Losing a loved one is never easy, and with all of the emotion surrounding your loss, you might forget the necessary legal process that follows. Though the legal process is multi-faceted, one key aspect is the home sale of your inherited property. When it’s time to sell the home, you need to know what you’re doing.
Detailed below are some of the critical steps you need to take before selling your inherited property. From property taxes to closing costs and commission, we’ve got you covered. It is easy to feel overwhelmed throughout this process, so we have tried to simplify it as much as possible. Once we’re through, you’ll be fully ready to sell the property.
How to Sell Inherited Houses: Step-by-Step Guide
Listed below is a paraphrased step-by-step of what will happen when you inherit property and how to prepare for selling. We can’t cover absolutely everything, but we have done our best to encompass all that you need to get started. We will assume it is your parent’s property that you have inherited for most of these steps, but of course, the same steps apply to all inherited property.
1) Determine the Current Status of the Inherited Property
If your parents owned their property outright, you likely knew at some point that you would inherit the home. What you may not know, however, is how that transfer takes place.
There are three different ways to inherit a house:
- Death Deed: This is the simplest form of inherited estate, but it isn’t legal in all states. Also known as a beneficiary deed, it requires no legal process or court intervention during the home’s handover.
- Living Trust: This document assigns your parents as trustees to the property with you as the beneficiary. It makes the inherited property yours without court intervention and may help you avoid certain estate taxes. This transfer could save you money in the long term.
- Probate: This is the most complicated way to inherit a home and often requires an attorney’s help. Probates are usually only necessary when your parents did not leave a will or similar document. It means that an attorney or similar representative must dispense your parent’s estate among relevant parties.
If you believe you will inherit a home in the future, it is worth checking to see what preparatory steps are already in place. Leaving it to probate is not an ideal situation, but you can avoid it with the correct documentation.
2) Find Out Who the Estate Executor Is
Even if you are set to inherit a home, that doesn’t necessarily mean you are automatically the one calling the shots when it comes to selling. It makes sense to think that, as the new owner, you would immediately become the estate executor. However, it is rarely this simple, especially if there are numerous heirs involved.
The first thing you need to do is identify all of the rightful heirs for the inherited house. The beneficiaries will often cover you and your siblings but could include any number of family members as dictated by your parent’s will. If they did not have a will, an estate attorney would assign this during probate.
The sale of the inherited house is the responsibility of the assigned representative. If the parties involved cannot decide on a singular representative, the sale of the inherited house will be a shared responsibility among all heirs.
3) Minimize Inheritance Disagreements ASAP
When you have inherited a property, nothing can cause friction faster than disagreements surrounding cash and sales. The issue is especially prevalent surrounding the sale of an inherited property, as there are often many sentimentalities associated.
Before engaging with professionals, the best course of action is to gather all heirs for a group discussion. An initial meeting will allow you to get everything out in the open. Most importantly, it will allow you to discuss expectations regarding the sale of the house.
Topics of discussion could include the value of the property, the cost of selling, funding the sale, and splitting the eventual sale proceeds among heirs. If the involved parties cannot settle amicably, you may need a mediator for assistance.
4) Work with Professionals Who Understand Inheritance
When listing your property, you need to work with a real estate agent with inheritance experience. Inheriting a home is very different from purchasing a home, as it includes unique costs and property taxes. Your agent needs to know the particular laws of this process. If they don’t have the proper experience, they may complicate the process further.
Your estate agent must also be from the same state as the property; otherwise, they will not be licensed to sell it. They also won’t be able to request the necessary documentation when assigning a price for the property listing. You should also make sure that all relevant heirs are comfortable with the chosen estate agent.
5) Ensure Settlement of All Deceased’s Finances
One thing to note is that it isn’t just the house itself you will inherit—you also take on any of the debts associated with the house. It will mean you will need to gain access to any accounts your parents had and will need to submit relevant documentation to any creditors. You’ll need to complete all of this before you can sell the property to a prospective buyer, so try to prioritize it.
6) Make Sure the Property’s Insurance Policies Are Up to Date
The cost of repairs on a newly vacant home can be high, especially if the home falls victim to vandalism or disrepair. You need to ensure that the home insurance on the house is still valid and will cover you until you can find a buyer. The home insurance policy may require alteration if the house will stand empty until you sell it.
If you discover that the home insurance policy has expired, you will need to replace it as soon as possible. Likewise, if your parents were paying for their home insurance each month, you will need to contact the house insurance company immediately to inform them of the changes. The insurance company can walk you through setting up a vacant home insurance policy until you find a buyer.
7) Prepare for Selling
Congratulations, you have made it to the final step: preparing for selling! Before any sale can take place, you want to make the house appealing to any buyer. This step includes necessary repairs as required.
If you are unsure which repairs need attention before selling, consider investing in a home inspection. It is an additional cost, but it could be worthwhile as it could help to increase the final selling price.
Of course, as you are still mourning, home repairs may have to take a backseat. If you want to sell the house ASAP, selling as-is isn’t a terrible idea. Just make sure to disclose any necessary house repairs before selling, or you could end up liable later.
Common Tax Questions When Selling Inherited Houses
Our guide to selling your inherited home is almost complete, but we still need to discuss taxes. Any income you acquire must have tax applied to it, including any home you inherit. This is generally known as property tax. Here are some of the most frequently asked questions regarding taxes.
What Are Estate Taxes?
These are federal taxes paid before disseminating the value of the home to the relevant heirs. It is a percentage of the original house value.
What Are Inheritance Taxes?
These are taxes paid after settling the value of the house and providing it to the relevant heirs. It is a percentage of the total sum, with varying thresholds and exclusion amounts per state.
Are Estate Taxes and Inheritance Taxes the Same?
Yes and no. You may hear the terms used interchangeably, which can lead many to believe they are the same thing, but in most states, they differ. An estate tax is on a federal level, whereas inheritance tax payment goes to the state.
What Are Capital Taxes?
This tax is the difference between the original purchase price of the house and the current price of the house. You can have this tax reduced significantly through various loopholes, so try to consult an accountant where possible.
Tax on inherited homes can be complicated, so don’t hesitate to contact a professional wherever you may need assistance.
Inheriting property is both a gift and an uphill task. It means your parents left you with the fruit of their labors but also requires navigating various court and tax frameworks. If you still feel unsure of any of the details we have listed here, get in touch with a professional at Kind House Buyers. We are an accredited business specializing in the sale of houses quickly and easily. If you have any questions, feel free to get in touch!