If you’ve inherited a property and you’re thinking about selling it, you might have more options than you realize. Read this blog post to find out the 3 financial options you can pursue when selling an inherited property in the Greater Toronto Area…
When a loved one passes and leaves you with a property, it might be a meaningful gesture but, the truth is, an inherited property isn’t always convenient to own. There are additional bills, expense, maintenance, upkeep, and stress; it can be time-consuming. So if you are thinking of selling, you might first be thinking about selling with the help of a real estate agent. However, you might be surprised to learn that you have options that you may want to consider as well. In fact, did you know you have three financial options you can pursue when selling an inherited property in Ontario?
First, Let’s Talk About Selling Through An Agent…
There’s nothing wrong with selling through a real estate agent, but you should be aware that an agent may have you fix up the inherited property first, then there are closing fees and the hefty agent commission you’ll have to pay afterward. And, this method can take months, so some people don’t like how long it takes.
Selling a property through a real estate agent is the most traditional method, and while it has its benefits, it also comes with several drawbacks that you should consider.
The Process
The process of selling through an agent typically involves the following steps:
- Hiring an Agent: The first step is to find a reputable real estate agent. This agent will represent you and help you navigate the selling process.
- Property Assessment: The agent will assess the property and recommend any necessary repairs or improvements to make it more marketable.
- Setting the Price: The agent will help you set a competitive price based on a comparative market analysis.
- Marketing the Property: The agent will list the property on various platforms, arrange for professional photos, and host open houses.
- Showings and Offers: The agent will schedule showings for potential buyers and present you with any offers.
- Negotiations: The agent will negotiate on your behalf to get the best possible price.
- Closing: Once an offer is accepted, the agent will guide you through the closing process, which includes dealing with inspections, appraisals, and final paperwork.
Costs and Time
- Repairs and Upgrades: Before listing the property, you may need to invest in repairs and upgrades. These costs can add up quickly, and there is no guarantee that you will recoup these expenses in the sale price.
- Agent Commissions: Real estate agents typically charge a commission of 5-6% of the sale price. On a $300,000 home, this could amount to $15,000-$18,000.
- Closing Fees: Closing costs, which include title insurance, escrow fees, and transfer taxes, can add another 2-5% to your expenses.
- Time: The process can take several months from listing to closing. During this time, you will continue to incur holding costs such as property taxes, insurance, and maintenance.
While selling through an agent can potentially yield a higher sale price, the costs and time involved can be significant. If you are looking for a quicker and more convenient option, you might want to consider other financial options you can pursue when selling an inherited property.
For more information on selling through a real estate agent, visit the Canadian Real Estate Association (CREA).
Second, Let’s Look At The Other Options…
Option #1: Refinance
One option, which is a type of selling, is to refinance the property with a bank and use that money for other things. Although you’ll still own the house, this is a financial option that some people might consider if they are selling in order to get the money.
You can still use the house, or rent it out, and you’ll need to pay back the loan to the bank, but it’s one option to consider.
Refinancing an inherited property involves taking out a new mortgage to replace the existing one. This can be a useful strategy if you need liquidity but want to retain ownership of the property.
The Process
- Assess the Property Value: Determine the current market value of the property. This will help you understand how much equity you have.
- Check Your Credit Score: Lenders will check your credit score to determine your eligibility for refinancing.
- Shop for Lenders: Compare offers from different lenders to find the best terms.
- Apply for Refinancing: Submit your application along with necessary documents such as proof of income, property details, and credit information.
- Appraisal and Underwriting: The lender will appraise the property and review your application.
- Closing: Once approved, you will close the new mortgage and pay off the old one. Any remaining funds will be disbursed to you.
Benefits and Drawbacks
- Immediate Cash Flow: Refinancing can provide you with immediate access to cash, which you can use for other investments, pay off debts, or cover personal expenses.
- Retain Ownership: You still own the property and can benefit from any future appreciation in value.
- Monthly Payments: You will need to make monthly mortgage payments, which can be a burden if you do not have a steady income stream.
- Interest Costs: Refinancing typically involves paying closing costs and interest over the life of the loan.
Refinancing can be a good option if you need liquidity but are not ready to sell the property outright. It allows you to leverage the equity in the property while retaining ownership.
For more information on refinancing, visit the Canada Mortgage and Housing Corporation (CMHC).
Option #2: Rent to Own
Another option is to sell the house over the long term by selling to a tenant. Typically, these are tenants who can’t get a mortgage but want to own a house – so they’ll pay you rent and over time they’ll be able to buy the house (either by paying you an additional amount above their rent that will go toward the purchase of the property, or by waiting until their credit is cleaned up to purchase the house with a mortgage).
Rent to own, also known as lease-option or lease-purchase, is a method where you lease the property to a tenant with the option to buy it after a specified period. This can be a win-win situation for both the seller and the buyer.
The Process
- Find a Tenant-Buyer: Look for tenants interested in eventually owning a home but who cannot currently qualify for a mortgage.
- Agree on Terms: Negotiate the terms of the lease-option agreement, including the purchase price, lease term, rent amount, and the portion of rent that will go toward the purchase.
- Sign the Agreement: Both parties sign the lease-option agreement, which outlines the terms and conditions.
- Rent Period: The tenant lives in the property and pays rent. A portion of the rent may be credited toward the purchase price.
- Purchase Option: At the end of the lease term, the tenant has the option to purchase the property. If they choose not to buy, you keep the rental payments and can lease or sell the property to someone else.
Benefits and Drawbacks
- Steady Income: You receive regular rental payments, which can provide a steady income stream.
- Potential Sale: The tenant-buyer has a vested interest in the property and is more likely to purchase it at the end of the lease term.
- Property Maintenance: Tenant-buyers are often more motivated to maintain the property since they plan to own it.
- Risk of Default: There is a risk that the tenant-buyer may not exercise the purchase option, leaving you with the property and potentially needing to find a new buyer or tenant.
Rent to own can be an attractive option if you want to generate rental income while providing a pathway to homeownership for the tenant. It can also help you achieve a higher sale price in the long run.
For more information on rent-to-own agreements, visit Realtor.ca.
Option #3: Sell Fast for Cash
One little-known option that owners of inherited properties might enjoy is the ability to sell the house fast for cash. Instead of selling through an agent (and hoping they can find a buyer, which can take months), you can work with a house-buying company (like what we do here at 24 Hour Cash Buyers) and they’ll often buy your house as-is for cash, usually in as little as a few days. It’s fast, simple, and doesn’t require any work.
Selling your inherited property for cash to a home-buying company is a quick and hassle-free way to offload the property. This option is especially beneficial if you need to sell the property quickly or if the property is in poor condition.
The Process
- Contact the Home-Buying Company: Reach out to a reputable home-buying company like 24 Hour Cash Buyers.
- Property Evaluation: The company will evaluate the property and make a fair cash offer based on its current condition and market value.
- Receive an Offer: You will receive a no-obligation cash offer, usually within 24 hours.
- Accept the Offer: If you accept the offer, the company will handle all the paperwork and close the deal in as little as a few days.
- Get Paid: You receive the cash payment, and the company takes ownership of the property.
Benefits and Drawbacks
- Speed: The entire process can be completed in a matter of days, providing you with quick access to cash.
- Convenience: You do not need to make any repairs, clean the property, or deal with showings.
- No Commissions or Fees: There are no real estate agent commissions or closing fees, allowing you to keep more of the sale proceeds.
- As-Is Sale: The company buys the property in its current condition, regardless of any issues.
Selling fast for cash is an ideal option if you need to quickly liquidate the property without the hassle of traditional selling methods. It provides a straightforward solution, allowing you to move on with your life without the burden of an inherited property.
For more information on selling your property fast for cash, visit 24 Hour Cash Buyers.
Conclusion
Inheriting a property can be a mixed blessing. While it may hold sentimental value, it also comes with financial responsibilities and potential stress. If you are considering selling an inherited property in Ontario, you have several financial options you can pursue when selling an inherited property:
- Selling Through an Agent: Traditional but time-consuming and costly.
- Refinance: Retain ownership while accessing cash.
- Rent to Own: Generate rental income and provide a pathway to homeownership.
- Sell Fast for Cash: Quick, convenient, and hassle-free.
Each option has its benefits and drawbacks, and the best choice depends on your individual circumstances and goals. If you need a fast and convenient solution, consider selling directly to 24 Hour Cash Buyers. We specialize in buying homes directly from homeowners, providing a quick and easy process with no repairs, showings, or commissions.
Contact us today to learn more about how we can help you simplify the home-selling process so you can move on. We will help analyze your situation so that you can make the best decision for you. (905) 971-0808
Related Links:
- Canadian Real Estate Association (CREA)
- Canada Mortgage and Housing Corporation (CMHC)
- Realtor.ca
- 24 Hour Cash Buyers
- Ontario Landlords Association
- HGTV Canada
- Real Estate Council of Ontario (RECO)
- Government of Canada – Housing
- Wikipedia – Real Estate
By exploring these financial options you can pursue when selling an inherited property, you can make an informed decision that best suits your needs and circumstances.