Inheriting property can be a complicated process. If a friend or loved one has named you in their will as a recipient of a house or other piece of property, there are many factors to consider. If you have no use for the house or property, the best choice may be to sell your inheritance.
Table of Contents
- How to Sell Inherited Property
- What Types of Inherited Property Can Sell?
- Selling an Inherited House vs. Selling Inherited Land
- Can I Sell Inherited Property to a Family Member?
- Enjoy Your Inheritance Now With Inheritance Funding
How to Sell Inherited Property
If you are named in the will, the property will first go through the probate process. Probate procedure may differ from state to state, but it essentially confirms the will’s validity. How long this process takes depends on the complexity of the will and if there are any challenges. Once the probate process is completed, ownership transfers into your name. But you can still sell the inherited property before the probate process ends.
When you inherit property, you become responsible for maintaining the property and paying expenses related to the property, which is why many heirs choose to sell their inherited property.
If the executor needs to pay off debts in the estate, selling a property can raise the money they need to do so. When a property sells during probate, all the related taxes are paid from the estate and all remaining proceeds are transferred to the beneficiaries upon probate completion.
As soon as probate opens, you can begin preparations to sell the property. If you are one of many beneficiaries, you’ll need to reach an agreement with the other heirs. If the other beneficiaries don’t want to sell, the issue will go to court.
Once you have decided to sell your inherited property and all owners are in agreement, you can list it on the market.
Do I Have to Pay Taxes on My Inherited Property?
You may also need to pay taxes when you sell your property. You could pay capital gains tax, which is calculated on the difference between the property’s value when you inherit it and the price you receive when you sell the property. For example, the value of the property when you inherit it is $400,000 and you sell it for $450,000. You will only pay capital gains tax on the $50,000 difference. Property sold at a loss won’t have to pay capital gains tax.
If you choose not to sell and make the property your primary residence, you may be exempt from paying capital gains tax. Once you’ve lived there for two years, you are eligible for a tax exclusion through the home tax exclusion. While this is only possible for some, it may be a great option if you are looking for a new home or relocating.
It’s also important to know that you may have to pay inheritance tax on the property. This inheritance tax applies in six states — Iowa, Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania. The amount paid differs in each state based on the value of the property transferred to the beneficiary. Surviving spouses are always exempt from this tax, and so are some family members. If probate is filed in one of the six states that legislate an inheritance tax, ask that state’s tax department about their specific requirements.
What Types of Inherited Property Can Sell?
When it comes to inherited property, the main focus is often on houses and land, but other types of property can be part of an inheritance. You can inherit the following:
- Bank or investment accounts
- Money
- Investment assets
- Intellectual property
- Personal belongings such as jewelry
- Real estate like land, a home, commercial or industrial property
Selling an Inherited House vs. Selling Inherited Land
When you inherit a house or land, there are essential factors to consider, especially if you want to sell it. Selling an inherited house is much like selling your own home, except there are different tax implications and costs that you may have to pay. Working with a real estate agent will help you to choose the best offer and the right price.
A land sale differs from selling a house as land buyers have unique needs and questions about the condition of the land. They may want to know more about the building restrictions, what crops, if any, were grown on the land and the elevation. While you can sell the land on your own, depending on the land type, it may be wise to work with an agent who specializes in land sales. They will understand the market well and know what prospective buyers seek.
Before selling inherited property, consider the following financial implications for both land and house sales:
- Property with a lien: An inherited house or piece of land may have a lien you must pay off before selling. For example, the previous owner may have defaulted on mortgage payments or property taxes, which means there is debt owed to the mortgage lender. A piece of land could have a lien on it for unpaid work.
- Home upgrades and land preparation: To get the best price for your property, consider making some improvements. A pre-home inspection can help you determine if there are any major areas that you need to attend to before selling. You may need to cut grass and clear out brush on your land. How you prepare the land will depend on how the future owner will use the land. For example, overgrown brush may be desirable for hunting purposes.
- Sale price: Understanding the property market and comparing listings in the area will help you set the right price for your house or land. In land sales, it’s wise to work with an appraiser who will consider the land’s most productive and profitable use, land use laws, the condition of the land and the financial potential to recommend a selling price.
- Divide or sell land whole: Land closer to residential or commercial may be easier to sell in sections, whereas larger properties are more attractive for buyers in rural areas.
- Best way to sell: You can do a traditional listing on a real estate platform or a private listing. Land auctions are also a great way to get a competitive price for your land.
- Sale structure: You can sell the property through a standard cash sale or bank financing. A land contract is another option that allows a buyer to pay a down payment on the land and then monthly installments with interest until they pay off the land in full. Choosing a land contract helps you avoid paying capital gains tax all at once. Instead, you pay the tax over the course of the installments.
Can I Sell Inherited Property to a Family Member?
Property can be expensive to maintain, and you may inherit a property that still has a mortgage. If you want to sell the house but other heirs, like your siblings, don’t, selling your share of the inherited property to them is a great option. It’s also possible to sell your share to a third party, such as your sibling’s significant other.
Siblings cannot force another beneficiary to sell their share of a property to them. If you can’t agree on whether or not to sell the property, you can take the issue to court. When there are more than two owners, the court may agree with the majority on whether or not to sell the property. If the court allows the house sale, they will appoint someone to sell the property for you. However, it’s always better to reach an agreement outside of court to avoid incurring legal expenses.
When you struggle to agree on selling an inherited house, another option is to turn the property into a rental. The siblings who would like to keep the property can take the lead as landlords, and you can all earn rental income. Renting out the property is an excellent option, especially if your inherited property has no associated debts.
Enjoy Your Inheritance Now With Inheritance Funding
You don’t have to wait to sell your inherited property if you need money now. You can access the money you need immediately through an inheritance cash advance. We know the probate process can take years, so we are here to give you the cash you need now. We purchase a portion of your inheritance, and even if there is not enough to pay us at the end of the process, we take the direct loss. Apply online and get the money that you need now.
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