Inherited property can cost you, here's what to do
Handling an inherited property can be an extremely difficult experience for real estate professionals, as well as for their clients.
Richard Gray, Harcourts Africa Chief Executive Officer, says it often touches deep emotions, but has enormous implications for long-term financial security - and so having a clear plan of action for when it arises is an excellent idea.
“One of the most common issues that we face is around information and documentation. The first step is to have it appraised to understand what it may fetch on the market,” says Gray.
“But working out what to do with an inherited property is often massively complicated by the title deeds having been mislaid, or not knowing what liabilities it carried - outstanding bond payments, unpaid rates and utility charges and so on.”
He says getting this information together is time-consuming, but important as it determines just how valuable an asset it is.
“What to do with the property relates directly to the new owner’s financial position and the net value of the property,” he says.
“Inheritors invariably choose one of three options: sell, rent, or use the property, either as a primary residence or a holiday spot.”
In each case, Gray says understanding the financial implications is critical.
“Inheritance often adds an unplanned-for asset to a household’s portfolio. This can mean taking on significant new expenses, another bond payment perhaps, renovation costs, and so on,” he says.
“Unless a household’s income stream can accommodate it, the property can actually become a financial burden.”
Renting it out is a good and popular choice, but he says it is important for the owner to understand what this entails.
“It is generally an excellent income stream, but can cause its own line of problems - one of which is the sensitivities that some owners may feel about having tenants in a ‘family home’ with its rich memories,” says Gray.
“Besides, one does not choose the location or condition of the property inherited, and this can influence its rental prospects.”
Selling may be advisable in some cases, although Gray says it often meets resistance from owners wanting to retain it for sentimental reasons.
“For these reasons, clients should seek the advice of a top-class real estate agent for advice on what to do with the property they have acquired,” says Gray.