Did your client inherit property? Here's what to know:

December 27 2018


Real estate transactions are emotionally charged under the best of circumstances. But making decisions about the property of a recently deceased loved one can be especially stressful. Confusion about what to do with the property or even disputes among multiple heirs could add to the emotions and potentially prolong the decision. 

Here are four tips for guiding a client who has inherited property.

1. Learn the terms of the existing mortgage. 
A non-family member who inherits a property with a due-on-sale clause may have to sell quickly to cover the cost of the loan. But a client who inherits a home with a reverse mortgage will have about six months to decide whether to sell, get a new loan or pay off the existing mortgage. 

2. Explain the options available to multiple heirs.
If multiple stakeholders can’t reach an agreement, help them find an amicable solution. For example, if one client wants to keep the home but the other wants to sell, options include an immediate buyout or a long-term promissory note. Or perhaps the clients will want to rent or sell the property and split the profits. 

3. Perform a CMA and an appraisal. 
It’s essential to establish the value of the home at the time of the owner’s death for probate inventory purposes. The IRS typically requires an appraisal for assessing capital gains or inheritance taxes

4. Decide to sell, rent or move into the property. 
Each option comes with certain costs, including:

  • Selling -- Listing, staging and closing costs
  • Renting -- Property management and maintenance costs
  • Moving In -- Maintenance and HOA fees

Each option discussed also comes with potential state, federal and capital gains taxes. To ensure your client receives the best advice possible, refer them to a trusted estate planning attorney. 

Have more questions about transactions involving an inherited property? Reach out today.