What to Do If You Inherit A Home

Inheriting a house is likely to be one of the greatest gifts you can ever receive from a loved one or family member. However, receiving such a gift can sometimes come with its fair share of expenses and other headaches. Specifically referring to things like the time and cost to maintain the property, as well as any taxes and levies that might come with it. Of course, the type, location and value of the property can contribute to the previously-spoken of headache.
Arguably, one of the most common questions that crosses the mind of anyone who has inherited property is whether they should keep or sell the property. The best answer to that question is that “it depends.” It depends on a whole host of things like what your goal with the property is, what the (opportunity) cost of selling it versus keeping it could be, what type of property it is (commercial, residential or farming property,)  what the cost of keeping it long term might be versus any potential revenue it could bring in, among others.
After considering these and any other relevant questions or scenarios, it will then be up to the inheritor to decide the best way forward, perhaps also, after receiving expert and professional advice from an experienced estate planner.
Inheriting a Property: A Double-Edged Sword?
There are lots of reasons why the blessing of inheriting a property can turn out to be stressful, to the point where some people could even go as far as to label it a ‘curse.’ Primarily, the issues revolve around the following aspects:
Financial and legal responsibilities: This financial responsibility primarily includes things like any debt obligations like a mortgage, that may be attached to the inherited property. Or it may even involve a loan that was taken out and securitized by the property. The legal issues or responsibilities, on the other hand, might involve situations where the property is co-inherited, for example, among siblings, and working together to find a common resolution becomes a nightmare.
Tax liabilities: This can include federal estate taxes and property taxes. It will be the responsibility of the inheritor to keep up with these taxes once they have inherited a property. And in the event that the property is sold, then a capital gains tax will likely become applicable.
Maintenance/Holding Costs: Inherited properties often tend to require expensive cleanups and repairs before they can be used. And in the case of certain types of properties, like a farm or vacation home, such a property can also include ongoing maintenance costs. Typically, one usually gets to inherit a home from a deceased parent, relative, or friend, and more often than not, these houses would have been used for several years or decades. This means having to renovate the house so that it is in good condition, which is never cheap.
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What are your options after inheriting a home?
Generally speaking, after inheriting a home there are three primary options you have to deal with your inheritance, and these are:
1.   Move into the property
A house that has been home to many memories over the years often holds high sentimental value, especially if the inheritor also lived in the house at some point in time. It is not uncommon for such properties to be moved into after being inherited. Children who want to keep their parents’ legacy alive or families that had an agreement not to sell their ancestral property tend to lean towards this option.
Note: Keep in mind that you will need to ensure the property is in the best shape for you to live in (renovation costs) and that moving in could lead to an increase in property taxes.
2.   Rent out the property
Another feasible option is to rent out the property. This option is no doubt a good way to earn a passive rental income while retaining ownership of the property. Despite this benefit, becoming a landlord is not without its responsibilities and expenses like the occasional property repairs and maintenance costs, ongoing property tax payments, property insurance payments, and more.
In going with this option, you may have tax benefits as the home (not the land) may be taxed as a depreciable asset. You will also have the flexibility of depreciating improvements that extend the value of the property. But, there is a catch to all these benefits as the day you choose to sell, you will have to pay back the depreciated costs to the IRS. Essentially, this means you will no longer have capital gains exclusions and will pay more taxes if you ever sell the property.

3.   Sell the house
The legal, financial and other responsibilities associated with either moving into an inherited house or renting it makes these options too demanding for many people. Luckily, there is always the option of selling the home and, generally speaking, there are two ways to go about it. You can go the For Sale By Owner route or you can get a real estate agent to do it for you. 
For Sale By Owner: As the name implies, the option involves the owner going through the entire process of selling the house by themselves. As you can imagine, this option is not for the faint of heart as there will likely be many moving parts that you will have no experience with.
Some of the things you will have to do in an FSBO process includes performing and overseeing the necessary pre-sale inspection and repairs, re-painting the property, conducting property staging, conducting several property viewings, possibly having to deal with a real estate lawyer, and being able to properly negotiate with a potential buyer, who no doubt will be want to get the lowest figure that he or she can get from you. This all might sound simple, but anyone who has gone through the process will tell you it is not. Lastly, there is always the possibility that selling an inherited property for cash is likely to get you below the market value of the property.
Use a Real Estate Agent: More often than not, the vast majority of people who wish to sell their property use a real estate agent to do. Not only is it the simpler way to go about it, but you are also likely to be better off with this option because the previously-mentioned tasks that you would have to take care of by yourself in an FSBO sale will now be the responsibility of the agent.
Additionally, there are several challenges that a real estate agent usually faces when selling a property. These are challenges that you otherwise might have to face by yourself in an FSBO, and there is a very high probability that you will not know how to tackle these issues. Given the probable large sum of money that might be involved in the transaction, it may perhaps be best that you let a professional handle it.
In Conclusion
Because the options available to you concerning your inherited property all have their pros and cons, the option to go with should always be guided by what your ultimate objective is. While, of course, balancing the positive with the negative to ensure that you make the decision that works best for you.
Author Bio: Kanayo Okwuraiwe is a startup founder and a digital marketing professional. He is the founder of Telligent Marketing LLC, a digital marketing agency that provides SEO services for lawyers and real estate companies to help them grow their businesses. Connect with him on Linkedln.