Inheriting real estate is rarely as wonderful as it may appear in movies – not everyone wants to be gifted that majestic palace under the swaying palm trees looking out over the Pacific Ocean or even a small condo in Waikiki. The responsibilities that come along with a gift like this can be quite overwhelming, especially if it’s an older property needing a lot of TLC or even a new rebuild entirely. While your loved one or close friend may have had the best of intentions when passing on their Hawaii real estate to you, too often the property is an emotional and financial burden to warrant keeping at all. If this is sounding familiar, then here is some important information you need to know about inheriting real estate in Hawaii.
Financial Responsibility
One thing you should know about inheriting real estate in Hawaii is that the recipient of an inheritance of real estate is financially responsible for the property, 50-year old roof and all. This includes any outstanding debts attached to the property, including liens like mortgages, HOAs, taxes, judgments, etc. Additionally, you’re now responsible for all the upkeep and maintenance. If the property is an investment for rental income you may now also be taking on the role of landlord, which brings along more responsibilities and demands upon your time. You will also owe property taxes and possible homeowner association (HOA) fees. Often these associations have strict guidelines that must be adhered to regarding the maintenance and appearance of the property.
Repairs
The frequency and expense of constant repairs begin to increase at a quicker pace as homes age, and Hawaii has plenty of homes built in the 1950s to 1970s that fall into this category. This, in turn, increases the risks and expenses involved with inheriting real estate in Hawaii that is not new or in near showroom condition. Whether your intent is to live in the property or list the property for sale with a realtor, you should take some basic steps to educate yourself on the condition of the home from the foundation to the top of the roof and everything in between. You may even want to hire a home inspector ahead of time so you can either fix in advance what your buyers would otherwise discover for themselves or adjust your asking price accordingly. It is highly recommended that you contact at more than one professional for each type of repair so you pay a fair price and don’t get gouged, either in cost or in time to complete the job.
Clearing Personal Property
Inheriting real estate in Hawaii can be very emotional and may even make it difficult or impossible for some to even enter the property – generations of memories have been created in some homes. Unfortunately, you’ll need to either remove all of the personal property of the deceased from the property yourself or hire professionals to do it for you (sometimes we’ve covered this cost for people who come to us to sell their house).
Depending on the condition of the property and the ‘state of the estate’, this could literally mean going through mountains, clutter and decades with of belongings. You’ve probably seen garages too full of boxes to even accommodate a car – that’s the picture. Putting off this necessary task will only make it more difficult when you find a buyer and are now on the clock to get it done. It also presents a less desirable image of the property to potential home buyers, so try to get this done in advance of marketing the house (unless you’re selling directly to a company like Oahu Home Buyers).
Taxation
Whether or not you believe you will personally ever inherit a piece of real estate, it is one of the most common items passed on and the tax implications are something everyone should have at least general knowledge about inheriting real estate in Hawaii. Under the Unified Gift and Estate Tax system, the estate tax is based on the value of the property transferred through inheritance, which is calculated based on specific guidelines and includes possible deductions. While often no federal estate tax is owed as the beneficiary, this is not always the case so don’t bank on that too quickly. Every American currently is allowed to inherit up to 11.18 million (this number is expected to change). You will also want to be certain to investigate the gift tax as well. Additionally, there are several states which do have estate taxes, so familiarizing yourself with these laws may be helpful in the future.
Purchasing Other Property
Because you now take on the financial responsibilities along with the property itself, if you were preparing to purchase your dream home, everything may have just changed considerably. One of the major changes may just be in the eyes of your lender when inheriting real estate in Hawaii. Depending on the remainder of the mortgage and any other expenses that are now in your name, your debt to income ratio may now mean you no longer meet the guidelines to qualify for that loan you were counting on to buy that nice house in Honolulu. Additionally, any new costs for repairs may deplete whatever savings you have managed to put together in anticipation of your plans.
For many, holding onto an inheritance of real property is much too time-consuming or simply not financially feasible. There is a simple and quick solution that will easily eliminate any concerns about inheriting real estate in Hawaii. Working with Oahu Home Buyers means complete convenience, with no showings or open houses. Just pack what you want and leave the rest behind – we’ll take care of everything from here. Oahu Home Buyers will help you with the paperwork and make the entire process easy, explaining every step along the way. Just send us a message or call Oahu Home Buyers at (808) 333-3677 to discuss the market value of the property and the possible options of selling your unwanted inherited property directly to us — no fees or commissions required, any condition OK.