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How To Sell An Inherited House Or Property
Finding yourself with a newly inherited property can be exciting, but it also can come with a lot of challenges, especially for those who might still be in the grieving process. There are many steps to take when it comes time to sell the property.
After following any legal processes for the property and determining the goal for the outcome of the property, there are many additional options to choose from before selling. Additionally, some steps can be taken to help move the process along a little faster or to make sure you can make the best of the profits you can receive.
Key Takeaways
Before selling an inherited property, ensure probate is completed and the title is transferred to the rightful owner.
If the inherited property has a mortgage, you'll need to address the loan before selling, either by making payments or paying it off.
Get an appraisal to accurately assess the home's value and avoid relying solely on real estate agents' estimates.
Be aware of potential capital gains or inheritance taxes, and understand any exemptions that may apply to reduce tax liabilities.
You can choose to sell through a real estate agent or accept a cash offer, with the latter providing a quicker, though potentially lower, sale.
Hiring professionals like realtors or appraisers can simplify the process and help maximize the sale price, especially if the property is in probate or has other complexities.
Inheriting a Property
Inheriting a property can be an emotional time. You may be eager to deal with and move the process along. As you may find yourself with a newly inherited estate, however, there will also be a legal process to follow alongside it. The first part of this process is usually referred to as “probate.” The purpose is to make sure that the wishes of the deceased are carried out after their death.
Every state may have its variations of these sets of rules. Typically, this means one “executor” assigned by the court to ensure the wishes of the deceased are followed. This includes carrying out the instructions of the will, such as making sure assets in the estate are distributed to the intended people.
Sometimes a will names a single person as the beneficiary which simplifies the process greatly. Oftentimes though, that isn’t the case. Regardless of what the case is, you probably have a lot of questions.
Legal Processes
The first thing you will have to do when inheriting a new property is get a grant of probate. A legal certificate of appointment is
required by estate trustees to sell the assets. This is the case whether you did or did not receive ownership of the property by a will. Probate can take anywhere from a few months to years.
The next step is to decide what you want to do with the new home. If multiple parties are involved, you will have to try to get everyone in agreement. This is often the case where you might find yourself as one of the other beneficiaries, meaning you only own a share of the property. If this is the case, make sure there is a solid answer for whether the house is being sold, leased, or bought out to others to avoid any unnecessary legal conflicts.
Before selling the property, you will also have to make sure the title of the home has been transferred over from the deceased person to whoever is selling the home. This means being on the deed. The deed indicates the legal and rightful owner of the property and will have to be modified every time ownership of the property changes. This includes from the deceased to the beneficiary, and from the beneficiary to whoever the property is sold to.
Mortgages
There is another part to consider before putting your inherited home up on the market: does it have a mortgage? When inheriting a property, sometimes that also means inheriting debts. If it does, the inheritance of the home also comes with making these payments. You will have to reach out to the lender and discuss the details, such as getting the property and loan under your name, as well as how to get rid of it. You can continue to make payments or pay it off in full. After that, you are all set to sell the home.
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Determining Value
Once you’ve made a solid decision on the fate of the home and cleared up any other immediate issues, it is time to determine how much the property is worth. You are going to want to look at other similar homes in the area, what they are being sold for, and what they recently have been sold for. Sometimes an estate trustee may already have this information available for you. If you decide to go through a real estate agent, they should also help you determine this value, however, that same estimate may vary from agent to agent.
The recommended way for determining the value of the property is by getting an appraisal. This is because appraisers have special training and expertise for finding the valuation of homes that real estate agents don’t always have. The downside to this option is that this service also comes at a cost.
The estimated cost for an appraisal for a single-family home or condo is between $300 and $500. This varies by region and costs even more for larger and more complex homes. If any repairs need to be made, the home may have to be appraised again once these repairs are completed. Sometimes total appraisal costs can be thousands of dollars.
Taxes
Every case for acquiring an inherited home is unique. One factor that needs to be considered is taxes. When selling an inherited home,
sometimes income taxes, or capital gain taxes, may apply. Sometimes even that doesn’t necessarily mean you need to pay taxes. This is dependent on the fair market value of the home, the amount the home is worth in taxes, and if you apply to any home sale exclusions.
If you happen to find yourself having to pay these taxes, they will be on your annual income tax return. This could apply to both federal and state gains tax.
If the property is located in Iowa, Kentucky, Maryland, Nebraska, New Jersey, or Pennsylvania, you may also have to pay an inheritance tax. However, Iowa will be removing its inheritance tax by 2025. This is a state-level tax and the amount varies by state – the highest being 16% in 2023.
If you are living in the home before selling the property, you may be eligible to bypass capital gains. This is called the Section 121 exclusion and you’ll have to live in the house as your primary home for at least two years out of the past five years to qualify. This can prevent either $250,000 or $500,000 from being taxed by capital gain, depending on whether you’re a single-headed household or a married couple who file taxes jointly.
Putting the Property on the Market
Now that you have determined the value, and the additional costs that may come along with it, and decided how you want to sell the home, it is time to put it up on the market. Real estate agents often have experience selling homes that are on the market due to inheritance. This includes experience with working in probate, with trusts, quit claim deeds and more.
You don’t have to settle on the first available agent. Make sure you find the agent that is best for you by setting up interviews with multiple and choosing from there.
Hiring real estate can help simplify the process for you and help work through any questions you may have along the way. Additionally, real estate agents help you list your property and can assist with scheduling showings. These showings, combined with cleanliness and good presentation, will help boost interest in your home by bringing multiple potential buyers through the property to see it in person. You will also want to take photos to put online with the listing, as well.
Remember, selling a house on the market can take a long time. You can also choose to sell the house for a cash offer. This won’t require getting a real estate agent and will guarantee you the money much quicker, however, the offers are generally a lot lower than the fair market value for the home. Cash offers are a great way to sell an inherited property quickly, avoiding repairs, reducing risk, and avoiding buyer’s costs. They are very convenient if you don’t mind the reduced profit.
Conclusion
Inheriting a property can be both emotional and exciting. Whether selling the property alone or selling alongside other beneficiaries, there are many factors to consider before putting the property up on the market. Every state is different, so additional taxes and legal procedures to follow may vary from person to person.
Hiring a professional to help you, such as a realtor or an appraiser, may help you maximize the profits you can receive from selling the property. Alternatively, if there is a great emphasis on selling the home quickly, there are many places that offer cash offers for a discount of the fair market value. This option can be settled in days rather than months.
Whatever you choose to do, make sure you have considered all of your options before finalizing your home. These details can make a huge difference in the long run.
This is completely up to the owner. If living in the home or renting it out makes the most sense, then keep it. If one does not want to keep the home, then selling it is clearly the best option.
According directly from the IRS, taxpayers can avoid capital gains tax up to $250,000 as an individual, or $500,000 as a couple when they sell the home after living in it as their primary residence for two years.
The first thing to do when inheriting a house is to speak to a lawyer, or family estate planner. Take the time to understand what it means to inherit it, and get the clear title of the property. After that then the new owner will go through the process of assessing the home and decisions on keeping or selling the home.