It can be emotionally and financially challenging when someone inherits their parent’s home. Clearing out belongings and making decisions about what to do with the property, especially when there are multiple siblings involved, can be difficult. Weighing the options and considering the investment of time and money is important. A few things to consider when making those decisions are:
List the House or Sell to an Investor?
Joe Tischler and his siblings inherited their father’s house in St. Charles, Missouri after he passed away. Joe is pretty handy and the house was structurally sound, so the decision was for Joe to make the necessary updates to the house so it could be listed for sale. Just as he was starting to clean out the possessions and work on the repairs, he received a letter from an investor who offered to buy the house as is.
“We had an agent come over and look at it,” said Joe. “After he told us what he thought we could sell it for after updating, I realized selling to an investor would be much faster and simpler. I didn’t want to spend the next 6 months working on the house. Even though I have a brother and a sister, I was going to be the one doing all the work.” Two weeks later, they closed on the sale and didn’t have to do anything else to the house.
How Much Money Should be Invested in Updates?
Inheritors must decide if the return on the investment of making repairs or updates is worth the time.
According to Phillip Vincent, a real estate investor in the St Louis area, spending the time and money to update a house may not lead to the increase in the sale price that inheritors desire.
“Let’s consider a St. Louis home priced at $141,000,” said Vincent. “Adding up the 6% realtor commission, holding costs during the renovation and sale (i.e. utilities, taxes, insurance, liabilities, grass mowing), inspection costs and the typical remodeling costs, this family would profit an average of $75,000 on the sale of the home. Generally, the time it takes to hire contractors, do the remodeling, stage and sell the home, and finally close is a minimum of 6 months in today’s market,” said Vincent.
He continues, “Selling as-is to a home buyer would most likely net the seller around $76,000. And the total time to close on the sale can be as short as 7 days.”
Expect to Run into Emotional Hurdles
Emotions can run high when money is involved. That is compounded when grief is also an issue. If a property is inherited by siblings who must agree on the decisions that are made, it may be best to come to an understanding about expectations before starting the process.
“Have a conversation about how much money everyone is willing to invest in the property,” said Vincent. “Discuss who will handle things like paying the utility and insurance bills and making sure the grass is mowed. Talk about how much time everyone is willing to invest in making necessary repairs. And discuss the reality of how much money will be made on the sale after all of those things are done.”
Having those honest conversations before processes begin can avoid any one sibling from feeling like they are overburdened or another from feeling like things are being done without their consent.
In summary, it might be a good idea to talk to a few experts before making any decisions. Investors will give you an offer to buy the home that you can consider. A realtor will give you an idea of what updates would need to be made and what the list price would be after those updates are done. A contractor would give you an estimate of time and money on the repairs. Using all of that data from the beginning to analyze the best option can avoid the emotional issues that can arise down the road.
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