What You Need to Know About Selling Inherited Property

 

Often, people who have inherited property already have a house, or live too far away to take advantage of the house they’ve just been gifted with. In addition, you might have to deal with a series of legal problems before you can convert the home into cash. Finally, there are tax considerations which need to be taken into account.

You’ll pay capital gains tax, not income tax.

Let’s remove one source of stress for you right now. When you sell an inherited property you don’t pay income tax on that money. You pay the much lower capital gains tax. If you receive less than the home was worth on the date the previous owner passed then you’d report a capital loss instead, and your taxes would be lowered accordingly.

While you should set aside some money to account for taxes, in general, tax concerns should not stop you from selling your inherited home. You will almost always come out ahead.

However, you do need to take property taxes into account.

You’ll only have to worry about federal and state taxes on the sale of your home once. However, if you decide to keep the home (say, by finding a tenant and becoming a landlord) then you’ll need to have the means to pay property taxes on the home every month. Some landlords build that into their rent, but you should keep in mind that becoming a landlord does come with its share of headaches…beginning with the fact that some tenants do not always pay their rent.

Sometimes tenants also move and leave the home vacant for months at a time, and all tenants leave some sort of mess that must be cleaned up when they go. If you don’t have the means to take care of all of these problems then you’re better off selling the home. There are things you can do if you fall behind on your taxes, but ideally you’d know in advance that this is something you have to account for.

Your relatives may make it difficult to sell the home.

They won’t do it because they’re malicious. They’ll just have legal rights. Sometimes estates get complicated, and when multiple parties all own a share of an inherited asset, selling it may be the only fair way to make sure everyone gets what they’re entitled to.

However, this may mean there are disagreements about which offers to accept, how much money to ask for and other factors. At Big State Home Buyers we’ve helped families navigate these situations so the sale doesn’t drag on for months.

In addition, there’s something about a cash offering that makes these situations far more palatable for everyone involved. A cash offer on the table becomes a “bird in the hand” situation that few family members will want to pass up. You also have to navigate fewer concessions and contingencies–investors buy the home as is, so you don’t have to argue with family members about who is going to pay for a new roof or fresh coat of paint.

The process can be very emotional.

If you had a close relationship with the deceased, you’re not just selling your home–you’re selling memories. Selling the home becomes another step in saying goodbye, and it can be challenging. This is when it is very important to get advice from outside experts. Otherwise, you may pass up a good deal because you think the home is worth more than it actually is.

It may also be harder for you to deal with the traditional steps associated with selling the home through a real estate agent. For example, you might not have a lot of time to show the house, and might find it emotionally difficult to do so. Staging the home may require you to change features you’ve always loved.

In this case, working with a reputable home investor might be the fastest and easiest way to get the home sold and dealt with so that you can process your emotions and move on.

You have to keep paying for the home until it’s gone.

The neighborhood association fees still have to be dealt with. The lawn still needs to be mowed unless you want to get in trouble with the city. If there’s a homeowner’s insurance policy you’re going to have to pay for that, too. These are very good reasons to unload the home quickly if you’re not going to be living in it. It can become a financial drain, and if those expenses go on long enough you will whittle your inheritance away while trying to get the “best price” on the home.

Be sure to sit down with your other family members and evaluate these expenses before deciding whether or not a traditional MLS-sale is right for you and your family. Take a moment to understand whether this is a buyer’s market or a seller’s market so you can determine how fast the home will sell, and be realistic about the number of repairs the home might need before deciding to go the traditional route. The disadvantages might well outweigh the advantages.

Work with reputable investors.

All anyone needs to become a home investor is a pile of money. There is no test. There is no certification process. That means if you’re looking to an investor to sell your inherited home you need to do everything you can to investigate the investor’s reputation. Don’t take the first lowball offer you get and assume it’s the very best an investor can do.

Don’t simply Google “Houston investors” and take whatever comes up. Take the time to read reviews and investigate websites. Call the office and ask some questions. See who offers advice freely, and see who starts pressuring you towards a sale. See who asks you intelligent questions and who just wants to know how fast they can buy your home for pennies on the dollar. Look for professionalism, and you’ll gain an ally who will make the process as painless as possible.

Sources:

https://ttlc.intuit.com/questions/2351616-is-the-money-received-from-the-sale-of-inherited-property-taxable