One of the earlier duplexes I bought was from someone who inherited this property but didn’t want it. They lived out of state and didn’t want to deal with the tenants or the necessary repairs. In this case study involving selling an inherited house, I will walk you through:
- their decision to sell
- the costly mistakes they made that you definitely want to avoid
- and how this sale STILL worked out in their favor.
The Problems With Inheriting A House
When the owner of the property died, he left a duplex here in Connecticut to his family that lived out of state. Firstly, the long term tenants were paying rent well under market value. Secondly, one of the tenants was a certifiable hoarder. Thirdly, the house had some serious safety concerns. Major concerns were rotting exterior staircases to the second floor. Plus, the house was just generally run down. The new owners didn’t have the experience to manage difficult tenants or a construction project remotely. Plus, they didn’t have the cash to pay for the necessary renovations because the value of their inheritance was tied up in the house. They wanted to pay off some of their own debt so they decided to sell the duplex, turning their burdensome inheritance into cash.
Costly Mistakes When Selling an Inherited House
The owners decided to put the property on the market with an agent, thinking this would cast the widest net to find buyers – costly mistake #1. Let me explain…Agents are paid by commission when the property sells. Typically, an agent will charge the seller 5-6% of the sale price. For a home of median value at $150,000, that’s $7,500. Plus, the idea that the property needed to be sold on the market was misguided. Normal buyers could never get a loan for this property. The low rent amount and poor condition of the property made the property unfinanceable by traditional standards.
These sellers needed an experienced buyer that wasn’t going to a bank to get a loan. That’s where I came into the picture and if the owner had sold direct to me, they would’ve pocketed that $7,500 themselves! The second costly mistake was not accepting my offer right away. Sure, we negotiated back and forth but they wanted to explore the market a bit more so we waited another 2 months before they accepted. For every month that the owner held the property, they were responsible for the taxes, insurance, trash, water, lawn care, maintenance, etc. of the property. Two months can add up to thousands of dollars, especially here in CT, where taxes are high. If they had accepted the offer earlier, they would have saved themselves those extra two months of expenses.
How this Still Worked Out in Their Favor
Ultimately, after they tested the market a bit longer, my offer was still the best offer they received and they accepted. This is when things started to get better for them. Because my offer was a cash offer, I was able to close quickly – much faster than a typical buyer would have been able to if they were waiting for an appraisal and a mortgage. My ability to move quickly to purchase the property without those typical requirements limited the exposure of expenses for the sellers and expedite their cash payout! Not only did I expedite their access to their inheritance, but I agreed to make things easy for the seller. I agreed that the seller wouldn’t have to make any repairs to the property or clean out the contents (let me tell you, there was a lot of stuff in there!).
I took the property as-is and let the sellers walk away without raising a finger! This was really important for them. They lived far away and couldn’t come back to empty the house nor did they have the cash to hire someone to do it for them. Lastly, even though they never asked for this, I wanted to make sure the tenants were well taken care of. They were long time friends of the previous owner and I knew their well being was important to the sellers. I ended up giving the tenant cash so they could move into an apartment more suitable and safe for them. This way, their relationship with the family that had owned the property and been their landlord for years ended on a high note, with them being taken care of even after the sale.
If you have a property that you’ve inherited in CT but don’t want to deal with it, know that you have options. The decisions you make can be the difference in thousands of dollars for you.