The Process of Selling Inherited Property
Dealing with an inherited property or a property in probate can be a difficult and time-consuming process. Because of the many laws associated, an inherited property can take months before the title changes hands. When it finally does, you can be left with a property that hasn’t been updated in years and is in dire need of maintenance.
Below we’ll describe the process of selling inherited property to better understand how to navigate the real estate market once this situation occurs. With ProWays Property Solutions’ help, you’ll be able to sell an inherited property much easier
Common Challenges When Selling An Inherited Property:
If you are faced with this type of situation, it is important to focus on the high-priority hurdles first. Here are the four biggest challenges to selling an inherited property with deferred maintenance:
The Sale of Inherited Property FAQs
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Going through probate can be a long and grueling process, even with a will. By the time you take ownership, you can feel drained and beaten down. The last thing you want to do is wait another extended period to complete your improvements and wait for a buyer. If there is an extensive amount of work needed in the property, you have two choices.
Do whatever repairs and work that is necessary, regardless of how long it takes. Waiting a month or two to get the work done has significant advantages.
Entertain a quick sale and take the first halfway decent offer. If not, it can easily be another handful of months before another offer comes your way.
Most buyers want their properties fresh, updated, and turn key. If there is deferred maintenance, you need to do the work before putting the home on the market.
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If a will/trust exists, one of the heirs will be the executor. The executor is the decision-maker and has the power to sell the property without permission from other heirs. But sometimes, no executor is chosen, which is a challenging situation for the heirs. Three things can happen:
Agreement
Buyout
Partition
If you or a loved one is planning a will/trust, make sure there is an assigned executor so you can avoid these problems.
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When selling inherited property, you may have to pay capital gains tax if you earn a net profit from the sale. The federal government will tax a portion of the amount you profited. The current capital gains tax rates are 0%, 15%, or 20%, depending on tax brackets. When you sell a home normally, you would pay capital gains tax on what you earned from the sale compared against the original price.
Inherited properties work differently. With inherited properties, the home is appraised after the death and given a market value. Let’s assume that an owner dies and the house is given a value of $400,000. If the house sold for $450,000, the tax basis would be $50,000. This is a stepped-up tax basis, the home’s original value is not a factor.
Heads Up: As of early 2021, there are talks by the Biden Administration to raise the capital gains tax for individuals earning at least $1 million per year.