Inheriting a house can be a daunting prospect. Maybe the house you inherited stirs unpleasant memories. Or perhaps you love the house, but you can’t afford to pay the outstanding mortgage. Or maybe you inherited the house along with siblings or other relatives and need to sell and split the money.
The process of selling an inherited home is complex, including an array of financial, legal, and market ramifications. To help untangle these complexities, we spoke with probate attorneys and a top-performing real estate agent to bring you these 10 essential steps for selling an inherited house.
1. Know where the mortgage stands
As the new owner of the house, you must fully understand the status of the mortgage. To surface liens or judgments attached to the property, such as unpaid taxes, a home equity line of credit, or a reverse mortgage, you should run a title search. This will determine your next steps and whether or not you have to address any issues with the title.
As the new owner, you’re now in charge of the mortgage payments. “If the mortgage holder was behind on mortgage payments, it is imperative to make the account current as soon as possible,” explains Somita Basu, an estate planning and probate attorney based in the San Francisco Bay Area.
“Time is of the essence where mortgage issues are concerned,” Basu cautions, so reach out to the mortgage company and any owed creditors as soon as you have the appropriate documents that show you are in charge of the estate or trust.
2. Anticipate your ownership timeline
Even if you know you’ll inherit the property, it may still take some time before you legally own it. The ownership timeline depends on how you inherited the house, whether via probate inheritance, transfer on death deed (also known as a beneficiary deed), or living trust.
You’ll take ownership the fastest if you’ve inherited the property through a living trust or life estate deed, according to Justin A. Meyer, an attorney whose decade-long practice includes probate, real estate, and title. “Because no court approval is required, you can sell the property immediately or at any time,” he comments.
Probate inheritance is more complicated. “Probate inheritance will take as long as it takes,” Meyer says. “That’s an unsatisfying answer, but remember that it’s a judicial process in most states, and it can take anywhere from a week to six months.”
For a rough timeline, ask your probate attorney and estate administrator about when the probate process is likely to conclude, so you can get an idea of the timeline to move forward.
3. Coordinate with all heirs to nominate a personal representative
Before you initiate selling the house you’ve inherited, you’ll need to identify all of the heirs as well as the named executor or personal representative. The executor will have the final say on decisions about the house and is responsible for maintaining the property and keeping it safe before the time of the sale.
If the deceased’s will does not appoint an executor, then all heirs must nominate a personal representative. Typically, this is the person in the family most emotionally and practically prepared to handle the responsibility.
“A judge wants somebody who’s going to follow his or her role, then follow the letter of the law for the accounting and the paperwork and the rightful distribution of the funds from the estate,” explains Melissa Harmel, a top-selling agent and probate specialist based in Anchorage, Alaska.
In Harmel’s experience, the deceased homeowner only names a personal representative about 25% of the time; that means 75% of the time, her clients must nominate a personal representative before selling the inherited property.
4. Open an estate account to manage shared assets
The personal representative should open a bank account in the name of the deceased person’s estate to temporarily hold the deceased’s assets, including the proceeds from the home sale and any ongoing income. In agreement with the other heirs, the personal representative uses the estate account to cover the deceased’s financial obligations (e.g., mortgage payments, property taxes, car payments, etc.) and probate-related expenses.
5. Consider selling the inherited house for cash
Selling an inherited home on the market requires significant time and labor (think staging, marketing, and negotiating). And until the property sells, heirs are on the hook for the monthly mortgage payments, property taxes, and utility bills.
If your top priority is an ultra-fast sale, consider selling the inherited house immediately to a cash buyer instead. While you may net less money selling for cash, the process can be faster, easier, and less stressful than selling a house on the market — a big plus if you’re feeling overwhelmed by the home sale process.
HomeLight’s Simple Sale platform will provide you with a no-obligation, all-cash offer for your property in nearly any condition. With Simple Sale, you’ll receive an offer in as few as 48 hours and can close in as little as 10 days once an offer is accepted. This means you can skip the repairs, staging, showing, and open houses that come with putting your home on the market.
6. Partner with an agent who does probate
Harmel says her goal as a probate specialist real estate agent is “to net the family as much equity as possible.”
HomeLight’s Agent Match tool can connect you with some of the top-performing agents in your market. This free tool analyzes over 27 million transactions and thousands of reviews to determine which agent is best for you based on your needs. Then you can interview the agents to compare their probate experience, marketing strategies, and communication style and decide on the best fit.
Because this can be an emotionally charged experience, you want an agent who will be in your corner throughout the process. “I want the family to feel like I have respectfully treated the property,” Harmel says. “I actually love those properties — they’re my favorite. They have stories, and it’s all about presenting them to the world in the best light possible. I like doing that.”
7. Enlist the help of a mediator if needed
In a multiple heir situation, there’s plenty of opportunity for drama. If your family is struggling to reach an agreement over the home sale, hire a mediator to help you work through the obstacles together.
“If there are beneficiaries who do not agree on the sale of the house or other issues regarding the house — renovations, the agent, removing tenants, etc. — then a mediator can help resolve these issues outside of a formal court process,” Basu says. “This can decrease the time spent on resolution, as well as the cost.”
Meyer adds that the most common scenario for hiring a mediator is when one heir doesn’t want to sell — usually for sentimental reasons — or wants to hold out for more money. “A big issue is when one heir has unreasonable beliefs as to the value of the home,” he says. “Usually, you’ll need one if there is a dispute about what to do with the house. But luckily, I’ve never needed one yet.”
8. Take an aggressive approach to decluttering before you sell
“Ninety percent of the time when I arrive at an inherited house, the family has already taken items that were personal to them, and now they don’t know what to do with the rest of it,” Harmel shares.
Create a decluttering plan with other heirs and family members to tackle the job over a couple of weekends. You can hire a professional estate sale company to manage and promote an estate sale or attempt to sell items individually with a garage sale and use of online platforms, such as Facebook Marketplace, Craigslist, and OfferUp.
9. Spruce up the property, but don’t renovate
Let’s say you’ve inherited a home dressed in 1970s shag carpet and popcorn ceilings. You’ll want to focus on light, cosmetic upgrades rather than full-blown room renovations. Ask your real estate agent what upgrades they recommend to help increase the property’s value and marketability. An experienced agent can also tell what repairs you can skip.
“With a mere $2,000, we can turn the property around, get it cleaned up — steam cleaning, painting, taking the time to appreciate the asset and making sure that the family benefits from the sale as much as possible,” says Harmel.
Here are some examples of easy, high-impact projects that can help you sell your inherited house faster:
- Boost curb appeal with a professionally groomed lawn, new mulch, and a fresh coat of paint on the front door.
- Replace aged carpet and linoleum with vinyl wood flooring.
- Remove window valances, faux plants, furniture covers, and other dated details.
- Paint the walls in primary shared living areas a light, neutral color like Agreeable Gray or Accessible Beige by Sherwin-Williams.
10. Determine capital gains and see if any home sale tax exclusions apply
Typically, if you inherit a property, you won’t owe taxes on it until you sell it — these taxes are called capital gains taxes.
Capital gains taxes are calculated using the stepped-up basis. This can get complicated, but simply put, when you inherit a property, the value of the property resets on the day of the original owner’s death. When you sell, you are typically only taxed on the increase in value — the capital gains — from that point.
Let’s look at an example: You inherit a house that was purchased for $200,000 but valued at $250,000 when you inherit it. The cost basis of that house is now $250,000. If you sell immediately, you would pay no capital gains taxes on the sale of the house.
If instead, you wait for five years and the house has increased in value and is now valued at $275,000, you would pay capital gains taxes on $25,000. And if you lived in the house during that time, you may be eligible for other tax exemptions.
In 2021, the Biden administration’s Build Back Better Act initially sought to end the stepped-up basis practice for gains that exceeded $1 million ($2.5 million for couples). This proposal was dropped from the final version of the bill that passed the House of Representatives.
To be eligible for the home sale tax exclusion that allows you to exclude up to $250,000 of the gain if filing single and $500,000 if married filing jointly, you typically need to live in the home as your primary residence for a total of at least two of the previous five years.
Regardless of when you sell, you’ll need to discuss the sale and proceeds with your tax professional to ensure you’re paying any taxes that you do end up owing. And because the tax implications of selling an inherited property vary from state to state, you may also want to enlist the help of an attorney.
Simplify selling an inherited house
While selling an inherited house can be a daunting prospect, these 10 steps can help simplify the process and improve your results. Having a top agent on your side when you decide to sell can help make it even easier. HomeLight’s Agent Match can match you with a top agent whose experience you can lean on as you navigate the process of selling an inherited house.
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