Should I Sell My Inherited House? (Pros and Cons)

You’ve inherited a house and suddenly feel overwhelmed by all the options.

“Should I sell my inherited house, rent it, or keep it?“

Your emotions are high, and the financial burden is higher. So, you might feel obligated to make a fast decision. But before you do, take time to breathe, and let’s walk through your options together.

Consider each option’s pros and cons and the steps you should take before you sell your inherited house.

What to Do with an Inherited House

You inherited a parent home or grandparent’s home – now what?

Here are three primary options to consider:

1. Living in the Inherited House

If you’re currently renting, moving into an inherited home that’s fully paid off can save you money, if that house is in good condition. You might also want to keep the house if it’s sentimental to you and your family.

Do you already own a house? Consider using it as your vacation home if you can afford to pay taxes and upkeep for two properties.

If you’re currently renting, moving into an inherited home that’s fully paid off can save you money, if that house is in good condition.

Doug & Andrea Van Soest

Pros:

• You don’t need to worry about selling or renting the property
• If the house is paid off, your living costs will go down

Cons:

• The house may need substantial repairs to make it livable
• If there’s a mortgage or liens on the home, your costs could go up
• You need to sell or rent your current home to avoid paying for two properties

2. Renting an Inherited House

Inherited property turned into a rental allows you to keep it in the family with a smaller financial burden. Instead of paying for the upkeep and debts out of pocket, you’ll use your rental income to cover many of those costs.

Typically, landlords charge 1% of the home’s value in rent. So, if your house is worth $600,000, the monthly rental income would be $6,000.

Instead of long-term renters, you can also opt for short-term renters. Short-term vacationers book through sites like Airbnb or Vrbo. You’ll make more profit through short-term renters but might also have a greater time commitment to manage the property.

Renting adds more responsibility to your plate, like upkeep and maintenance.

Do you have the time to find renters and keep the house up to code?

Renting the house allows you to keep it in the family with a smaller financial burden.

Doug & Andrea Van Soest

Pros:

• You can keep the house in your family
• You can make an extra income from the property

Cons:

• You have to invest time in maintaining the house for renters
• Rental costs quickly add up (like marketing the house, fixing it between renters, and paying higher rental taxes)

3. Selling an Inherited House

Selling the inherited house gives you the greatest financial flexibility. You won’t have to deal with reoccurring costs like mortgages and liens. Plus, you’ll have the finances to purchase the house you want or pay off your current home.

Selling the inherited house gives you the greatest financial flexibility.

Doug & Andrea Van Soest

Pros:

• You’ll have fewer reoccurring costs
• You’ll have cash in hand to use wherever you need it most
• You won’t need to maintain or renovate the house to make it livable
• You can receive cash sooner when you sell the house as-is through a homebuyer

Cons:

• Selling houses through the regular market takes time, so it’s not an immediate solution
• Selling houses can become expensive when you sell through a realtor
• If the sale price is less than remaining mortgages and liens, you won’t make any profit

Is It Better to Sell or Rent an Inherited House?

That depends on what costs go into the house’s upkeep. If the house needs extensive renovations and upkeep is costly, then rental payments might barely cover the house’s costs.

A house with active mortgage payments is most likely to cost more than you bring in. This is because the mortgage will take most of the rental income, so you’ll have little left for upkeep. Then, you’ll also have gaps between renters where you’ll be responsible for mortgage payments until you can find a new renter.

On the other hand, if the house is newer and requires very little upkeep, you could make a decent profit from renting. Just be sure you have the time to take care of landlord tasks like regular maintenance.

Selling a house gives you cash in hand you can invest in a low-maintenance rental, your own property, or other investment options with a higher return.

Selling a house gives you cash in hand you can invest in a low-maintenance rental, your own property, or other investment options with a higher return.

Doug & Andrea Van Soest

Questions to Ask Before Deciding Whether to Sell

Now you know your options, ask yourself these questions to choose the best one.

What Are the Costs Involved with the House If You Keep It?

The most important question to answer is the financial burden of the inherited house. If you can’t afford the house, you’ll want to sell it or rent it as soon as possible to avoid foreclosure.

Some standard costs you’ll inherit with a house are the mortgage, liens, and credits on the house. You’ll also have regular property taxes and homeowners’ insurance payments. Inheriting a house that is paid off has fewer costs since you’ll only need to keep up with property taxes and insurance.

What Are the Costs Involved with the House If you Sell It?

Selling a house means you don’t have to deal with those costs as long. But you do have additional taxes.

How much tax do you pay when you sell an inherited house?

California charges a tax on capital gains. Capital gains are the profits you make when you sell a house.

For example, your parents bought the house for $300,000. Now, you’re selling the house for $500,000. Your capital gain is the $200,000 profit.

California taxes capital gains the same as income. If you own the house for less than a year, the property is taxed as a short-term capital gain. Depending on your income, short-term tax rates range between 10% and 37% of the profit.

If you hold onto the house for over a year, it’s a long-term capital gain. Long-term capital gains have a lower tax rate, ranging between 1% and 12%.

Let’s see those numbers in action. If you immediately sell your house for $200,000 more than your parents bought it for, and you’re in a 22% short-term capital gains tax bracket, you’ll owe $44,000 in taxes.

Is Anyone Occupying the House?

Sometimes that inherited house comes with an unexpected guest living in it. The guest might be a previous tenant or a family member.

A house with a tenant might limit your options, especially if the tenant has legal rights to the house, like another beneficiary.

You could offer to sell the house to the current tenant or continue renting the home to settle the issue quickly. Otherwise, you can legally ask the tenant to move out so you can sell the house.

What Repairs Does the House Need?

SoCal research showed that 87% of beneficiaries receive a house that needs repairs. An additional 13% require complete rehabilitation. Often, as the house’s previous owners age, they can’t keep up with regular repairs. So, the house tends to fall behind in maintenance.

Before you live in the inherited house, sell it on the traditional market, or rent it, you’ll need to address those repairs. Repairing a house is costly and takes time, delaying when you’ll be able to see a rental income or house sale profit.

One survey found that maintenance costs range between $950 and $9,820 annually. A house where the previous owners haven’t maintained it in years would be much higher than that on average.

What options do you have if the inherited house is in complete disrepair, but you don’t have the time or money to fix it up?

Selling the house as-is to a home buyer like SoCal saves you time and money. You can offload the house quickly, so you won’t have to deal with mortgage payments. Then, you also won’t need to invest anything into repair costs.

Learn More: How to Sell a House that Needs Major Repairs

Who Else Inherited the Home?

You might not be the only beneficiary with a legal claim to the home. Inheriting a house with siblings or other family means the decision has to involve everyone. If you’re choosing the best option, remember that your family relationship is more important than the house.

If you sell the house, you’ll split the costs and profits equally with the other beneficiaries. On the other hand, if you keep the house, you’ll also split responsibilities and ownership.

When a beneficiary is living in the inherited home, they would pay the other owners a small rental fee. Otherwise, you can offer to sell your house share so the beneficiary can own the entire property. Then, you can have your share in cash to use as you want.

Options for Selling an Inherited House

You’ve decided that selling your inherited house is your best option because you don’t have the financial burden. Here are your three options based on what you want to invest and make from the property.

1. Sell the Inherited House with a Realtor

If you want to make the most profit from the sale, you will sell through a realtor. To sell through a realtor, you’ll want to address any outstanding debt and liens, like overdue property tax. Next, you’ll fix up the house and make it show-ready. Then, a realtor will post the house on listing sites.

After weeks of showings, you’ll begin the house-buying process. In total, the house-buying process in California takes 72 days. That’s 37 days to find a buyer and 35 days to close.

You’ll also have high realtor fees to budget for in addition to your capital gains tax. The average Californian realtor fee is 4.91% of the house sale.

Learn More: How to Sell Your House Without a Realtor

2. Sell the Inherited House by Yourself

For sale by the owner can cut realtor costs, so you take home more of the profits. The downside is you’ll be responsible for other expenses like marketing and showings. You’ll also have limited listing options for selling the house as realtors have access to the leading home listing tools like Zillow and Redfin.

Because you don’t have as many channels and tools for selling your house, the sale time will take longer. That longer time can add an extra financial burden if you’re trying to sell because of costs.

3. Sell the Inherited House through a Home Buyer

A home buyer is your fastest and most convenient option as you’ll not have realtor fees and long listing wait times.

For example, SoCal Home Buyers makes a cash offer within seven days. We buy houses as-is, so you’ll have no repair obligations. We’ll also take houses with liens and other debts attached. That means you can sell your house faster and with no financial investment for a fair cash price.

Learn More: Companies that Buy Houses and 7 You Can Trust

Are You Ready to Sell?

Take your time to decide what the best option is. There is no time limit on selling an inherited property. If you do choose to sell the house, let us support you in the process. Our team understands the emotional ties to inherited homes and will work with empathy and understanding throughout the process.

We’ll take care of all the legwork, so you don’t have to worry about repairs, liens, and other financial burdens. You can even sell the house with a current tenant. That way, you’ll receive the profits faster without long sales processes and expensive commissions.

Contact us for a no-obligation, fair cash offer on your inherited home Today.

Frequently Asked Questions