If you've recently suffered the sad loss of your last remaining parent, you may be anxious to do all you can to keep his or her memory close -- from retrieving prized photos or home movies from his or her home to, in some cases, actually purchasing your parent's residence from the estate. Often, purchasing your parent's home can be a great decision from both a financial and an emotional perspective, but this process is not without its complications and potential drawbacks. Read on to learn more about some of the financial and practical concerns that can arise purchasing from your parent's estate.
What are some of the logistical issues you may run into when purchasing a home from your parent's estate?
There are a number of advantages for just about all sides of the transaction when a home is purchased from an estate. For the other heirs, selling the home "in-house" without the use of a real estate agent can be a speedy and cost-saving way to finalize the estate, especially for situations in which there's no guarantee the home would sell within its first few months on the market. For the bank that holds the mortgage (if any) on the home, selling it to a family member at fair market value can quickly satisfy the mortgage and eliminate many of the liability issues that can come with a vacant home. And for the person actually purchasing the home, getting a fair price and being able to take advantage of today's low interest rates can provide a huge financial boost.
However, there are often some complicating factors when it comes to purchasing from an estate. The first issue arises when the home is worth more than your share of the estate and you're therefore required to "buy out" the other heirs. Unless you have the cash on hand to pay the estate yourself, you'll generally need to take out a mortgage on the home. This will usually require you to have an appraisal (and sometimes an inspection) performed so that the lender can be satisfied with the condition of its prospective investment.
In some cases, you may even be required to come up with additional down payment funds rather than using your share of the estate as a down payment. For example, if the estate consists of a home worth $100,000 and $10,000 in cash, with you and one sibling as the only heirs, you may assume you'll need a mortgage for only $95,000. This isn't always the case, and you'll want to speak to a loan officer and a probate attorney before proceeding too far down this path.
Another problem can arise when there is a disagreement among the heirs as to how the home will be liquidated or by whom it will (or can) be purchased. Depending upon the language of your parent's will, you may be required to sell the home to a third party (or at least list it for sale to the public for a certain period of time) rather than immediately arranging for financing and to take possession.
What should you do if you want to purchase your parent's home from his or her estate?
If you're certain you'd like to proceed with the purchase of your parent's home, you'll want to make an appointment with his or her probate attorney to discuss your options. Although the probate attorney works on behalf of the estate, not any of the specific heirs, he or she will be in the best position to inform you of the content of your parent's will and any relevant restrictions on the sale of the home. In some cases, you may need to hire your own private counsel to complete the transaction.
When it comes to buying a new or used home, one of the most important ways to protect your new investment is to hire a real estate attorney to represent you throughout the process. An experienced real estate attorney will work as your ears and eyes to ensure that nothing important is overlooked in any paperwork you’ll be signing, and they will also help to ensure that your home is in good condition before you make an offer. If for any reason a problem arises during or after the buying process, your real estate attorney will ensure that you are financially protected. Feel free to browse the pages here to learn more about how real estate attorneys can benefit you when you’re ready to buy a home.