Inherited Homeowners in Atlanta: The Pros and Cons of Selling
Though inheriting a house can provide you with a new home or monetary gain, it also comes with financial and legal responsibilities. In some cases, you may need to negotiate with other heirs, which can also add a difficult emotional element.
The first step after you learn that you are inheriting a home is to design a short-term plan for keeping the house in good working order while the estate is settled. If the property falls in your hands at the end of the process, you have several options on the table.
Sometimes, you might be glad to move into the house yourself. However, when residing in the home isn’t something you’re considering, your two remaining options are renting or selling the property.
What are the pros and cons of selling an inherited home in Atlanta? What factors should you incorporate when making this decision? First, let’s take a look at what you need to know.
I Inherited a House: What Are My Options?
Sometimes inheriting a house is something you can plan for far in advance, while other times, it catches you by surprise.
Move In
Of course, this option only makes sense if it fits within your life, but if you live in the Atlanta area and moving into the home you inherited is appealing, this is a simple option that can help you keep the property in your family. If there isn’t a mortgage on the house, it can also be an economical choice.
Keep the Property as a Rental
If you don’t want to sell the home but it’s also not practical for moving in, keeping the house as a rental is a viable option. Beyond keeping the house in the family, this is a way to generate passive income and even enjoy some tax benefits.
At the same time, being a landlord isn’t always a walk in the park. Before you decide to rent out the home to a long-term tenant, you’ll want to take some time and really dig into the potential benefits and drawbacks of what this would mean. Of course, you can always hire property management to take care of the day-to-day operations of the rental, but this doesn’t completely insulate you from the risks of owning a rental property.
If you’re considering turning the home into a short-term rental property, it’s worth learning how Atlanta has been responding to the influx of short-term rentals in the area. New regulations were enacted on March 1, 2022, including rules prohibiting people from operating properties inside the city limits if they are not city residents. Additionally, one of the rental properties must be your primary residence.
Sell the House
Finally, the third option is selling the home. How much you stand to profit will have to do with whether or not there is a mortgage on the property and, if so, whether the home is worth more than the mortgage. Additionally, you will want to factor in the cost of any necessary repairs that will need to be made before the home is put on the market.
If you are interested in the quickest and easiest way to turn your inheritance into cash without accruing future risks, selling the home is a reasonable option. A little further down in the article, we’ll take a closer look at the potential pros and cons of going this route versus renting or living in the house.
The Pros of Selling an Inherited House in Atlanta
Selling an inherited house relieves you of the financial and legal responsibility of the property and can also potentially leave you with a profit. So let’s look at some benefits of selling rather than renting out the house.
Selling Is Easier and More Straight-Forward Than Managing a Rental
When you inherit a home, particularly in a desirable area, keeping it and turning it into a rental property can be tempting. This isn’t necessarily a bad idea– if there’s still a mortgage on the property, rental income can cover the debt and even potentially provide additional income. Additionally, there are some tax advantages to owning rental properties.
At the same time, being a landlord isn’t for everyone. Unless you hire property management, which cuts into your monthly take-home, you are essentially on-call 24/7 as a landlord. A number of risks come with the benefits of owning rentals, and some people might find that the amount of work and stress associated with tenants simply isn’t worth the trouble.
You Could Potentially Make a Nice Profit From the Sale
An obvious advantage of selling your inherited home in Atlanta is that you turn your inheritance into cash, so long as the home is worth more than the mortgage and the necessary repairs don’t cut into your profit.
Cash From the Property Can Be Used For Other Purposes
If you are not interested in renting out the home or living in it yourself, selling your inherited house allows you to free up the cash in the asset to be used for other things. So whether you have debts that you can pay down or your children’s tuition to save up for, selling can allow you to extract the greatest financial benefit from your inheritance.
It Can Help Provide Closure
Sometimes, selling an inherited home is the best choice simply because it helps to provide closure after the death of a loved one.
Houses are often filled with many memories, and depending on one’s relationship with the deceased, some might find that selling the property and putting the money towards other purposes is the most appropriate decision.
The Cons of Selling an Inherited House in Atlanta
On the other hand, there are some potential downsides to selling the property you inherited, which you’ll also want to take into consideration.
Inherited Houses Often Are In Need of Repair
It’s not uncommon for inherited houses to require repairs– sometimes ranging from a bit of deferred maintenance to serious neglect. There’s always the option to sell the home as is, meaning that the seller won’t be making any repairs or updates requested by the seller, but this can reduce the pool of interested buyers and decrease the home’s market value.
Depending on the situation, you might find it well worth paying for the necessary repairs to sell the house. If there is no mortgage on the property and you stand to profit even after putting together a reasonable budget for your repairs, putting a bit of money into the home before listing it can help ensure that the property sells quickly and for a good price.
You Might Have to Pay Capital Gains Tax
Capital gains tax is paid on the appreciation of an asset that has been inherited. You won’t have to pay these taxes when you inherit the property, but you will need to pay up when you sell the property.
Keeping an Empty House Isn’t Free
Maybe you inherited a house in a highly desirable area that is in move-in-ready condition. If so, you might not have to worry too much about how long it takes for the property to sell. At the same time, even the fastest-selling homes will take a little time between listing and closing, meaning that you will be responsible for the vacant home in the meanwhile.
On the other hand, the property you inherited may need a little TLC and will likely sit on the market for a bit when you’re waiting for the right buyer.
Either way, you’ll need to think about the cost of property taxes, utilities, insurance, normal wear and tear, and general maintenance in the meanwhile. Without attention, an unoccupied home will deteriorate gradually, and therefore it’s important to incorporate the costs of maintaining it into your decision.
The Home Won’t Generate Ongoing Income
Though selling the house can set you up to get a nice lump sum after closing, and being a landlord isn’t going to be everyone’s cup of tea, it is worth considering the ongoing income that keeping the rental could generate.
There are a lot of factors that go into making a property a good rental– the neighborhood, the property taxes, the schools, the local economy, the type of property, and so on– and lots of risks associated with owning rentals, like holding vacancy for extended periods, delinquent tenants, and unexpected repairs or maintenance costs.
What to Know About Inheriting a House in Atlanta
Let’s take a quick peek at some of the state laws that can impact inheriting a house in Atlanta.
The Probate Process
Probate isn’t always a necessary part of the inheritance process– wills in Georgia typically don’t need to be probated if the deceased only had non-probate assets or they didn’t own any assets in their name only. Non-probate assets include those owned by another person, assets with a named beneficiary, and assets held in a trust.
Additionally, the laws in Georgia allow an estate to not go through the probate process so long as there is an agreement regarding distribution among the heirs in cases where no will was left. In this case, any creditors will also need to agree to the distribution plan.
Mortgage Debts on Inheriting Assets
If the deceased has prepared a legal will, it will typically name who will inherit their property. When there is no will and a co-owner, the house will go to the other person who owns the home. In the instance when there is no co-owner, the home will often be passed to the nearest blood relative.
Mortgage ownership can be transferred to the inheritor as per the Atlanta real estate transfer laws, or the inheritor can choose to sell the home in order to pay off any remaining dues.
Estate Tax and Inheritance Tax
Georgia has no inheritance tax or estate tax on its inheritance laws.
That being said, there are a number of tax forms that will need to be filed on behalf of the deceased and their estate, including:
● Federal estate/trust income tax forms
● Final individual federal and state income tax forms
● Federal estate tax forms
Factors to Consider When Deciding to Sell an Inherited House
Finally, let’s look at some of the factors you’ll want to consider when you decide to sell a property you’ve inherited.
Does the House Have a Mortgage?
It’s possible that the home you’ve inherited hasn’t had a mortgage for some time, or there could be a significant amount of money still owed to the lender. If the house does have a mortgage, you’ll need to keep making regular mortgage payments– otherwise, you could be hit with late payment fees or even risk foreclosure if enough time passes.
If there is a mortgage, you’ll need to figure out who the lender or servicer is, where statements are delivered, and the payment options.
Is the House Going Through Probate?
If the property is currently going through probate, you will need to wait until the probate process is complete. Once it is over, you are free to sell the home if you choose to do so.
Are You the Sole Heir of the Property?
If you are the sole heir, you can make the decision about whether or not to sell on your own. If there are others involved, though, you’ll have to come to an agreement and determine who is going to manage the process of selling the home.
What Is the Home Worth?
When you’re considering selling a house you inherited in Atlanta, one big question is how much it’s worth. This is vital information that, in combination with learning about the local market, will help you get a sense of how quickly you’ll be able to sell the home and whether the sale price will cover the outstanding mortgage or debts, if applicable.
Are There Outstanding Debts and Taxes?
In addition to mortgage debt, it’s also possible that there are other outstanding debts or taxes due on the property. It’s easy not to factor in these other costs when considering how much you might stand to profit when selling an inherited home, so it’s important to do your research before coming to a final decision.
Is It Time to Sell Your Inherited Home?
Selling an inherited house is a big decision, but it is one that can allow you to turn a property that would be costly to upkeep into a financial gain for you and your family. When you choose to put a house you inherited on the market, you want to know that you have a team of people working around the clock to ensure the property sells quickly and for the highest price possible.
If you live in Atlanta and are considering selling a home, the Justin Landis Group is here to help. Not only will you have a real estate agent that serves as your primary point of contact, but you will also be connected with a world-class team of experts that will work tirelessly to help you achieve your real estate dreams.
Ready to get started? Contact us today!