Common Problems When Selling Inherited House

Inheriting a home may feel like hitting the jackpot, but sometimes, it’s not all its cut out to be. The reality is that inherited homes can bring baggage with them, putting you in an unwanted, tricky situation.

If you’re looking to sell an inherited house, here are some of the most common pitfalls to be aware of… 

5 Pitfalls You Could Face When Trying to Sell an Inherited House

What may seem like a very generous gesture by a deceased loved one could, in fact, end up being a major inconvenience. Inheriting a home and deciding what to do with it can be stressful in itself. You may have to face some tough financial and emotional decisions along the way. 

As the saying goes ”knowledge is power”. If you are aware of what could be facing you, then you can at least prepare for when you inherit a home.

1. Pre-Existing Debt and Unpaid Bills

Unfortunately, this is a common pitfall that faces many people who inherit old homes. If the home itself is not paid off, this means you may inherit the remaining mortgage owed on the home too. 

The house could also be in poor condition. This means you’ll need to spend your own money on renovations if you intend to sell it.

Ultimately, there are three main options when inheriting a home. You could choose to sell it, move into it or rent it out. 

If you currently renting and the home is in good condition, then moving into may be a great idea. But this could become an issue if the home was left to you and your siblings. You’ll have to decide who gets to live in it, first. 

The other two options generate money and are often the most common decisions. You can either sell it and split the money among you and your siblings if that’s how it was inherited. Otherwise, you could rent it out and split the rent. 

2. Sibling Conflict 

On the topic of sibling inheritance, this could put a strain on your relationship(s) if you cannot come to a mutual agreement. Sibling conflict is common, but when money is involved this can put a real strain on things. 

It’s best to go over your options carefully and be realistic about your expectations. Speak openly when trying to reach an agreement. Otherwise, you may have to leave it up to the court system to decide.

3. Huge Tax Breaks Come at a Price

The great news is that you don’t pay capital gains tax when you sell an inherited home. Why? This is because the home’s property tax basis is stepped to market value at the date of a loved one’s death. 

In short, capital gains tax does not apply to the appreciation or increase in the value of the home. You inherit the home at fair market value at the date of death. Once the home is transferred to your name and it increases in value, only then does tax apply to the sale of the home. 

Now, this sounds just peachy, but this tax break comes at a price. You may not have to deal with capital gains tax, but you do still have to pay federal estate taxes. This applies when an estate is worth more than $5 million in assets.

However, this threshold can be much lower in other states. This means that the location of the inherited home plays a big role in how much federal estate tax you’ll need to pay. 

4. A ”Free” Home is Never Really Free

If an inherited home still has an existing mortgage, it can sometimes be settled by the state. Generally, you’ll receive a home that is ”free” of debt. 

However, if you’ve only ever rented, you’ll soon learn that owning a home is a major expense. It may be an expense that you’re just not ready for, too.

Even if you’re not paying a mortgage, owning a home comes with ongoing expenses that can squeeze your budget. Some of these include property taxes, heating, water, and electricity bills, homeowners insurance, and liability insurance. 

The reality is that owning a home is an ongoing expense. If you just don’t have the budget for it, it’s probably in your best interest to sell it.

5. Conflict Over Sentimentality 

Inherited homes come with a decent amount of emotional baggage, too. You may find that the physical home and its contents bring up emotional conflict between you and other family members. 

While sorting through all the physical goods – furniture, electronics, clothing, jewelry, crockery, etc., emotions are high. This is because all of these things are tied to memories and sentimentality. 

Conflict could arise if you and a sibling want to keep the same sentimental item. This could be anything – fine china, a piece of jewelry, your father’s favorite painting, an antique clock. Unfortunately, this can cause strife between family members.

Aside from this, letting go and selling certain items within the home could be very difficult too if you intend to sell the house. This is a process that must be done slowly and with consideration- don’t rush it, or you may regret it. 

The emotional stress of clearing out and selling an inherited property is very real. However, it’s important to not leave the home untouched for too long. This can be costly and you could also lose major value on the home and its contents. 

Looking to Sell an Inherited Home? 

Lisa Buys Austin Houses is your go-to when trying to sell an inherited house you just cannot afford to keep. We understand that an inherited home can seem like a real burden, that’s why we are here to streamline the selling process for you! 

If you’ve become the accidental owner of an inherited home, learn more about the services we offer and how we can help.