More than half of cash-strapped Brits expect to inherit a property in their lifetime but most claim they can't afford to foot the initial £20,000 bill without resorting to a loan. Being gifted a house or flat may seem to be the answer to someone's financial prayers, but for more than half (58%) who expect to inherit most (64%) can't afford to without help.
A poll of 2,000 Brits by Tower Street Finance revealed that Brits left a property in a will this year should expect to cough up around £20,000 in associated costs, which don't include inheritance tax. This cost, expected to soar over time, includes expenses such as house clearing, basic redecorating, standing charges for energy and water, insurance and solicitors' fees.
It varies slightly depending on what the new owner decides to do with it - whether they plan to sell, rent out or move in themselves. If left a property in a family member’s will (in the next 12 months), 39% said they'd sell it, while 34% would keep it.
Those inheriting a property, excluding inheritance tax, and putting it on the market for sale would expect to fork out £23,800. People inheriting a property, excluding inheritance tax, and moving into it would be looking to pay marginally less at £19,000.
Those inheriting a property, excluding inheritance tax, and wanting to earn some cash by getting it ready to let would need to spend £18,600. Those prepared to do work themselves or shop around could reduce this cost. Solicitor fees are usually the largest cost, averaging around £12,000.
Clearing the property, deep cleaning it and decorating it (painting only) costs around £2,800 on average for a typical home too. However costs can soar depending on the work that is needed – with structural work, rewiring and bathroom and kitchen renovations often costs significantly more.
Even those who plan to sell the home without doing anything to it will still have to splash out on additional bills. Empty properties come with costs too as insurance, council tax, and standing charges for utilities (gas, electrics and water) will all apply, costing around £2,000 for the average home.
Upfront costs amount to around £5,000. These include clearing the property (£1,000), deep cleaning (£2,000) and redecorating (£2,000). Mid-way costs add up to around £15,000. These include council tax (£1,375), gas/electric (£296), water (£120), building and contents insurance cover (£300) and solicitors' costs (£12,390).
While back-end costs amount to between £1,000 and £6,000. These include the cost to let (£776), the cost to sell (£6,000) and removals (£1,180). Despite these hefty costs, with the current average UK property price sitting at £296,000, being left a home is likely to be a very welcome discovery.
This is especially true among under-35s who are the most likely to be relying on inheritance to get onto the property ladder (16%). But according to the study a third (34%) are unaware of what the process is for receiving their inheritance or how long it could take for them to get the keys.
An optimistic third (36%) expect it to take less than six months, whereas the typical wait is 9-12 months. A quarter of those quizzed (24%) were unaware of if they're liable for inheritance taxes.
Founder and Business Development Director at Tower Street Finance Dicky Davies said: "A home is typically the most valuable asset we own in our lifetime, so being left one in a will is a great privilege. That said, it certainly doesn’t come without its costs and challenges.
"Typically properties are left to children or grandchildren and, according to HMRC reports, homes make up 54% of the average estate value total at death. Around a third of estates, that include a property, break the inheritance tax threshold - meaning that many will face another bill to cover this, on top of things like solicitors’ fees, insurance and clearing costs."
TOP FIVE WAYS TO SAVE CASH AFTER INHERITING A PROPERTY
1. Shop around for a solicitor. If a specific solicitor wasn’t dictated in the will, and you are named as the executor, then you may be able to shop around to ensure you receive the best value for money.
2. Clear the property yourself. Hiring a van and clearing a property yourself can save you a lot of money, but keep in mind that this is often a strenuous, emotional and time-consuming job.
3. Sort the right storage. Once cleared, there may be some larger items that you need to put in storage temporarily.
4. Tackle some home improvement yourself. If the property is in a reasonable condition and just needs sprucing up with a fresh lick of paint, then you could also save money by doing this yourself.
5. Shop around for insurance. Even an empty home will need insuring. Use comparison sites to shop around for a good deal.
For more information visit https://towerstreetfinance.co.uk/the-true-cost-of-inheriting-property-in-2023/
