The death of a close family member can certainly be a stress inducing event in anyone’s life, but when you compound that stress with matters like probate and inheritance of property matters can become overwhelming. Siblings should be able to rely on each other as support in the unfortunate circumstance of losing a parent, but when matters of money and inheritance are central to discussions, even the closest of brother/sister bonds can become strained or broken.
If you and your sibling inherit a home together, there are many viable options for dealing with the property, but most require family members to reach an agreement. In the event that a consensus can’t be reached amicably regarding any inheritance matters, including those of property, courts will have to become involved. Often when negotiations devolve to this degree, damage to relationships can be long lasting and irreversible, and financially any possible windfall can diminish rapidly.
There are several avenues siblings in this type of situation can pursue that can allow them to settle the value of the property, without damaging their relationship. One sibling could buy the other/others out of their share of ownership, a private agreement could be achieved, the house could be used as a rental income, there could be a suit for partition, or the new owners could sell the property quickly to an investor to achieve maximum financial returns in a short period of time.
Buyout
One possibility to consider when a piece of property is inherited in the event of the death of a parent is that one of the siblings may wish to keep and live in the family home. In order to make this type of arrangement equitable to everyone involved, several steps must be taken. First, an appraisal of the property should be taken by a certified appraiser, to ensure that all parties are aware of the market value of the home at the time of inheritance. Once it is clear how much value the house has, minus any mortgages that remain on the property, that number should be divided by the number of inheriting siblings. In order for one of the brothers or sisters to retain ownership they need to pay the other siblings for their share of the property either in cash or by obtaining a mortgage. This method of dispensing the family home is often a success for the family, as the deed of the home can be put in the sole hands of one member and all others will receive a monetary settlement. The costs of this type of arrangement can be minimal — just the cost of appraisal and closing costs.
Private Arrangement
A possibility that may make a buyout slightly more messy is if the sibling wishing to live in the home can not qualify for a third party lender. In that event, one possible solution would be to effectively finance the home internally. The sibling wishing to stay could pay the others on a monthly basis including interest. Though this type of arrangement would not require any out of pocket expenses such as closing costs, it is always advisable to record the terms of the agreement in a promissory note. In addition, as an added layer of protection, all parties could agree to a deed of trust. That means that if the brother or sister remaining in the house defaults on payments, any others can proceed with foreclosure. Obviously, this would not be an ideal situation, but it does provide some measure of protection for the siblings not actively residing at the property.
Rental
If neither sibling feels strongly about keeping the house, but it is a property that is in good order, one possibility to consider would be to retain ownership and use it as a rental investment. Many financial advisors recommend real estate as a great investment in the right markets. Certain neighborhoods in the San Diego area are considered prime for rental properties, and if the inherited property is owned outright or has a small mortgage renting the home could be extremely advantageous. Once the house is rented, the proceeds every month would be split evenly between the siblings. In the event that one sibling wishes to manage the property, that individual could receive a slightly larger share than the others as a result. If this is an option worth considering for your family, any details of the arrangement should be discussed and then agreed upon in a contract, so that there are no questions that arise from confusion. Keep in mind that property management can provide its own set of challenges and headaches.
Sale
Another option to consider if no one in the family is interested in keeping the home, is to sell the property either through conventional methods or to a real estate investor like Trusted House Buyers for cash fast. In order to sell with a real estate agent, you would have to list the property, possibly make improvements, declutter, and go through the months long process of closing on the house. If the house is in any disrepair this might take even longer or cost a considerable amount of money. An alternative to conventional sale is to seek out a real estate investor in the San Diego area. An investor could give you a fair appraisal of your property and within just a few days you and your family could be dividing the cash payment dispersed by the investor. In addition, home investors do not require your family to make any improvements on the existing property. This type of transaction is generally extremely fast and easy to negotiate, and can allow children of deceased parents to move on from the willed property without arguments and disagreements.
Suit for Partition
If siblings in this type of scenario can’t reach an agreement, they may have to involve the court in a proceeding called a lawsuit for partition. You would be asking a judge to order the sale of the home so that co-ownership can be terminated and proceeds of the sale can be divided equally by the courts.This type of proceeding can be time consuming, extremely costly, and emotionally difficult in many ways. You will be required to ready the house for sale and pay for any improvements, but in the state of California the petitioners are not allowed to decide what is necessary for sale. Instead, decisions are made by a third party referee who must also be paid. In addition, in most cases suit for partition, a broker and an accountant must be retained and their services must be paid for. Ultimately, all of this will take time and will reduce any profit you may have seen from the sale considerably.
When a family member passes away and leaves considerable assets such as a home to a group, it can oftentimes be difficult to know how to fairly divide the home. Though there are many viable options to consider, if none of the siblings involved are interested in living in the house, the easiest and possible most profitable solution available is to sell the home to a real estate investor like Trusted House Buyers. If you and your family find yourselves needing to divest from an inherited home, and would like to do so quickly for a fair cash price, give us a call and we may be able to close a deal with you in as little as a week.