Inheriting a piece of land is often associated with strong emotions. The most obvious being grief after the loss of a family member or close friend.
Likewise, you may already have a lot of “emotional equity” tied up in the land you inherited. Maybe it was a favorite camping spot in the mountains your family returned to each summer or an acre or two overlooking a lake where you learned to swim or spent countless hours fishing.
These emotions can blind you to the realities of inheriting property. Here are 3 mistakes to avoid upon learning you’ve inherited property.
Mistake #1: Assuming You Legally Own It
Believe it or not, legal ownership is often overlooked by those who have recently inherited land. In fact, it’s not uncommon for people to reach out to us about selling “their” land when a title search shows they don’t legally own it (yet).
Therefore, if you are bequeathed a piece of property in a will, it’s important that the property has been conveyed (title has been legally transferred) to you through a deed. Until that’s done, you’re not currently the legal owner, which means you cannot sell or take possession of it.
Depending on the amount of estate planning performed by the previous owner prior to his/her death, this may have automatically taken place. For example, a transfer on death (TOD) deed (also called a beneficiary deed in Colorado) conveys ownership to the designated beneficiary at the time of death. Or it may have been placed in a living trust with you as the designated beneficiary.
But too often, ownership is not conveyed to the beneficiary until after the estate goes through probate. Talk to a real estate attorney or the estate’s legal personal representative (executor) if you believe you have inherited land or property. Keep in mind that laws governing deeds vary widely from state to state, so we advise speaking with an attorney practicing in the state where the land is located.
Mistake #2: Assuming You Own It Free and Clear
Whether you have inherited a piece of land or property, the first thing you’ll need to determine is whether or not there are any liens or encumbrances on it. That’s because there’s a chance you inherited the property subject to the previous owner’s liens (which means you — or the decedent’s estate — is responsible for paying those off).
The most common type of lien is a mortgage — a loan used to purchase the property from a local or national bank, or even a private or hard money lender. Other types of liens include tax liens (from the county or township), Homeowner Association (HOA) or Property Owner Association (POA) liens (when owners fail to pay annual or monthly HOA/POA fees), IRS liens, or even a utilities lien or mechanic’s lien.
If the property is still in probate, the executor (legal representative of the estate) will determine whether or not there are any outstanding liens or debts that need to be paid. But keep in mind that the property bequeathed to you may need to be sold by the estate in order to cover these debts.
Finally, you’ll need to make sure the land is currently not in use or in possession by a third party. For instance, the previous owner may have leased the land for farming or hunting. If someone has a lease on the land, legally, you may need to honor that lease until it expires.
Likewise, you need to consider the possibility that the previous owner (from whom you inherited it) sold it to a third party on a land contract — without notifying family members or updating his/her will or living trust. A land contract is sometimes called a land installment contract or contract for deed.
If this is the case, someone has already purchased the land and is paying monthly installments on it. The buyer can use and possess the land, but the deed remains in the previous owner’s name as long as the payments are still being made. (It’s not unlike a lease-to-own situation.)
Only after the land is paid in full (often after several years) will it be conveyed to the buyer using a deed, which is then recorded with the county. Depending on the state or county, this land contract may or may not have been recorded. Speak with an attorney in the state where the land is located if you believe land you inherited was sold using a land contract.
Mistake #3: Assuming You Can Sell It Quickly
If you inherited land with one or more encumbrances, the title is not marketable — and as a result, you may not be able to sell it quickly. Likewise, even if you inherited the land via a beneficiary deed, you will need to wait until the decedent’s estate is settled before you get free and marketable title.
Finally, some people believe that a property they inherited will sell quickly once listed with a real estate agent. The reality is that land often takes much longer to sell than houses in most markets simply because fewer buyers exist. This is especially true for land that is vacant and has few desirable attributes. Land that is far from electricity and has no septic system or well will take longer to sell.
Fortunately, at LandPocket, we can help landowners by offering cash for their unwanted, vacant land and guiding them through a quick and hassle-free closing. Find answers to commonly asked questions on our FAQ page.
Most importantly, whenever you are confused or have doubts about any aspect of land or property you may have inherited or purchased, you should always consult with an attorney in the state where the property is located.
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