There are FIVE things to consider when you inherit a house.
When you inherit a house there’s a lot to consider. It’s not as easy as you might expect. Grieving lasts a long time. The house is very much a part of the grieving process. Losing someone feels like you have to say goodbye to the memories. But you don’t need to say goodbye to the memories, just the stuff.
I’ve seen it over and over, Americans gather too much stuff. Guess who must deal with it when we die? I too have collected too many things. I’m sure nobody wants to deal with my junk when I die. I certainly don’t want to burden my family with the chore of dealing with it.
Unfortunately, during the Covid-19 pandemic people were dying at record rates in the US. I met a poor woman who had lost two men in her life in less than 30 days, her father first, then her boyfriend. She’s at her wits ends about the stuff in the home. I told her that I buy houses all the time with stuff in it. All she needs to do is take what she wants and leave the rest. I’ll take care of the rest. I could hear relief in her voice. Then she asked “And you pay cash?” – Yes, that’s right, I pay cash. (Now I could hear her smile.)
There are 5 things you need to consider when you inherit a house:
Whether you plan on moving in, selling, or renting it out there are 5 things you need to consider when you inherit a house.
- The property condition
- Value of the property
- Mortgage on the property
- Other liens on the property
Let’s look at each one of these areas so you will be better informed of your inheritance. (Plus it’s nice to be informed before talking to an attorney and knowing what questions to ask!)
There are some houses left by the deceased that are market ready, and fewer houses that are move-in ready. Having an inspection done on the house before moving in or listing it with a realtor could be a good thing to do. An inspection can tell you what is wrong with the house as it stands, may it be wiring, foundation, old roof, or a thousand other things. Just keep in mind when you get the long list back from the inspector that you hired the inspector to find things wrong with the house, as the inspector does not make a living by finding things right about the house.
Does the house have an odor?
Does the house have a lot of stuff in it?
Does the house need to be cleaned, cleared out and repaired to put it on the market, or rent it out? Some of these things you will instinctively know, and others may be more difficult to recognize without the help of a property inspector.
Upon discovering repairs needed to either sell, rent, or move in, you’ll need to either tackle that or decide to wait. If you want, you can sell it to a house flipper like me who will gladly take care of the repairs after I buy it. Either way, just know that improving the value of a home with the intention of selling it is different from improving the value of a home with the intention of renting it. As a landlord, I know that I don’t want to improve a property too much, as the tenants will just destroy some of it anyway. So, the cheaper the improvement, the better when you intend on renting it out. If you plan on selling it, you might want to consider new flooring, a new kitchen, a new bathroom, and new paint. If you plan on renting it out, you might want to consider some new flooring and new paint. Let me know if you have questions on this, and I will be happy to take a look and give you my opinion. Call or text me at 541-554-4633.
Having an appraiser come over and appraise it for value can also be helpful. Another, much cheaper way to get a feeling of the condition and the value would be to have a real estate broker or realtor come over and give you their opinion for free. Realtors, like appraisers run what’s called “comps” (comparative market research). The difference is that the appraiser gets paid for it, and the realtor does it in hopes that you will list the property with him or her and in the end, they will get paid a commission from the sale. Or you can call me, I also run comps, although not official, and will make an offer on the spot or within 24 hours.
There are two types of taxes to consider when you inherit a house. One is the property tax, which in Oregon is high to say the very least. The other is capital gains tax. When you inherit the property it is valued at the current market rate. If you hold onto the property and sell it, you will be taxed on the inflated difference between the time you inherited it and the time you sold it. So, if you inherit a property today, and it’s valued (per the county or state) at $100,000 and sell it next year at the price of $150,000 you will be taxed on the $50,000 that you gained.
I suggest that you talk to a Certified Public Accountant (CPA) about the taxes.
You may have heard of an inheritance tax, otherwise known as “death tax”. The good thing for you is that in Oregon, we don’t have such a tax. There are only 6 states in the US that charge this mean tax. Those states are Maryland, Nebraska, Kentucky, New Jersey, Pennsylvania, and Iowa. We are also one of the few states that does not have a transfer tax on real property, keeping my fingers crossed. A transfer tax is a tax charged for just the purchase of a property. So, if I buy your property today, I don’t have to pay a transfer tax on it (much like a sales tax in other states.) A caveat to this is that there is one county in Oregon that is charging a transfer tax, and that is Washington County, but it’s only .1%
The word mortgage comes from the Latin root word “mort” – meaning death, and the “gage” part means pledge. I suggest this in this article because to talk about a death-pledge in an article about things to consider when you inherit a house, is that you may also be inheriting a death-pledge.
There are many nuances to mortgages, but I will just cover the two opposite kinds of mortgages.
There’s the kind of mortgage where a home buyer pledges to pay interest and pay down the purchase of the house monthly over many years. That’s probably the kind you are familiar with. Most of the first several years are charging way more interest than paying down the principle, until finally the payments start to make a dent in the principle. So if the deceased had owned the home for many years there may still be a substantial mortgage on the property. Not only that, there may be two mortgages on the property. Many homeowners will take out a second mortgage or a home equity loan (HELOC) because the home’s value had increased over the years.
The opposite kind of mortgage is called a Reverse Mortgage. This is a mortgage offered to homeowners who have paid off their house, they own it free and clear. The Reverse Mortgage offers to the homeowner a monthly income plan based on the value of their home. Instead of borrowing money to buy the house, the homeowner is borrowing money to live inside the house. When the homeowner passes away, the heir gets to pay off that mortgage and is expected to sell the property in order to pay off the lender. (Talk about a death-pledge!)
The last thing to check out is to find out if there are any liens on the property. This is done by either hiring someone, like a title company, or doing it yourself. To find out if there are any liens on the property you need to go down to the county courthouse and look it up. Depending on your county, you might be able to research this from your house on the web.
What kind of liens might you find? Well, the usual lien an heir might find is a lien placed on the property by the medical community. I find often that hospitals, medical groups and others medical practices have filed liens on the deceased person’s property. If the deceased had been having some construction work being done, or had a car being fixed, and didn’t pay the bill, there might be another kind of lien, called a construction lien. All liens will need to be settled before or during the sale of the property. If you find a lien, don’t fret, there are still people like me who are willing to buy the property and take care of the lien.
If you want to learn more about this topic, ask questions or run something by me, please call me or email me. My mobile phone number is above, but here it is again: 541-554-4633. You can email me at firstname.lastname@example.org