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To Fred Brown, the sale of his grandmother's house was a big mistake.

That's the home where he grew up with his grandmother, parents and four siblings in the Columbia Heights neighborhood of Washington, D.C. His grandmother bought the house in 1960 for under $7,000.

After she died, Brown says his father wanted his aunts to help pay the taxes on the house. "I guess they didn't want to pay it, so they had a big dispute. And you know, they just wind up selling it," he says.

The house was sold in 2015, and its new owner renovated it and split it into two units, selling each for more than Brown's family had made on the whole thing.

Brown, 26, now stays with friends while he applies for jobs, and his parents are renters in nearby Maryland.

"The values of houses is going up in D.C.," he says. "They could have just ... invested in the future instead of just worrying about the present."

To sell or not to sell

For most American families, home equity is their largest asset. And homeowners are much wealthier than renters: Americans who owned homes in 2019 had a median net worth of $255,000 — more than 40 times the median net worth of renters.

Now, fast-rising home prices in much of the U.S. can raise a big question: To sell or not to sell?

That decision can have long-lasting consequences for generational wealth — a particular concern for Black families, the result of America's racial wealth gap. In 2019, the typical white family had $184,000 in assets, while the typical Black family had $23,000, according to an analysis by the Federal Reserve Bank of St. Louis.

For Regan Adams, 42, the two properties that her father left behind in Knoxville, Tenn., have provided a roof over her head and a way to pay off debts. She and her husband divorced when he was released from prison, and then he soon died, leaving her with funeral bills and little in Social Security to support their daughter.

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She fixed up one of the properties and rented it out for several years before selling it. She now lives in her father's former home in northeast Knoxville. Her father had been upside down on his mortgage, and the house was in poor condition. Adams hadn't been keen to return to the neighborhood, but the house was a place to live when she needed it.

It turns out the area was changing fast, and her equity started rising.

"Maybe about four years ago, I started hearing a lot of buzz about people wanting to move on this street, and I'm thinking, 'Why? This just does not make any sense,' " she remembers.

Into what Adams says was a lower-income neighborhood of mostly renters, came a lot of new people buying houses and fixing them up.

"Now it's very quiet," she says. "People are walking the neighborhoods. There's no crime. It's totally different from when I was there before."

The neighborhood's demographics have also changed. She estimates her street used to be about half Black and half white.

"Has it gotten whiter? Absolutely. My whole neighborhood is white. I probably am the only Black person on the street," she says.

In addition to the wealth gap, there's a homeownership gap in the U.S., the result of income inequality, discriminatory lending practices and other factors. The rate of white homeownership is now 74%, while the Black homeownership rate is 30 percentage points lower, according to the most recent Census Bureau figures.

For Adams, the properties she inherited have meant the chance to start building her own wealth. She's using the proceeds from selling the rental property to renovate her home, and she plans to put a tiny house in her backyard to rent on Airbnb.

Being strategic with her money is something Adams learned the hard way.

"I bumped my head the first time, because my dad left a substantial amount for me when he passed away and I blew it," she says. "I had nothing to show for it. And I told God, 'You know, if you run this money back to me, I'm going to do right by it.' Because I don't have a husband and I don't have a lot of family, I had no choice but to be smart about this money and make sure it could stretch and reach. ... I had to do right with this money. I couldn't squander it."

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For her, investing in real estate is just a sound financial plan.

"I think everybody should own and keep at least one home in their family and try to buy as much property or land as they can and sit on it," says Adams.

Making sure home equity wealth doesn't disappear

The swift rise in home prices can cause mixed feelings for longtime Black homeowners, says Sunny Jones, a real estate agent in South Los Angeles.

They are sometimes "flabbergasted at how much more their home is worth than when they purchased their home," she says. "Some people are just excited that they made a smart investment and get to basically capitalize on that now, and then others ... they know what that means, and that might price even their own kids out of the market."

A family home that's now worth a lot of money has the potential to create generational wealth — either a home or the funds to provide some stability for family members to come.

When a homeowner or family does decide to sell the house, Jones tries to encourage smart financial decisions.

"When that property is passed on to the next generation, it's important that that person receiving the property has some sort of financial education on what makes sense, in order for it all to have been worth it," she says. "I've seen some really sad stories about what happens to grandma's house and what happened with the proceeds from the sale. And then I've seen some really good stories where it did exactly what it was supposed to do," in which the proceeds were reinvested to provide financial security for the next generation.

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"That's ideally what you want to be able to do," says Jones. "I think a big part of this is just education for those who are receiving what can be a really big windfall."

Experts say there are a few strategies to ensure the value of a family home doesn't disappear. Number one is not selling it to an investor who comes calling or writing, offering cash. Real estate agents say properties typically sell for more when they are sold on the open market.

And to ensure there's a plan for the property in the event of the homeowner's death, a will is crucial, and a trust is even better. Danaya Wright, a law professor at the University of Florida, has studied what happened to properties when the owners did or did not have wills.

"What I found was just a pretty stunning difference," Wright says. "The people who died without wills ... those homes sold for significantly below fair market value. They were much more likely to be lost at foreclosure and tax sale — four times more likely, for instance."

A major goal is avoiding the heirs' property problem, in which a property becomes fractionated among several heirs and any one of them can force a sale. The problem has caused many Black families to lose their land.

A trust keeps the home from going into probate, which is often expensive and complicated for the family.

When the homeowner dies, Wright explains, the trust will designate a successor trustee, and that person — ideally just one person, often one of the children — will have the legal authority to sell the house or transfer it, simplifying the process.

"Even if Grandma said, 'I want my house to be sold and split three ways among my three kids,' it can be done. It can be done right away so that the house doesn't deteriorate. And we're not relying on those three heirs to actually do this process. We've got a designated trustee who's going to do it, and it's one person," Wright says. "As a legal matter, it's much easier for that person to do."

One homeowner prepares to sell

In the Petworth neighborhood of Washington, D.C., 68-year-old Cynthia Harris is reaping the rewards of inheriting a family property. She lives in the home her parents bought more than 50 years ago.

"I think my parents paid $26,000 for this property in 1970," she says. (Property records show her parents bought the house for $23,000 in 1969.)

About 15 years ago, she reached out to a real estate agent about selling the house, but he advised against it.

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"The Realtor told me that he wouldn't sell the house. ... It was a corner house, a lot of property. The area would be improving and I should keep it," Harris says, recalling that at the time, the house was worth about $220,000.

Today, she says, the house is estimated to be worth $1.2 million.

How does she feel about that?

"I feel real good about it," Harris laughs. "And actually I ended up marrying the Realtor. We live in the house together."

The idea of establishing roots in a particular place has always been in her mind.

"We're city people. We didn't get 40 acres and a mule, but we had no place to call home, except this corner in Petworth," she says. "I always wanted my family to have someplace where they can say, 'Yeah, that's where I'm from. That's my home.' And that's why I held on to it."

Still, she's preparing for change: She plans to sell the home in 2023 and use a chunk of the proceeds to downsize to a condo.

"In all likelihood, we will offer it to family first at market value," Harris says. But she anticipates that her husband's daughters probably won't be able to afford to buy the house, and her husband has property of his own.

"They've made their homes in other places now," she says. "I guess I have done what I seek to do."

Black sellers, white buyers

Knoxville real estate agent Kanika White says Black homeowners selling their homes in East Knoxville know that in many cases, it's going to be a white person buying it.

"And that's one of their concerns," she says. "They grew up here. Their children grew up here. Their grandchildren are here. And they are now seeing the demographics change."

White grew up in New Orleans and Atlanta, and she says in both cities, she saw areas where development and displacement went hand in hand.

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"Once gentrification was fulfilled, I guess for lack of a better word, city officials and developers and even charitable organizations who participated in that development and the growth in the area, they would just tout how they completely changed the area," she says. "And it would just really upset me, because you may have changed the area, but you have not changed any lives."

"The people who you no longer see in this area are still poor," she adds. "They still don't have access to certain resources to get out of situations that they're in. And so you've really just moved poverty from one ZIP code to another."

With rapid change underway and home prices rising fast in what has been the heart of Knoxville's Black community, White sees it as her mission to help homeowners harness wealth, whether they intend to keep their property or sell it.

Part of what she does is direct homeowners to options such as a cash-out refinance, enabling them to draw out some of the equity in their home to fix it up. Then they can either stay in it or sell it for more than they could if they were putting an old, perhaps dilapidated, house on the market.

"We know that there is wealth here," she says, so one strategy is to "get our hands on the money to do those renovations ourselves, essentially 'flip their own house' like an investor would do. Do the renovations ourselves and take advantage of that increased equity, and then turn around and sell that house at the top of the market. And we retain that wealth for ourselves and our families."

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"Take your wealth with you"

White says understanding the accrued wealth in these homes is crucial to closing the wealth gap. But knowing how to tap into that wealth can be hard for folks who "don't usually talk to people who know things about this kind of stuff."

"It's important because you can take that money and use it to start a business, send your kids to college," White says. "You can use it to buy another piece of real estate, another asset and all kinds of things. ... If they don't know how to do that, then they cannot change the trajectory of their families financially."

There's a tension between gentrification and things remaining the same, White says. She hopes Knoxville will make it easier for the residents who have been living in these fast-changing areas to stay and enjoy the perks of reinvestment, through expanded homestead exemptions for seniors and subsidies for developers of new affordable housing.

She also hopes that Black people with the means to won't move away to more upscale parts of the city — but instead buy in the now-gentrifying neighborhoods they grew up in, and be a part of racially and economically integrated neighborhoods. But either way, she urges them to not leave empty-handed.

"If you're going to leave, take your wealth with you," she says. "If I'm able to help people achieve that, I'm happy. I'm satisfied."

Closing the wealth gap in America depends on many Black families doing just that.

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Tags: black homeownership  wealth gap  real estate