Inheriting a property is rarely as simple as receiving a set of keys. Along with the property comes a wave of decisions about probate, taxes, maintenance, and ultimately what to do with a house you may never have planned to own.
If you have recently inherited a property and are considering selling, this guide will walk you through everything you need to know.
Step 1: Understand the Probate Process
Before you can sell an inherited property, you typically need legal authority to do so. If the deceased had a will, the executor named in the will can manage the sale once probate is opened. If there was no will, the court will appoint an administrator.
Probate timelines vary by state but typically take 6 to 12 months. However, in some states and under certain circumstances, you can sell the property during probate with court approval. An investor experienced with probate properties, like 30A Investment Group, can navigate this process with you.
Step 2: Assess the Property Condition
Inherited properties often need work. The previous owner may have deferred maintenance for years, and the house may have been vacant for months during the probate process. Common issues include outdated systems, roof problems, pest damage, and cosmetic deterioration.
The good news is that you do not have to fix any of this before selling. Investors buy properties in as-is condition, which means you can skip the expensive renovations and sell the property exactly as it stands.
Step 3: Understand Your Tax Obligations
One of the most significant advantages of selling an inherited property is the stepped-up basis. When you inherit a property, the IRS resets the cost basis to the fair market value at the time of the previous owner's death. This means if the property was purchased for $100,000 thirty years ago but is worth $300,000 today, your cost basis is $300,000, not $100,000.
If you sell shortly after inheriting at or near that $300,000 value, you may owe little to no capital gains tax. However, if you hold the property and it appreciates further, you will owe taxes on the gain above the stepped-up basis. This is a strong financial argument for selling relatively quickly after inheriting.
Step 4: Decide How to Sell
You have three primary options for selling an inherited property. Listing with an agent is the traditional route, but it requires the property to be in showing condition, takes 60 to 120 days on average, and costs 5 to 6 percent in commissions plus closing costs.
Selling to an investor is faster, simpler, and requires no repairs. You can close in as little as 7 days and pay zero commissions. With creative financing options, the investor may also offer you a higher total price than a cash-only buyer.
The third option is to keep the property as a rental investment. But if you live out of state, do not want the management burden, or need the cash, selling is usually the better choice.
Dealing with Multiple Heirs
If multiple family members inherited the property, all parties typically need to agree on the sale. This can complicate things, especially if some heirs want to keep the property while others want to sell. An experienced investor can often structure deals that satisfy all parties, such as buying out certain heirs while keeping others involved.
Key Takeaway
Inheriting a property does not have to be a burden. Understanding the probate process, the tax advantages of the stepped-up basis, and your selling options empowers you to make the best decision for your situation. If you want a fast, hassle-free sale, an investor who specializes in inherited properties can make the process remarkably simple.