If you’ve recently inherited a house, you may not be prepared for the questions and problems that can arise. If you make the wrong decisions, you will likely encounter financial problems, legal issues, and family stress.
“Forewarned is forearmed”….as they say, SO here’s some of what can go wrong when you inherit a house in Oklahoma because it isn’t all money and roses….
What Can Go Wrong When You Inherit a House in Oklahoma
You May Owe More Taxes than Anticipated
Most people don’t have to worry about estate tax because of the very high exemption (in the millions), and the estate tax was even temporarily suspended on 2010. But also mostly suspended in 2010 was the step-up provision. So in considering what CAN go wrong when you inherit a house in Oklahoma and when you intend to sell it, you need to consider the stepped-up capital gains situation.
The step-up provides that you pay capital gains taxes only on the gains above the fair market value at the date of the decedent’s death. It has nothing to with the price the decedent paid for the house – unless the step-up falls in one of the years when it was changed. In that case, you may owe a lot more in taxes than you bargained for. If you intend to sell a home you inherited it is best to speak with either a CPA or professionally licensed home buying company like us!
The Mortgage May Be Bigger than You Thought
Sometimes, when an elderly parent or relative passed, the mortgage on their house was paid off. Typically they have owned the home for 30+ years and paid the mortgage off long ago. These days, though, it’s common for elderly people to take out a reverse mortgage or refinance their equity against their home. In the best cases, this means there is very little equity in the home for the heirs. In the worst cases, the mortgage owed is more than the home is worth!
You also need to be aware that a reverse mortgage cannot be assumed by heirs. And in the case of a standard mortgage, you can assume the mortgage only if you live in the house yourself. So if you intend to rent the house, you may have to fully refinance it in your own name. If you want to keep the house, we suggest reaching out to your local bank to explore financing options.
If you want to sell the property, no matter how much is owed on it, you just need to contact a home buying company to come take a look at it. They’ll give you an offer and take care of the paperwork. You can reach us for this at 405-673-4901.
The House May Need Repairs and Upgrades
With respect to what CAN go wrong when you inherit a house in Oklahoma, this one may be the most costly. Most of the time, people inherit a house from a deceased elderly or older relative. Besides not having the physical ability to perform maintenance and upgrades, many elderly people also don’t have the money for it either. And if they do, they may simply choose not to because they know they won’t be living in the house very many more years. This means you could be inheriting a house that needs $10,000, $30,000, $50,000 or more in repairs/upgrades before it can be sold in top condition. Not everyone has that chunk of change lying around…
If you plan to live in the inherited house, this may not be a huge concern. You can do the repairs yourself at your own pace. But if you intend to rent it or sell it, you’ll have to make repairs to make it marketable and upgrades to bring it up to code and meet other legal and insurance requirements. Installing a new HVAC system, installing a new roof, or re-wiring the house will involve a big chunk of money.
If you do plan to make repairs to the house…get THREE bids on any job. Don’t just take the first bid you get. Get three! Trust us, it will save you thousands.
You May Have Problems with Relatives and Joint Heirs
But what if you’re not the only heir? That can be a problem. Suppose you and your 3 siblings inherited the house together. If you want to sell it, your brother may want to rent it, and your other brother, to live in it himself. We’ve seen this scenario a lot with families. Often times it just takes a lot of time to argue through the problem so that the house can be eventually sold. Other times, we see family members buy out other family members to gain full control over the house.
In most states, joint heirs of a home are considered tenants in common, and one heir can actually force a sale if it comes to that. The process, however, is expensive, and the emotional and familial consequences are likely to be highly unpleasant. It might not be worth it to play this card…
So what can go wrong when you inherit a house in Oklahoma? Quite a lot if you’re not up to speed on tax laws, mortgages, and upgrade issues. It is best to contact a qualified professional to help head off these issue quickly.