Selling An Inherited House: What To Consider
If you have inherited a home, you are probably weighing your options on whether to take it on as a residency, rent it out, or simply sell the property. If selling is your choice, it is good to be prepared and aware many variables of an inherited home that can impact your sale:
- Property Cost. You can learn more about the property costs of the home by using an online home value estimator that can also compare its market value to comparable properties in the area.
- Outstanding Costs. Establish if any remaining balance is due towards the mortgage and if any additional outstanding bills have been accrued and use a home sale proceeds calculator to determine your expected expenses towards a sale.
- Beneficiaries. Take into consideration any other potential or named beneficiaries to the inheritance and understand the terms of inheritance.
- Tax Implications. In addition to inherited debts, you will also want to understand the potential tax costs on proceeds made from the sale. The tax laws are complicated and vary from state to state so consulting an accountant or attorney should be considered. Whilst learning more about your tax costs, you may want to explore if your sale is eligible for an exemption such as the Stepped-up Tax Basis (which protects beneficiaries for owing substantial taxes on homes with substantial value increase while under the prior owner) or the Home Sales Tax Exclusion (which stipulates having lived in the home for a minimum or two years to access a deduction).
- Reporting Proceeds.
Once you have determined the above and are ready to move forward with the sale, you will need to ready the property for sale.
- Organize, sort, and clear out personal effects.
- Hold a yard or estate sale for any belongings you have chosen to sell or part with.
- Assess any needed upgrades and consider using a concierge type service to deal with the details.
- Wait for the estate to go through probate and identify the Executor of the Will or Trustee.
- Choose a real estate agent.
- Get the property inspected by a certified home inspector to identify any potential problems.
- Consider holding an open house.
When pricing your home for sale, keep the market conditions in mind and know that you likely will not get your asking price. For this reason, you will want your price to be reasonability above the lowest you will accept. Be careful of choosing a listing that is too high that might deter potential buys. While it is common to list higher for as a buffer during negotiations, listing lower can also encourage bidding wars that could result in a higher priced sale. It is important to select a real estate agent that understands the market and can provide you with the best guidance. A good real estate agent will be able to help you navigate listings, offers, and negotiations.
To better prepare for negotiations determine your hard boundaries from the start and brush up on some negotiation tactics. Remember, you don’t have to accept the first offer that comes in and sometimes you may even want to provide a counteroffer.
Selling your inherited property can be a tedious and lengthy process riddled with obstacles. Getting the house from offer to closing can see such frustration as:
- Continued financial obligations on mortgage, utility and other maintenance requirements still owed through the finalization of the sale
- Unexpected repairs inherited from neglected problems that could be both visible or hidden. Often, during a home inspection foundation, maintenance, safety considerations may turn up that require addressing, the extent of which can run up expenses.
- The probate process can take years
- Distribution terms outlined in the Will or Trust may specify the distribution of the estate amongst several family members. This will mean the final cost must also be divided accordingly amongst all beneficiaries.
- Disagreements amongst all heirs over anything from the assets that are kept to handling of repairs to the asking price and more.
- Feelings of guilt over items you choose to part with.
- Property debt amounting to more than the home is worth.
Being as prepared about the selling process as possible is the best tool you can have in an already emotional and complicated process.