Highlights:
- Being close to retail can be an advantage when selling a home.
- Consider taxes when deciding whether to rent or sell an inherited home.
- Upgrading an inherited home may be a good investment.
by Harvey S. Jacobs, the “House Lawyer”
Harvey S. Jacobs
Special to InsideRealEstateNews.com
Dear House Lawyer: I have inherited a house and am trying to decide if I should sell it. I know they are building a Wal-Mart in the neighborhood, and Costco is not far from there. Would you have any insight you could share on the projected value of property?
Sincerely,
House Heir
Dear Heir:
Generally speaking, the closer you are to major roads, public transit and modern retail establishments, the greater the value of your home. Access to well-regarded schools will also add value.
Property features relative to other homes in the area, such as the number of bedrooms and baths, lot size, square footage and property condition, play critically important roles in arriving at fair market value.
You asked whether the proximity to existing or planned large retail stores such as Costco and Wal-Mart would have an immediate impact on home prices in the area. The stores aren’t within walking distance, so a broker I spoke to said they are too far away to have an impact on the value of your home.
The real estate market in many parts of the country, of course, have shifted from a buyer’s market to a seller’s market.
Despite the turn around, buyers, though, still are looking for well-priced properties in excellent condition.
A Realtor told me that an updated kitchen, for example, can help sell a home quicker. If the seller can’t afford such an upgrade, less pricey fixes such as enhancing curb appeal, applying neutral paint, de-cluttering, and even something as simple as washing windows, are in order.
Neglecting to spend any money on an inherited house, however, can be a mistake, as the return on the investment can be substantial.
Presumably, if you don’t sell, the alternative is to hold on to the property and rent it out. In analyzing the situation, you should understand the federal and local income tax implications.
If you sell, you will pay federal capital gains taxes on the difference between the amount realized and your tax basis in the property.
The amount realized is your contract price, less your sales costs, which include real estate commissions, legal fees, advertising fees and any seller-paid points.
The tax basis of property inherited before and after 2010 – but not during 2010 – is its fair market value on the date of the owner’s death. That is called the stepped-up basis, and it is often obtained by having the property appraised shortly after the death of the owner.
Michael Berson, a certified public accountant in Bethesda, said that “depending upon the size of the estate, property inherited in 2010 may have limited stepped-up basis.”
The basis calculations for property inherited from someone dying in 2010 require complex elections by the personal representative of the estate and are thus best handled in connection with a trusts and estates attorney and/or a CPA. A detailed explanation of how to treat the sale of your inherited home is provided in IRS Publication 523, “Selling Your Home.”
Harvey S. Jacobs is a real estate lawyer in the Rockville office of Joseph, Greenwald & Laake. He conducts residential and commercial real estate settlements throughout The District of Columbia and Maryland. He is an active real estate investor, developer, landlord and lender. This column is not legal advice and should not be acted upon without obtaining legal counsel. Jacobs can be reached at harvey@harveyjacobs.com or (240) 399-7891
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What a frustrating, lawyerish response.
1. Do you want the money now (selling) or do you want to be landlord?
2. If selling, then interview 3 real-estate agents and ask them how to maximize your return.
3. If renting, then find a property management company to help you.
4. Don’t worry about taxes as they won’t amount to that much. (The person who inherits a $5M house does not live near a Walmart. The one who inherits a $200K house does.)
I actually heard that a Wal-Mart within driving distance would increase the value of a home. Is that not true, or is it dependent on the market?
yes the major point in selling an inherited home is to see the location of the house and also if you have upgraded rooms or kitchen, you are liable to get more price.