There are basically three options here:
- Sell it
- Move in
- Rent it out
Each option depends entirely on your unique circumstance. For example, if you inherit a house with a mortgage that you can’t afford, your only option may be to sell it (or rent it out, depending on how soon you can find renters in your area).
If you have siblings, you may need to consult with them to determine the best solution. While you might want to move in, your sibling(s) may want to sell it instead and split the profits and move on.
2. “What do I need to know about taxes?”
The good news is that when you inherit a home, you receive a stepped-up basis for taxes. This means that you receive the home at the current fair market value of the home. In other words, if your parents bought a home for $100,000 and you inherited it at $700,000 (slightly under Seattle’s current average housing cost), you only pay capital gains on the difference between the home’s value from when you inherited it and when you decide to sell it.
Why is this a good thing? Well, if there wasn’t a step-up provision, you’d be responsible for the capital gains on the difference between $100,000 and $700,000, or $600,000.
The problem is if the home decreases in value from the time you inherit it. For example, if you inherit the home at $700,000 and it decreases to $650,000 before you can sell it, you will end up with a capital loss. Fortunately, you can deduct that loss from your taxes, but only at $3,000 per year.
This summary is a simplified summary of what to expect in terms of taxes. It’s worth doing a little more research and consulting with a lawyer to find out everything you need to know about the taxes on your newly inherited home.
3. “What do I do with the stuff?”
The home you’ve inherited might have come with furniture, collectibles, and various other items that you are now responsible for. If you decide to sell your home traditionally, you (and anyone else involved) are responsible for taking care of those items. Similarly, if you decide to rent out the home, you might not want your tenants to have access to your parents’ things.
Depending on what you’d like to do with everything, there are a lot of solutions. If there’s a lot of items, there are plenty of junk removal companies in Seattle that will come help clean everything out. Other things can be donated to Goodwill (picked up or dropped off) or similar donation sites. If there are treasured items you’d like to save, renting a storage unit will help give you some time to sort everything out.
If you decide to sell the home as is, you might not have to do anything with the items except keep anything with sentimental value. Everything else will be taken care of by the company who buys it from you.
4. “What condition is the house in?”
When you inherit a house, it’s smart to conduct a home inspection. This way, you’ll know up front what condition the house is in and whether any work needs to be done. If you are opting to sell or rent out the house, it’s smart to understand these problems as soon as possible. That way, you can make an informed decision when it comes to fixing everything up for the new owners/tenants.
When checking the condition of the house, the priority is to ensure the house has good “bones.” This basically means that essential elements such as the foundation, roof, and overall structure of the house are intact. Any other aesthetic problems are easily fixable down the road and are not necessarily as important unless you’re looking to make top dollar on the inherited home.
Note that even if you’re looking to sell the home, you don’t need to make any changes yourself, even structurally. If you need a solution to sell the home fast and in the condition that it currently stands in today, there are options. Contact us today to get a quote and consultation on your newly inherited home, should you decide to sell it. We’ll give you an all-cash offer and a quick close to ensure your inheritance doesn’t empty your wallet.