Inheriting a home can be a financial boon, or a costly mess. What you need to know about hidden costs.
In a previous blog post, we discussed some of the initial questions that come up for people who have inherited a home. Because there are so many variables related to property inheritance, the topic warrants several posts.
In this installment, let’s consider inherited homes in need of significant repairs:
Appreciated value vs. costly repairs
In the movies, the reading of wills often depicts families battling over a deceased relative’s enormous riches and valuable assets. In real life, inheriting property could mean that you now own a piece of valuable real estate that will make you money – or it could mean you now possess a money pit.
If your family member owned the property for many years, the home has had time to appreciate in value. On the other hand, it could also mean the home has sat in disrepair and now requires many expensive upgrades in order to sell it.
Real estate experts often say that kitchens and bathrooms sell houses and, if your inherited home needs a kitchen remodel, that could cost you an average of $18,500 for a minor redo (source: Popular Mechanics). An average exterior paint job costs $3,106 and the average national price paid to install new flooring is $4,244, depending on the size of the home and the materials selected (source: HomeAdvisor).
Even if the home only needs cosmetic decorative upgrades, such as fresh interior paint, there could be other major repairs needed. A new roof, for example, could run you an average of $7,496, and a new furnace could cost more than $4,000 (source: HomeAdvisor). If you place the house for sale, these types of repairs will be noted by the home inspector, and you may need to pay for the repairs before the house can be sold. That can mean a delay in how quickly the sale closes as well as more money out of your pocket.
No mortgage, but hidden costs
In addition, inherited homes often come with no mortgage payment, but no mortgage doesn’t mean no expenses. Property tax, insurance, utilities and other maintenance costs can add up quickly. In Colorado, the median property tax is $1,437 per year on a home valued at $237,800 (source: TaxRates.org). Home insurance runs an average of $1,278 in Denver and utilities can run more than $200 per month (source: AreaVibes).
Bottom line
Inheriting a home may turn out to be more of a headache than a happy occasion when it comes to the time, energy and monetary investment it can require of you.
Seek the advice of your attorney, accountant or a real estate professionals when deciding whether to spend money on the property you have inherited. If you would like to learn more about how to sell the property as is, take a look at our website or give us a call at 720-445-4541.
The information above is intended for educational purposes only and should not be used as official legal or financial advice.