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!
- 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:
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.
- 👾 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:
- New Jersey
👉 NOTE: Inheritance tax does not apply to the spouse and children of the deceased owner.
2. Estate Tax
An estate tax is different from inheritance tax. The estate tax applies only to properties worth $12.92 million or more per individual. Currently, the estate tax ranges from 18% to 40%.
At times a part of an estate can be sold to pay off the earlier unpaid taxes. In such cases, the property sold to pay off the debts cannot be passed on or inherited.
3. Gift Tax
Gift tax is involved when someone gives you a property before they pass away. As long as your name is on the title, the property is not an inheritance.
However, the person gifting the property needs to report it to the IRS (Internal Revenue Service) or pay the gift tax.
Taxes on Selling an Inherited House
- 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 in advance. You need to pay the pending amount if you have not paid the tax.
- 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.
How to Sell an Inherited House?
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 file a lawsuit, known as ‘partition action’, through the probate court. If the majority of owners agree, the court allows the sale. The owners can divide the proceeds among themselves.
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 or Flat Rate Realtor: The best discount real estate brokers offer all the services that traditional Realtors do but at discounted rates. You can also opt for a flat rate Realtor 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.
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.
Eager to Know More About Houzeo?
Here are the Flat Fee listing plans offered by Houzeo to sell your inherited property.
Houzeo offers 4 Flat Fee MLS packages.
- Bronze Package – $329+: This package offers Houzeo listing only for 6 months with maximum photos.
- Silver Package – $399+: This includes everything that home sellers typically look for.
- Gold Package – $379+: It is Houzeo’s signature MLS package and includes all the technology Houzeo is known for Houzeo Showings, Houzeo Offers, and DigiTransact.
- Platinum – $349+: It includes the assistance of a licensed broker to help you with negotiations, disclosures, and closing.
👉 Our Take: We recommend the GOLD plan. You’ll have access to Houzeo tech, making managing showings and offer negotiations easy! Confirm all prices on the state’s pricing page before you list.
» 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.
- 5-star Customer Service: Houzeo has a fully staffed customer service desk available 6 days a week. Chats and emails are open 7 days a week. This is rare in today’s world.
- 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.
- No Hidden Fees: In most states, you’ll be paying just a small flat fee to list on MLS by owner. And remember, all fees are disclosed upfront, so there are no Houzeo hidden fees. You get to bypass the listing agent commission.
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Selling an Inherited Property Near You
Frequently Asked Questions
1. 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.
2. 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).
3. 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.
4. How to pay-off the mortgage on inherited property?
You can pay the mortgage on an inherited asset in multiple ways:
1. You can sell the property and pay-off the debt.
2. Transfer the mortgage along with the ownership of the house in your name.
3. The mortgage lender can foreclose the property if no inheritor pays the debt.
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