Inherited Real Estate: Now what?
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Many times people become recipients of legacies or gifts that may include vacant land or other real property that they are unfamiliar with or unsure how to manage. These gifts do not usually include an instruction manual or even a suggested course of action from the donor. The recipients must decide, without having any experience or direction, about an investment that may have a significant affect on them and their families. In many cases, these decisions must be made during a time in their lives when emotions may be strained and clear thinking is not always possible. A real estate counselor can be very important and helpful to beneficiaries during these times.
Many individuals that become "instant land owners" are unaware of the rules and regulations regarding land development. They may feel so overwhelmed with all that's involved with development that they choose to sell or dispose of the land at less than its fair market value simply because it is easier. Individuals not experienced with land development or property management are at a disadvantage. They have an obligation and a responsibility to do what is in the best interest of all parties involved.
Should the property be appraised? What are wetlands regulations? What is the ConComm? 21E?……Developing raw land means that these questions and many more must be addressed before marketing the real estate. Although the process seems very confusing, the steps to follow are well defined.
An important first step is determining the sites' highest and best use. A real estate counselor will recommend that a feasibility study including a survey, wetlands study, conservation review, preliminary environmental site assessment and a fair market value appraisal be done for the site. The highest and best use analysis will be completed during the appraisal of the property.
The cost and time needed to complete the entire process are dependent on the size of the site, location, the number of studies needed and the results from each study. The feasibility study allows the owners to make an informed decision about the future of the property.
Unless you are a real estate investor, you probably don't have any reason to keep up with the latest rules and regulations pertaining to real estate. The average person purchases three or four homes during his lifetime, usually made on an "as needed" basis and for personal use. During these times an individual considers many factors when selling his current residence and purchasing a new one. The local neighborhood, school systems, location of shopping, hospitals and transportation are some considerations as well as the type and style of the dwelling to be purchased. These items are all very important since they have a direct impact on one's lifestyle.
When a person inherits real property, there are a number of added considerations. In most cases, beneficiaries inheriting property are already well established and do not need or want the added responsibility of additional real property. They would rather sell the real estate and invest the proceeds in a less time consuming investment. While this seems like a logical and prudent course to take it is not always as easy as it sounds. Selling the asset is not very difficult; however, getting all beneficiaries to agree on the price and terms of sale sometimes is. Once again, emotions may play a major role in the decision process.
For these reasons beneficiaries should consider engaging a real estate counselor familiar with the issues arising from inherited property to work with the family to form and implement a plan for the real estate. The beneficiaries should devote their time on matters of the family such as the tangible assets and not on the real estate. The real estate counselor can arrange for the sale of the real estate and follow the process from beginning to end. In the case of property that was being managed by the donor, the real estate counselor can assume the responsibility of property management and keep the family out of a potentially difficult situation.
Carl J. Izzo, CRE is the Managing Director of Fiduciary Real Estate Advisors
LLC, a subsidiary of Burns & Levinson LLP. Fiduciary Real Estate Advisors
provides professional technical advice and real estate services to individuals
and fiduciaries who hold title to or manage real estate.