Not every inheritance is a windfall. Sometimes inherited property needs a lot of attention for deferred maintenance issues.
If you’re now responsible for a home that’s seen better days, here’s what you need to know.
Most common issues with inherited properties
The majority of the time if you’ve inherited property it’s because an elderly relative has passed away. Elderly homeowners generally have a harder time keeping up with routine maintenance and as a result their properties may appear a little run-down.
Often those issues can be minor aesthetic things like overgrown landscaping or outdated finishes. But there can be structural issues if a home hasn’t had good upkeep, too.
“When you think about what maintenance they probably couldn’t perform on their own, the first place is probably the roof,” said Nick Gromicko, founder of InterNACHI, the International Association of Certified Home Inspectors. “You don’t see too many old ladies up on roofs.”
If the most recent homeowner moved to a care facility and left the house vacant you should be especially wary, Gromicko said. “The vacant houses are always the roughest,” he added, because issues like leaks or other normally obvious problems may go undetected and wreak havoc on the structure.
The previous homeowner’s lifestyle can also affect the condition of the property, says
Michael McNeill, a Realtor with RE/MAX Professionals in Cottage Grove, Minnesota.
“I’ve seen houses that in my view are unlivable. The hoarders where they keep everything and there’s just pathways through the home,” he said. Dealing with property like that can take “a lot of cleaning and a lot of dumpsters.”
No matter what, Gromicko said, it’s a good idea to get the property inspected so you know what you’re dealing with and can plan how to proceed based on the actual condition of the home.
Sell as is, repair or demolish: what to do?
Whether or not you plan to keep the property you’ll want to at least do a basic cleanup.
“Broom swept is fine. If there’s garbage around, clean it,” Gromicko said. “Sell all the personal property.”
What you do next depends on your specific goals, but the general advice is to do as little work as possible.
“Being smart with your budget is very important when fixing up a disrepaired property,” McNeill said. “If I think there’s money to be made with repairs I’m going to advise them to get repairs done.”
The best fixes and updates to make are often minor ones, he added, like investing a few thousand dollars in new carpet and paint or cleaning up the yard, which usually takes more sweat equity than cash.
More expensive repairs may not be worth it if you hope to make your money back quickly or even turn a profit on the investment, McNeill said.
Gromicko advised even more strongly against making any improvements to inherited property you’re looking to sell.
“Let that financial decision be made by the buyer,” he said. “Take one of my neighbors who’s real handy. When he sees a property that’s run down, that’s what he wants,” he added. “The idea that everybody’s looking for a nice house is totally incorrect.”
Even people who want to buy a newly renovated home may not like the finishes you chose, which can make it harder for you to recoup your investment.
“Don’t lift a finger. Don’t waste money. You can’t read minds,” Gromicko said.
Also keep in mind if you’re the executor of an estate you are actually barred from making any improvements to the property. Your sole responsibility is to liquidate the property and distribute the proceeds.
Other options and complications
Every property and every inheritance situation is different, so you’ll want to talk to a number of professionals, possibly including tax experts, Realtors and lawyers to figure out what makes the most sense for you. Here’s a small potpourri of things to keep in mind as you figure out what to do with an estate.
Disclosures and repairs
If you decide to sell, you have less liability with an as-is transaction because you can honestly attest that you do not know the history of the property and have nothing to disclose.
“That negates liability on the person selling the home,” McNeill said. “It’s the buyer’s due diligence to have the home inspection done and find out the main issues in the property.”
Once you start making repairs, Gromicko added, you become responsible for the things you change.
“If you fix a bannister and it collapses and someone gets hurt,” Gromicko said, “you’re on the hook long after you sold the house.”
It’s fairly common for parents to leave their estates to be divided equally among children or grandchildren and that can make managing property even more difficult. If not everyone agrees on how to proceed, it can become a complicated legal battle.
“Not all families see eye to eye,” McNeill said. “Those become very touchy and they can take some time.”
Maybe you don’t want to sell
If you decide you want to keep the property, whether to live in or rent out, that changes the calculation because then you’ll almost certainly need to make updates and repairs.
McNeill said living in the house for two years usually allows you to avoid capital gains tax, and could give you time to make repairs slowly on your own — a cost-effective way to fix up a rundown property if you have the skills to do it correctly.
Inheriting property can be complicated and emotionally fraught. Experts say it’s best to surround yourself with a team of professionals and figure out what makes the most sense for you as you think about what to do with an estate.
“I really want to hammer home that it is really important to talk to that tax professional right away,” McNeill said. “You may not want to put a bunch of money into a property if taxes haven’t been paid or if the property is underwater” financially.