Helping Clients Who’ve Inherited a House
September 12, 2018
Buying and selling real estate can be an emotionally-charged venture, especially when it involves property that belonged to a family member who's recently passed away. It’s up to the real estate professional to provide guidance to clients who are making important decisions regarding what’s usually the biggest asset in an estate—the home.
But it’s not always straightforward. Take the recent death of legendary singer-songwriter Aretha Franklin, which initially posed a quandary for her four surviving sons, for example. “Because she didn’t leave a will, her $80 million fortune—including Franklin’s numerous real estate holdings—likely will take longer to divide, and the process could become complicated,” says Alex Lehr, broker-owner of Lehr Real Estate in San Carlos, Calif., and the author of The Unexpected Sale: Guidance For The Executor/Administrator Of An Estate.
To help navigate handling a house that’s part of an inheritance, Lehr offers these five tips.
Read more: Lessons From a Bad FSBO Purchase
- Deciding to keep, sell, or rent. Unfortunately, competing interests among siblings can make this decision difficult, Lehr points out. “Caught in the middle, the executor has to ask the heirs to keep their emotions under control and put the rational facts on the table,” Lehr says. If medical bills, tax issues, or other stressors require cashing out, then selling is usually the best option, he advises. It also produces a specific amount of money that can be divided equally among those involved.
- Establishing the value of the home. Whether listing the property for the beneficiaries or assisting an heir who wants to buy the house, it's important to start by giving your clients a cost market analysis and directing them to get an appraisal. “Alternatively,” Lehr says, “the executor can put the property on the market with the expressed provision that one of the heirs has the right of first refusal to match the highest offer.”
- Figuring out the extent of repairs needed. Often homes need updates or repairs before being listed for sale. Help clients determine how much work is worthwhile before putting the home on the market, which will depend on the property and circumstances, Lehr says.
- Deciding to sell furnished or unfurnished. Beneficiary clients not only have to make decisions about a property, but also the possessions inside the home. “It’s not unusual for an inherited home to be filled with a 30-year accumulation of stuff,” Lehr says. He generally recommends thinning out furnishings and offering a more limited number of pieces with the property.
- Determining if an investment property is realistic. If your clients are leaning toward keeping the home as an investment, they need to make sure the viability of the relationship between the beneficiaries will last long-term. “Could they get divorced, go bankrupt or bring other entanglements?” Lehr asks. The real estate professional must also help them consider the local rental market and what it will take to maintain the property, he says.
Updated: November 19, 2018