The Hidden Costs of Inheriting a House
The passing of a house or other assets from one person to their beneficiary does not always go as planned (whether you were expecting it or not). There is so much to think about when you inherit a property. It’s both an emotional and financial situation.
No one likes unexpected expenses. Inheriting a house can wind up being a financial nightmare if you don’t know — and anticipate — the associated costs.
Inherited House Costs to Remember
Maintenance costs can range from minor fix-ups to major repairs. They also include less obvious items like lawn care and gutter cleaning. The longer you hold the property, the higher your routine maintenance costs are going to be. Going through the home and making a list of needed repairs can provide you with a good start to get an estimate, but as with other costs, always be prepared for surprises.
If you’re selling the property, you might want to keep the electric and heat (if it’s cold out) turned on, as well as the water since a new buyer will want to check these utilities. And of course, you’ll need to continue to pay until the property is sold or rented out. Internet, TV, and landline phone service can be shut off. Legally, all utilities will need to be transferred to your name.
You’ll need to have your own insurance policy on the home, and if it’s unoccupied, the policy could be costly. Shopping around is the best way to get a good deal. Be sure to contact the decedent’s insurance company to see if they paid in advance, in which case the insurer may owe the estate a prorated amount based on the date of the decedent’s death.
If you’re inheriting a house with a mortgage and the mortgage includes an escrow account, property tax (and often homeowners insurance) might be included in the mortgage payment. If you’re inheriting a house that is paid off, you’ll need to contact the municipality to determine the amount of property taxes and when they’re due (and also make sure no back taxes are owing).
If the home is in a development or planned community or if it’s a condo or co-op, you’ll need to find out how much the fees are and how often (and when) they’re due. You’ll also need to make sure the fees are all paid up (and ask for evidence if the association claims they’re not).
If you’re selling, set some money aside for closing costs. These fees can be a hefty amount. The national average is about $12,000. On top of that, you’ll have agent fees, which will be deducted from the sale price. Typically, agent fees are around six percent.
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