Around thirty trillion dollars of wealth will be passed on from one generation to the next over the following few decades. Part of that will be from the sale of inherited homes.
Inheriting property can come at an emotional time. It may also add complications to your life that you could do without. If it all feels like a challenging inconvenience then the sensible thing to do may be to sell it. Here are the things to weigh up.
The Probate Process
You can only sell the property when the estate has gone through probate. This is a legal process in which the estate is settled according to the previous owner’s wishes.
During probate, the executor should ensure all assets are maintained and safe. This will involve ensuring the house has adequate insurance coverage. The executor would also be responsible for filing tax returns for the deceased person.
The Property’s Value
Do some research into recent sales of comparable homes in the area. This is going to give you a sense of the property’s value. Be careful to compare like for like.
You should check the size and condition of the house you’re comparing yours with. You could try using the Federal Housing Finance Agency’s HPI calculator to help.
It’s also wise to find out how much, if anything, is left to pay against any mortgage or loan on the house. Check too to see if there were any other outstanding bills or taxes that would need paying.
When several people inherit a portion of the property, you would all have to agree that selling the inherited property is the right choice. You’ll then need to reach a decision over who’s going to manage the sales process.
Tax Implications of Inheriting Property
It could be that you have to pay taxes on any proceeds from the sale or from the inheritance of the property itself. Laws can be different from state to state.
When you sell a property you’ve lived in for several years, you’re able to take advantage of a tax exclusion. This means you won’t pay tax on up to a quarter of a million dollars of the proceeds of a sale.
This figure applies if you’re a single homeowner. It doubles for married couples. If you’re not planning to live in the inherited home for at least two years, you won’t qualify for this exclusion.
The IRS does require anybody selling inherited properties to report the proceeds as taxable income. The taxable amount is based upon the fair market value and any improvements made to the property.
Tax law is not always straightforward. It’s a good idea to seek the advice of an accountant or attorney. This is going to help you to understand the financial obligations that come with inheriting real estate.
Getting the Property Ready for Sale
Having decided to sell the property, you’ll next need to prepare it for sale. That can involve clearing out personal belongings. It’s quite normal for this to be very emotionally challenging in certain circumstances.
You’re unlikely to want to keep everything. Focus on a few cherished items for yourself and other family members. Once you have done that, you’ll need to decide what to give away, what to throw away, and what you might be able to sell.
Homes are more likely to sell quickly if they are clean, empty and then staged. You may want to consider small upgrades at this point to help the house look its best.
Options for Selling the Property
If you’re planning to use the services of an agent, do your research well. It’s crucial to be certain it is someone you feel you can trust. Check online reviews and use your own network to find a recommendation.
You might also consider selling the property to a company that specializes in property investment. This is often the most painless way to sell an inherited property. You’ll avoid commissions, agents’ fees, or administrative costs.
It could be a good move if there are repairs that will be expensive and could hold up the sale. It could be a great way to sell if you cannot afford to carry out the repairs at all. Check out this blog article for more information about this type of sale.
Setting the Price of the Property
How to price the property is going to depend on a few factors. You’ll need to take into account any existing mortgage, remaining debts, along with the current real estate market.
Price the property realistically. A reasonable price is more likely to pull in potential buyers. A low listing price can be a strategic move. It might attract several buyers who then enter a bidding war. That could mean you achieve a higher sale price.
The price needs to be low enough to attract buyers but high enough to allow some room to negotiate.
You should try not to settle for less than the property is worth. It’s a good idea not to be too keen straight away to make any concessions, like agreeing to a reduction in price due to future repairs.
It may be better not to accept the first offer you receive. Buyers may want to test the water first by making an initial offer that’s far less than they are willing to pay.
During the Sale Process
You might have a lot of memories tied up in the home if it was where you lived as a child. Be prepared for the emotions that selling such a home can bring up. You should make sure you are properly supported.
Bear in mind that just because you’ve listed a home on the market doesn’t mean your obligations have ended. Utility and service bills will still need to be paid.
You may also encounter additional expenses or demands on your time. This could include lawn or yard maintenance and organizing household repairs.
Inheriting property can by its very nature bring with it extra emotional strains. Prepare well by carrying out as much research into the tax and legal implications involved beforehand. Forewarned is forearmed.
Continue reading more useful property-related articles in our ‘Home and Garden’ section.