Renovations of Trust Property Prior to Sale

Renovations of Trust Property Prior to Sale

  • The Crem Group
  • 02/14/24

Remodeling is not uncommon for real estate investors or homeowners. Property owners take on remodeling projects to garner an increased return on their investment. Deciding which renovations to tackle and which will provide the highest return on investment takes some research. In some cases, these renovations can increase a property's value by making it more functional and appealing to potential buyers. They also improve the chances of a successful sale. For others, the increase in the property's value may also be very minimal, leading to a low return on investment or even losses.

What is a trust?

This is a relationship in which the property of one person, also known as the beneficiary, is held by another person or a group of persons, also known as a trustee, for the benefit of the first person (the beneficiary). Many types of investments, such as stocks, real estate, or even cash, can be held in a trust.

Trust properties are more tax-efficient than family estates. When set up correctly, trusts can reduce taxation rates from the maximum rate of 40% to a lower rate or even eliminate the estate tax burden altogether. Trusts can also help avoid probate. In addition, trusts can be used to pass on property to beneficiaries through certain rules and regulations, making it possible for minors to own valuable assets.

The trustees can sell trust properties to satisfy the needs of the beneficiaries. Usually, there have to be qualifying conditions for this sale. When trust property is sold, the proceeds are distributed among the beneficiaries as per the terms of the trust. Before the sale, the property may need some aesthetic or structural improvements to boost the price. Below are some factors to consider before renovating a trust property.

The condition of the property

The condition of the property affects its overall appearance and appeal. Generally, properties in good condition are more appealing to buyers and do not require significant renovations. In contrast, properties in poor condition are less attractive to potential buyers and will require extensive repairs to make them marketable.

The cost of renovations and the potential increase in sale price

Renovations are often expensive. As such, the cost of these renovations should have a direct positive impact on the sale price. It is financially wise to only invest in renovations if they are likely to increase the value of the property. Otherwise, investing in renovations isn't financially justified, and you should sell the house in its current condition.

The selling timeframe and the needs of the beneficiaries

The timeframe for the sale of a property is important, as it affects the finances of beneficiaries. If the beneficiaries are in urgent need of the proceeds, it means the property has to be sold immediately, and there is no time to wait for renovation. If there is no urgency in completing the sale, there is an option for long-term improvements.

Legal requirements

In order to renovate a trust property, some legal requirements must be met, and they vary depending on the state and the type of property. They include zoning regulations, building codes, and environmental regulations. In California, home renovation projects over $500 in value require a written contract. This contract and any changes to it must be in writing, legible, and easy to understand. It should also inform the consumer of their rights to cancel the contract. It's important to ensure that all necessary permits are obtained and that all work complies with applicable laws and regulations.

If the above factors justify renovation, it is time to determine what renovation projects should be completed. The following are best practices for renovating trust properties.

Focus on high-ROI improvements

Homeowners should focus on high-return-on-investment improvements in order to take advantage of the investment. If a home has outdated and unattractive features, one way of improving ROI is to replace them with attractive features. For example, using granite countertops or hardwood floors instead of vinyl flooring can enhance the home's appeal.

In addition, it's important to consider local market trends before renovating a trust property. This can help determine which improvements will make it more attractive to potential buyers and add the most value to the property. For example, if open living spaces are in demand in the local market, it's advisable to remove the necessary walls to create a more open floor plan.

Hire experienced professionals

It is practical to hire experienced professionals to ensure all renovations are done right. These professionals can include contractors or interior designers, and they can provide guidance and oversight throughout the renovation process.

Improve smart home technology

It's important to optimize the property with smart home technology in order to make it more appealing to buyers in this digital age. These technologies include smart lighting, temperature control, voice-controlled assistants, and security systems.

Add value to the property with unique features

Another way of improving ROI and increasing appeal to potential buyers is by adding unique features to the property. Outdoor living spaces are a good example of these features. Adding a patio, garden, pool, or hot tub can improve ROI and make the property more attractive to buyers. Unique architectural features such as a skylight or a fireplace can also add value to the property. Luxury amenities such as a wine cellar can also increase the appeal.

Staging the property

Staging the property is the last step in the renovation process. It ensures the property looks appealing to potential buyers. Staging includes decluttering the house, highlighting the property's best features, and adding finishing touches. In addition, it is advisable to paint rooms in neutral shades to make the house more appealing to a wider range of potential buyers.

Work with a probate real estate broker

If you are selling a trust property, you should work with a probate real estate agent that specializes in selling probate properties. The CREM Group is a team of leading probate real estate brokers in Los Angeles, Orange County, and surrounding areas. They have helped hundreds of clients with their probate real estate sales needs. Contact The CREM Group today to learn more about their probate real estate services.

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