Inheriting a property from a deceased relative can be an overwhelming process. Typically the home will go through probate courts which can take months. Things only get more complicated when multiple heirs (especially if everyone doesn’t agree with selling). Converting the property into cash by selling is complicated and sometimes confusing as taxes and governing laws must be factored into the equation.
Inheriting property from an estate is governed by a legal process. If the previous owner had a legal will, you might be able to skip many of the typical legal actions. If no will was left from the deceased owner, typically, the property will go to the next of kin.
Even if a will was written, the majority of estates would still have to go through a legal process called probate. This process ensures that the wishes left by the person who died are followed.
Every state has its own laws governing probate. In most cases, the court will appoint an executor to carry out the instructions desired in the will. This includes making sure ownership of assets goes to the right people and is not wasted.
If a will names a single person as the beneficiary and new owner of the property, it simplifies matters considerably. As the sole owner, the beneficiary will not have to consult with joint-heirs about what to do with the property.
In most cases, a will name multiple people as beneficiaries. This can result in multiple owners of one property.
Most states won’t be subject to federal estate tax; if the property is sold again, you will have to pay taxes.
You can avoid paying taxes on the majority of the proceeds from selling the property because of a law that allows the value of the deceased person’s property to be stepped up to its fair market value on the day they died. Instead of whatever it was when the property was acquired.
Say your parents purchased their home 40 years ago for $80,000, but today it’s worth $200,000. For purposes of inheritance, its “stepped-up” value will be set at $200,000
If the property is sold, the heirs will only owe taxes on the amount if it exceeds the basis price. For example, if the $200,000 home is sold for $210,000, taxes would be owed on $10,000.
Any gain is subject to capital gains taxes. There are two types of capital gains, long-term and short-term.
Sales of assets held more than a year are subject to long-term capital gains taxes. Long-term capital gains taxes can range from nothing to as much as 20%, depending on the tax filer’s personal income and filing status. Higher-income filers usually pay more.
Short-term capital gains are generated when assets are sold after being owned for less than a year. The tax rate on short-term capital gains is the same as the ordinary individual income tax rate, ranging from 10% to 37%, depending on income.
Lastly, what if you sell at a loss? You’ll be eligible to apply a capital loss as long as you sold the home at fair market value in an arm’s length transaction (not sold directly to a relative at a discounted price)
Selling your parent’s or deceased relatives’ house as-is and getting a little less for the place isn’t as bad as it sounds. This can help you avoid hefty capital gains tax plus the disclosure rules are more lenient for inherited properties. This is because you were never the primary resident, so you do not know any issues it may have.
If you are unaware of any major issues with the property that will be expensive to fix and don’t disclose, you may be liable to cover those repair costs. Your liability all depends on how you inherited the property if you sold it as the outright owner or as the estate’s personal representative.
When selling your own property, you will want to get the highest price possible. But when you’re setting the list price for an inherited house, you will want to consider the tax implications and time investment.
If you sell just under market value, you may end up making more money in the long run if it helps you avoid paying capital gains tax.
Not to mention the faster you can sell the property, the more you can walk away with.
Every month you don’t sell the home, you will have to pay bills and operating costs. The longer you wait to sell, the more money you will lose every month.
Traditional home sales require you to clean and make repairs to the property. Hire a realtor and appraiser to help you market the property and show weekly open houses. Not to mention all the time and energy preparing the home for sale.
When time is short, getting your property sold should be your number one priority. Working with a company specializing in purchasing inherited properties can help you navigate the legality, paperwork and answer any questions you have. These companies offer fast, hassle-free, all-cash closings, making the entire process simple and straightforward.
Feeling overwhelmed and not sure what the next best step is? We can help! We realize that the average person may buy and sell a home only a couple of times in their entire life. We buy and sell property every single day and understand the process like the back of our hands. Connect Home Buyers has helped dozens of homeowners with inherited properties.
We offer free consultations to anyone seeking advice. Please fill out your information below, and one of our specialists will contact you during regular business hours.
Want to get an honest, fair market price for your inherited property and walk away without doing any work? When we say “without doing any work,” we mean it! No repairs, no cleaning, no realtors, no lawyers, no appraisers, no open houses, no waits, no commissions, no fees. It’s just seller (you) and buyer (us). We cut out all the middlemen and all the stress.
It’s 100% percent free. What do you have to lose? If you are not satisfied with our services and offer, you can always decline and move on.
The worst-case scenario is you will get a free consultation and have a backup offer just in case a buyer’s loan falls through last minute or something unexpected happens that you weren’t prepared for. Lifes happens to all of us, and we are here to make it easier.
“Because this is new for us, the whole process is new for us. Working with the bank, working with your actual realtor. We didn’t even have to get a realtor, so we had to do nothing. The only thing we had to do was paperwork with the bank, and you all took care of the rest. You made us comfortable leaving our home. We didn’t worry about it and sit back and say, well, maybe we made a mistake. There was no second-guessing with us because you didn’t make us second guess. You made us feel comfortable that this is the right choice, and we are doing the right thing.” -Mike
“I want a process I don’t have to put any work into it. Because I’m away from the house, I’m a couple of hours drive away. I said I don’t want to go to closing; I don’t want to have to show up at the house, I don’t want to have to show up a meeting with anybody. I want to collect a check and be done with it and have it done quickly within, you know, two to three weeks or so, and that’s what you guys were able to supply for me, and that’s what I wanted. At first, you knew what you were talking about right, I’ve had a lot of people call and different things and try to-and you could tell they were maybe just out of a new class or something where you get a lot of flippers, and they start emailing out to everybody. Right off the bat, it seemed like you guys knew what you were talking about, and you’ve done this before, and you had the investors. It seemed to be a little more legit than a lot of these cold callers that you get that wanna buy your house.” -Tom Stall