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.
Those memories are great. But whether you ultimately decide to use or sell the property, it’s important that you don’t allow your emotions to cloud your judgment. To help you, here are 3 mistakes we hope you’ll avoid after learning you’ve inherited land:
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).
So, if you’re bequeathed a piece of property in a will, it’s important that the property has been legally transferred and recorded in your name in the county where it’s located. Because, until your the owner of record, it’s legally not yours.
To be clear, you may have automatically been granted legal ownership at the time of death. Depending on the state, the person you inherited the land from may have signed and filed a transfer on death (TOD) or beneficiary deed in advance with the county. 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 has gone through probate. As a consequence, months may go by before the deed is officially transferred into your name.
Talk to a real estate attorney or the estate’s executor about the steps you need to take (if any) to get the property officially recorded in your name. 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
Even if the property is now legally yours, you’ll still need to determine whether or not there are any liens or encumbrances on it. That’s because you—or the decedent’s estate—may be responsible for paying off any old or current debts tied to the property.
The most common type of lien is a mortgage. This is 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, Homeowner Association (HOA) or Property Owner Association (POA) liens, IRS liens, or even a utilities 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. Also, be aware 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 that’s the case, 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.
In other words, someone may have already purchased the land and is paying monthly installments on it. In most cases, 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 when initially signed.
Speak with an attorney in the state where the land is located if you believe land you inherited may have been leased or even sold with 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 clear title with the right to use or sell the property.
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. For instance, land that is far from electricity and that requires a well and septic system will take longer to sell.
Looking to sell your vacant land right now? Once your inheritance is transferred into your name, we can offer you quick cash and a hassle-free closing. Learn more by reading How Selling Your Land to LandPocket Stacks Up Against Your Other Options.
Final note: whenever you’re confused or have doubts about any property you have inherited or purchased, consult an attorney in the state where the real estate is located.
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