Over the past decade, Central Ohio has undergone a remarkable economic transformation. Columbus and its surrounding areas have attracted major investments from tech giants like Intel, Amazon, and Google, transforming the region into a thriving economic powerhouse. This rapid growth has driven up property values, increased demand for housing, and intensified real estate development. Although this economic boom offers substantial opportunities, it also poses financial risks for families who own real estate—particularly those who have inherited property without a clear estate plan.
Without proper estate planning, families who inherit real estate can face legal disputes, financial strain, and forced sales that often result in selling their properties for far less than their true potential value. For lower- and middle-income homeowners, understanding the economic realities of real estate transactions and the importance of estate planning is crucial to preserving family wealth.
Columbus’ Economic Boom and Its Impact on Real Estate
Columbus is experiencing one of the most significant economic expansions in its history. Major corporations have committed billions of dollars, generating thousands of high-paying jobs and drawing skilled workers to the region.
- Intel’s Semiconductor Facilities: Intel’s $20 billion investment in Licking County is expected to generate 3,000 direct jobs and over 20,000 indirect jobs, adding an estimated $2.8 billion annually to Ohio’s GDP.
- Amazon Web Services (AWS): AWS has already invested $6 billion in Central Ohio and plans to invest an additional $7.8 billion by 2029, creating hundreds of new jobs and expanding data infrastructure.
- Honda-LG Energy Battery Plant: A $3.5 billion project will boost Ohio’s role in electric vehicle production and bring additional economic activity to the region.
- Google and Facebook Data Centers: These tech giants have invested in Central Ohio, further cementing the area’s status as the “Silicon Valley of the Midwest.”
This surge in economic development is driving population growth, raising demand for housing, and putting pressure on property owners. Investors and developers are actively acquiring real estate to capitalize on these trends, often targeting properties that have been inherited without clear legal ownership structures.
The Risk of Inherited Property Without an Estate Plan
When a homeowner passes away without an estate plan, their property is typically divided among several heirs under Ohio’s intestacy laws. This can result in a complex ownership situation where multiple family members own a fractional interest in the home. Without a structured estate plan, heirs may face:
- Ownership Disputes: When multiple family members own shares of the property, disagreements can arise over whether to sell, renovate, or rent the home. If a consensus is not reached, the property may remain in legal limbo, unable to be sold or improved.
- Difficulty Accessing Equity: Mortgage lenders typically do not offer financing since no single owner has a clear title. This prevents families from utilizing home equity loans, for example, to fund essential repairs or improvements.
- Forced Sales at Below-Market Prices: Real estate investors often approach heirs individually, offering quick cash payouts. If just one heir sells their share, the investor can initiate a partition action in court to force the sale of the entire property—often at a price far below market value.
The Economic Reality of Selling to an Investor Without a Unified Front
Consider a hypothetical inherited home without a mortgage in Columbus with a renovated value (also called after-repair value or ARV) of $250,000. However, the home requires $100,000 in renovations before it can be sold at that price. If a real estate investor offers $125,000 for the property, some heirs might believe they are being “ripped off” because the investor will later sell it for $250,000. However, this perspective overlooks key financial factors:
- The investor must first purchase the home for $125,000.
- They must then invest $100,000 to renovate it, making their total investment in the property $225,000.
- If they sell it for $250,000, they will net a profit of only $25,000—not $125,000.
For families who lack the capital or expertise to manage a renovation, selling a property in its current condition to an investor can be the most practical and financially beneficial option.
However, this scenario assumes that the heirs agree and can negotiate with the investor as a united front. The situation may unfold differently if there is no estate plan, and multiple heirs inherit the property. Heirs who cannot agree may reject reasonable offers, delaying the sale and allowing the property to further deteriorate. In other cases, individual heirs—especially those in financial distress—might accept much lower offers for their shares, reducing the overall price the family receives or opening the door for a partition action.
If a single heir sells their share to an investor, that investor can initiate a partition action in court, forcing the sale of the entire property. Under these circumstances, the home may be sold for even less than the $125,000 initially offered—sometimes just pennies on the dollar—leaving families with far less wealth than they would have received with a plan in place.
Re-Evaluating the Hypothetical: How Estate Planning Maximizes Value
Now, consider the same hypothetical home—but this time, the deceased homeowner had an estate plan that designated a single beneficiary or structured the inheritance through a trust or family LLC. The family proceeds with a unified front, ensuring that they:
1. Negotiate for the Maximum As-Is Value: Because they are organized and in agreement, the heirs can negotiate for the highest possible as-is sale price, ensuring they receive the full $125,000 instead of a lower amount due to forced sales or delays.
2. Explore Alternative Sale Options: With a structured estate plan, the family may have access to financing, allowing them to explore listing the property on the open market rather than selling quickly to an investor. This could result in a higher as-is sale price.
3. Undertake Renovations Themselves: In a best-case scenario, the family may have structured their estate planning to include a financial plan for renovations. By using available resources—such as home equity loans, government grants, or partnerships with contractors—they could invest the $100,000 needed to renovate the home themselves.
4. Sell at ARV and Maximize Profit: If the family follows through with renovations, they could sell the property at its full ARV of $250,000. After deducting the $100,000 renovation costs, they would net $150,000 instead of just $125,000—maximizing the wealth passed down to future generations.
How Estate Planning Protects Your Property’s Value
Proper estate planning ensures that inherited real estate is handled in a way that maximizes its financial benefit to the family. A well-structured plan can prevent forced sales, maintain property value, and allow heirs to make informed decisions about their inheritance.
Estate Planning Tools for Protecting Property
- A Will or Trust prevents ownership disputes and ensures that property passes to the intended heirs. A trust allows property to be transferred outside of probate, avoiding delays and potential legal challenges.
- A Transfer on Death Designation Affidavit (TODD) allows homeowners to name a beneficiary who will automatically receive ownership of the property upon their death, bypassing probate entirely. This is a simple and cost-effective way to ensure a smooth transfer of real estate.
- A Family LLC consolidates ownership, allowing for structured decision-making and easier access to financing. It also provides liability protection and can help prevent forced sales.
- A Buyout Agreement ensures that any heirs who wish to sell can be compensated without jeopardizing the property’s value, preventing disputes and preserving family wealth.
Conclusion
Columbus’ economic growth presents both opportunities and risks for homeowners. Without estate planning, inherited properties can become burdens rather than assets, leading to forced sales at below-market prices. By taking proactive steps to create a clear plan, families can ensure that their real estate wealth is preserved for future generations, maximizing financial benefits and honoring the legacy of their ancestors. For further questions or assistance establishing an estate plan, contact KJK estate planning attorney Gregory Williams (GLW@kjk.com; 614.427.5746).