On average, home sellers spend 5 to 24 months selling an inherited property. Median days on the market will increase significantly in the coming months due to the slowing real estate market.
So, if you are ready to sell your inherited house, start now!
KEY TAKEAWAYS
- Probate Process: A probate is a legal validation of a deceased person’s will that helps to distribute the property amongst its heirs and beneficiaries.
- Sale of an Inherited House: After the probate is completed, the process of selling an inherited house is the same as selling a pre-owned house.
- Selling a House with Multiple Inheritors: If the inherited property has multiple heirs, the majority can decide to sell the house by filing a lawsuit of partition action in the probate court.
- Inheritance Tax: Certain states charge an inheritance tax upon the transfer of ownership.
- Bottom Line: In 2023, more sellers are opting to sell their homes by owner. By using best For Sale By Owner websites, you get full exposure via the MLS and save thousands in commission – negating the decline in home prices.
Can I Sell an Inherited House?
Yes, you can sell your inherited house after the probate process is complete. Selling an inherited property is similar to selling a pre-owned home.
Here are two crucial factors that can impact your sale:
1. Probate Process
An inherited property must undergo a probate process that can take up to 24 months. The probate period varies statewide. It can extend in case of multiple inheritors or complex state laws.
You need to submit the owner’s death certificate and property ownership proof during the probate process. You also have to pay for several expenses such as outstanding mortgages, taxes on the property, and other bills.
Properties Exempted from Undergoing Probate Process
You will be exempted from a probate process under the following conditions:
- Transfer-On-Death Deeds: Transfer-on-death deeds allow the owner to transfer the ownership of the house to another person as beneficiary. The owner can retain control over the property as long as he lives. Select counties in 30 U.S. states allow transfer-on-death deeds.
- Receive a House in Trust: A property trust is a legal entity that allows the passing of the ownership of a property from the grantor (the owner) to the beneficiary. You can inherit a house directly without probate if the owner has placed the house in a trust.
2. Mortgage on Inherited Assets
The mortgage on the inherited property can be paid off in one of three ways:
- You Sell Inherited Assets to Pay Off the Debt: If your inherited property has outstanding debts, you can sell the inherited assets to pay off the mortgage. The profits will be shared amongst the legitimate heirs.
- You Get the Mortgage Transferred in Your Name: You can transfer the outstanding mortgage to your name along with the ownership of the real estate. This allows you to own the house and pay the outstanding debt simultaneously.
- The Property Will be Foreclosed: The mortgage lender can foreclose the property if no inheritor is ready to repay the mortgage.
- 👾 ALIENATION CLAUSE: This clause triggers when the ownership of an inherited property is transferred to a new heir. The inheritor now has to pay off the full mortgage. However, certain laws allow you to repay the mortgage on a monthly basis. A real estate attorney can help you with this.
Taxes on an Inherited Property
You have to pay taxes while inheriting as well as selling the property.
1. Inheritance Tax
Inheritance tax is a state tax applicable when you inherit a property from a deceased person. You need to pay an inheritance tax only if your house is in one of the below six states:
- Iowa
- Kentucky
- Maryland
- Nebraska
- New Jersey
- Pennsylvania
👉 NOTE: Inheritance tax does not apply to the spouse and children of the deceased owner.
2. Taxes When Selling an Inherited Property
- Transfer Tax: Transfer tax is a one-time fee (generally costs less than 1%) that sellers pay at the time of transferring the ownership between the two parties. You need to pay this tax to the local government body in your area.
- Property Tax: Property tax varies by county, but you will pay approximately 1% of the total home sale value to the government as property tax. You can claim a rebate if you have paid your property tax a year in advance. If you have not paid the tax, then you need to pay the pending amount.
- Capital Gains Tax: Capital gains tax is imposed only when you sell the house, and not while inheriting it. The IRS (Internal Revenue Service) authority levies the tax on a stepped-up basis. The stepped-up basis calculates the difference between the property’s present market value and the final sale price.
- 💡 Capital Gains Tax Exclusion: You can be excluded from paying capital gains tax if the following criteria are met:
1. You have lived in the property for more than two years in the last five years.
2. You have not used the exclusion in the past two years for another property.
Selling the Inherited Property
After completing the probate process, you can sell your inherited property. Selling an inherited home is similar to the sale of a pre-owned house.
You have to follow a certain number of steps in order to sell a house. They typically include-
- Hiring a Mediator: Hire a real estate agent or realtor to assist you in the home selling process.
- Pricing Your Home for Sale: Analyse the current market trends and price your home accordingly.
- Hiring a Photographer: Professionally photographed homes sell 32% faster. Make sure to hire a real estate photographer to create a portfolio of your house.
- Listing Your Home on the MLS: Homes listed on the MLS sell faster and for 17% more. FSBO sellers can opt for a Flat Fee MLS service like Houzeo to list on the MLS.
- Managing Showings: Host open houses and schedule showings to attract potential buyers for your inherited property.
- Negotiating Offers: You must compare the offers from prospective buyers on your listing. You can also negotiate if the proposed offer is too low.
- Closing the Sale: The closing process mainly consists of you completing the final paperwork, and paying the closing costs and home-selling taxes.
Selling an Inherited House with Other People
Sometimes a property might have multiple inheritors. They may include close family members like siblings, cousins, etc. In such cases, selling a house with multiple inheritors can become difficult.
Appoint a neutral party as the head person for sale. They will ensure a transparent home sale process. The head person will also guarantee a fair distribution of proceeds amongst the inheritors.
What if All Owners Don’t Agree to Sell?
In such cases, the majority of inheritors can go ahead with the sale.
You can start by filing a lawsuit known as a partition action in probate court. This will allow the majority of inheritors to sell the house and distribute the proceeds amongst themselves immediately after probation.
The majority of owners can also sell the house post-probation. They must file the partition action in the local court instead of the probate court.
Ways to Sell Your Inherited House
You have many options to sell your inherited home.
- List Your Home on a For Sale By Owner Website: For Sale By Owner websites allow you to leverage technology in your home sale and save you thousands in commissions. You retain control of your transaction and can engage directly with the buyer and buyer’s agent. FSBO sites will also get you listed fast, typically within 24 to 48 hours.
- List with a Discount Real Estate Broker: The best discount real estate brokers offer all the services that traditional Realtors do but at discounted rates. They usually charge 1.5% to 3% commissions to list your home.
- List with a Full-Service Realtor: Hiring a full-service agent may not be the best alternative. They charge a hefty real estate commission of 5% to 6%. This will decrease your net proceeds significantly. However, if you need hand-holding at each step, opt for local real estate agents in your neighborhood.
- Sell Your Home to an iBuyer: An iBuyer can instantly make a cash offer and help you sell your house quickly. They make cash offers as high as 100% of the fair market value. However, iBuyers have strict purchase criteria.
- Sell Your House to a Flipper: You can sell your inherited property to professional house flippers. They produce offers as high as 70% of the fair market value.
-
✍️ Pro Tip: Sell Your Distressed Inherited Property to Cash Home Buyers
Cash home-buying companies typically offer 50% to 70% of the property’s fair market value. They majorly deal in distressed and rental properties.
» Cash House Buyers: Check out our rankings.
Bottomline
Selling an inherited house is a complex and time-consuming process. Your inherited home might remain in probate for up to 24 months. You also have to pay several taxes while inheriting as well as selling your inherited home.
All of this adds to the existing complexity and expenses of selling a house. We recommend you sell with a Flat Fee MLS company to ensure a smooth sale.
A Flat Fee MLS company like Houzeo will get your house on the MLS right after probation. An MLS listing via Houzeo will give your house maximum exposure, and you may even attract cash offers.
Eager to Know More About Houzeo?
We’ve got you covered. Check out the following video to understand why Houzeo is one of the best for sale by owner websites in the U.S.
#1 Flat Fee MLS Service
Houzeo.com
- Listing Fee: $349
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(4,521 reviews)Houzeo offers 4 Flat Fee MLS packages.
- Bronze Package – FREE: This package offers Houzeo listing only for 6 months with maximum photos. You pay a $49 refundable fee for a yard sign and receive your refund after sending a selfie with it.
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👉 Our Take: We recommend the GOLD plan. You’ll have all the access to Houzeo tech, making managing showings and offer negotiations easy!
» Houzeo Reviews: Houzeo is 100% online. You can finish listing formalities in less than 60 mins.
Houzeo is America’s #1 Flat Fee MLS service because of 4 reasons:
- Max Exposure: Houzeo MLS packages give you access to the MLS, Zillow, Trulia, Realtor.com, Redfin, and 100s of other websites.
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- 100% Online: Houzeo is high-tech. For you, this means easy listing, fast changes, online showings, and online offers. Houzeo Mobile App is also very powerful.
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There are no dealbreakers with Houzeo.
» Houzeo Reviews: Houzeo is rated “Excellent” with a 4.9 out of 5 star rating by 4,521 home sellers on Google Reviews and Trustpilot!
Houzeo is rated 4.9 out of 5 stars by thousands of home sellers on Google & Trustpilot.
» Houzeo Reviews: Check out how Team Houzeo has addressed all Houzeo complaints from home sellers.
» NEED MORE CLARITY? Watch exclusive Houzeo reviews and learn why it is one of the best FSBO sites in America.
Selling an Inherited Property Near You
Frequently Asked Questions
Can majority rule in selling an inherited property?
Yes, the majority may rule in selling the inherited property. The majority can try to convince the rest members to sell the inherited house.
Do I pay taxes when I sell an inherited property?
Yes, you pay 3 different taxes on the sale of inherited property. They are: 1. Transfer Tax 2. Property Tax 3. Capital Gains Tax (on a stepped-up basis only).
Is there a time limit on selling inherited property?
No, there is no time limit to sell an inherited property. Once the probate process is completed and the legal inheritor is declared, you can sell your inherited property anytime.
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