Inheriting a home comes with some financial perks… as well as some potential headaches, too. You essentially have three options when you inherit a home: you can sell it, you can rent it, or you can move into it. Selling inherited property can be quite profitable, provided you know how to navigate the most common pitfalls of the process!
The Most Important Considerations When Selling Inherited Property
When selling your primary residence, there are a lot of individual details to consider. There might be even more when selling an inherited property, which is why it’s especially important to do your research and hire an agent you trust. Here are some things you might need to take into consideration.
Is there a mortgage?
First and foremost, determine whether there is a mortgage on the home, and how much still needs to be paid. You’ll also want to find out if the mortgage is assumable—in other words, if it simply passes down to you—or if the balance will need to be paid at the time of inheritance. This is often the case with reverse mortgages or other unconventional mortgages.
Is anyone else inheriting the property?
Often, siblings or other family members will inherit a property together. For some, this might not be a problem. But often, there will be differences of opinion on what should be done with the property or how much it should sell for. It’s important to sit down to discuss all possible options and ideas with all responsible parties before taking any definite steps towards selling.
What are the tax implications for you?
Typically, when a home is sold, a capital gains tax is assessed on the profitable difference between the sale price and the initial purchase price. For a home that’s been held by the same owner for many years, this profit can be quite steep. Usually, a portion of that profit is excluded from being taxed. However, this is not the case when selling an inherited property.
However, not qualifying for the capital gains tax exclusion isn’t cause for panic. Instead of paying a tax on the total profit gained from the start of previous ownership, you’ll instead use a stepped-up basis to calculate taxes. This simply means that a Fair Market Value is assessed at the time of inheritance, and you’ll pay a tax only on the difference between that amount and the final sale price of the home.
Should you make repairs?
If a home has been held by the same owner for many years, or if the previous owner was unable to take proper care of the property, it might be in need of significant repairs or updates. Before you list, it might be a good idea to hire a home inspector to root out any potential maintenance problems or issues that could deter a buyer. Whether you decide to repair them or simply list the home as-is, it’s better to know up front, rather than lose a buyer halfway through the sale.
Have you left time for decluttering and cleaning?
An important step to selling inherited property is completely cleaning and clearing everything from the home. Since you likely won’t be moving all the items into another home, as you would when selling your primary residence, you’ll need to sell, donate, or give it all away—furniture, clothing, keepsakes, dishes…everything. This can take a lot longer than you might think, so be sure to leave yourself plenty of time to completely clear out, and clean, the home.
Once the home has been emptied, work with your agent or a professional stager to dress the home up a bit. You might need to purchase inexpensive furniture or rent or borrow some pieces to give the property a less empty feel.
Do you know what the home is worth?
Pricing a home is critical to selling it profitably and quickly. Knowing the value of a home is also important when it comes to negotiating. You may receive some lowball offers from buyers hoping to get a good deal out of an estate sale, but if you know the value of your home, you shouldn’t let yourself be swayed into taking a low offer.
How much do you trust your agent?
One of the most important things you can do anytime you sell, but especially when you sell inherited property, is to find a skilled and experienced agent that you trust. Finding an agent who knows the market, who knows the area, and who knows estate sales can save you a lot of time and headaches. Your agent can also help you understand the implications of all your options so you know you’re making the best decisions for your individual situation.
Looking for an Experienced Triangle Suburbs Agent?
Are you thinking about selling inherited property in the Triangle suburbs? Ann Milton Realty is here for you. We understand that there’s a lot that goes into selling an estate, and oftentimes there is a lot of emotional baggage along for the ride, too. We want you to feel confident that you’re in good hands and that no step of your home selling journey will be alone. Contact us today to learn more or to get started.