Inheriting a House with Siblings Options
Property inheritance is an inherently charged experience since it follows the death of a loved one. With heightened emotions, decision-making has added stress to take into consideration.
It’d be great if siblings were innately friendly and agreeable in times of emotional and financial stress. But that’s often not the case. And when money is involved, even best-buddy relationships can strain beyond repair. If you’re inheriting a house with your siblings, knowing your options ahead of time can help you plan your strategy so you can avoid major disagreements.
Inheriting a House and It’s Mortgage
Easily the simplest of all the scenarios, selling the property releases you and your sibling from any obligations or responsibilities toward the property and each other. If you sell quickly and without getting involved in protracted renovations, you can probably avoid capital gains taxes as well, which can be a major bonus. Plus, you won’t have to worry about splitting holding costs.
Renting the house is another option, but divvying up the landlord responsibilities can be difficult, especially when it comes time to split the monthly profits. If one of you assumes more responsibility for managing the property (or even if one of you feels as if you do), feelings of resentment are sure to follow. That’s when even the best sibling relationships turn sour. If you do decide to go the rental route, having everything in writing beforehand is the best way to avoid what could turn out to be costly (and ugly) disputes.
Suppose your sibling wants the house, but they can’t qualify for a mortgage. Then you might be willing to negotiate a private agreement involving a promissory note which allows your sibling to pay you back for your half of the home at terms (including interest) set forth in the note. If you select this option, you might want to consider having a power of foreclosure written into your documents to allow you to foreclose on the property if your sibling fails to pay you.
Suppose you want to sell the house, but your sibling wants to keep it. As long as you’re not inheriting a house with a mortgage, your sibling can buy out your interest either with their own cash or by obtaining a mortgage. But if the home has an existing mortgage, you’ll both need to work with the lender to see if they’re willing to let one of you assume the loan. Otherwise, that mortgage will need to be satisfied before your sibling can buy out your interest. If the estate has other debts that exceed the value of assets aside from the house, the court may intervene and force the sale of the home to pay off those obligations. In any event, you should have an estate lawyer represent your interests to avoid costly mistakes.
The worst-case scenario is when you and your sibling simply can’t agree on what to do with the home. In that case, you might decide to sue for partition, in which case the home will be sold and the profits split. Often, the judge will assign a mediator to oversee the sales process to eliminate discord between you and your sibling and to facilitate a faster sale. The process can be costly, and in the end, you’ll end up with far less than you would have if you and your sibling had decided to simply sell right from the start.
HomeGo Can Help.
For many people, selling an inherited property ASAP is the simplest, most straightforward solution.
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