For many large families, being left a property often means inheriting it alongside other family members.
When this situation arises, the question of how to proceed often becomes problematic. This is especially so when one member wants to keep the property, but the others wish to sell it off.
When this occurs, specific measures need to be taken. One of the most common ways to proceed here is for the heir in question to refinance the property.
Here we consider how to refinance an inherited property to buy out heirs or what happens when one heir wishes to purchase inherited property – but needs to work alongside others to seal the deal.
The Possibilities for All Heirs with an Inherited Property
When a group of heirs has been left a property together, several options are available going forward. These range from:
- Selling the property – dividing the sale equally between all heirs
- Renting the property out – dividing the profits regularly between all heirs
- Keeping the property – so that everyone can enjoy it equally
- Signing the deeds over to one heir – as they pay all heirs for their share for full ownership of the property
The Procedure When One Heir Wants to Keep the Property for Themselves
Though it depends on the current family dynamics, buying an heir out of an inherited house can be a simple process. That is, if all members can come to an agreement to take steps toward formalizing the sale.
Firstly, the heir in question can pay cash for their share of the property. Then the deeds will be signed over to them. Yet, this is often a high sum, and most people don’t have the funds to do this outright.
Another way for the heir to obtain the property is to take out a mortgage. However, this is problematic in itself. A conventional lender will not offer up a mortgage for an inherited property for several reasons. The first being the title won’t be in your name. This is simply because, at this stage, the house still belongs to the estate. Thus, this proposition is deemed risky for banks.
Some families work to a private arrangement. This requires writing up a suitable contract to determine how the heir would pay the beneficiaries off. This means determining how much would be paid, the interest rate, and monthly payments until the house is paid off in full. But this arrangement needs a record of a deed of trust.
Overall, though feasible, these options don’t always take precedent when it comes to inheritance property. Furthermore, most heirs simply want the whole process completed as soon as possible. Many also want to have their share full, not installments.
Why Do Heirs Consider Refinancing Inherited Property?
Refinancing a mortgage is perhaps the most practical of ways to buy out heirs. Though in many cases, it’s often the only option for an heir to make a property their own.
Because of the complications surrounding the inherited property, each beneficiary needs to be on board here. This means every individual who inherited a proportion of the property has to have their say on the matter.
Only when each heir to the property has agreed to be bought out, can the heir in question proceed with refinancing a mortgage on it.
Once all heirs are onboard with the concept of one person taking on the inherited property, the more complicated process then begins with refinancing.
This aspect is more complex due to legal procedures. These vary in each state. So, it makes sense to utilize the help of a fully qualified real estate agent for this process. This means an agent who has vast experience in the inherited and refinancing sector.
The Process of Refinancing When Other Beneficiaries Are Involved
Once the heir looking to purchase the property has found their real estate specialist, they can then begin to set the process in motion.
Initially, it’s more than likely that the value of the property will have to be reasserted first. But, when this has been performed, the heir can get to work refinancing the mortgage.
To do this, the heir will need to approach potential lenders. This will require them to show proof of the proprietor’s death. There will also be a request for the necessary documents proving they’re the legal heir.
Such lenders offering to refinance loans are often referred to as hard money lenders. They exist to provide loan solutions for this very situation. These loan types are then referred to as either probate loans or estate loans.
The concept of these loan types is that the beneficiary looking for full property ownership assumes the loan. When the refinancing is complete, the title is then transferred from estate to beneficiary.
At this stage, the lender will then write out individual checks to each of the heirs for their entitled share of the property.
Why Property Is Not Always a Simple Inherited Asset
In many cases, those wishing to buy out other heirs usually do so with ease. However, properties are a complicated inheritance subject. A house is not an asset that’s easily distributed between several heirs.
Thus, when it comes to family members who don’t communicate well together, problems arise at this stage.
Many times, people have decided they want to keep the family property they’ve inherited – while the remaining heirs want to sell it without question.
This often results in so many people being forced into selling simply because a compromise can’t be reached at this early stage.
When this does happen, some heirs can even go as far as filing for court action. This then demands the property be sold with proceeds spilt between the heirs.
When the process gets as far as this, the property is unfortunately listed for sale. Whether through regular real estate listing or public auction, the heir will have to bid or make an offer like everyone else with interest. Only if that offer is accepted or the bid is the highest will the original heir in question be able to purchase their family property.
Refinancing an Inherited Property Requires Careful Consideration
In concluding, while it initially sounds straightforward, an inherited property can bring about many issues.
Yet, with more people needing quick access to cash these days, holding onto the property for an extended period is not always the preferred option by many heirs. So, the time scale for individual heirs planning to purchase the property is greatly reduced.
Therefore, if cash isn’t readily available, refinancing could be the perfect way for an heir to satisfy the needs of all involved – while keeping the property in the family.