• Daniel sisto

The Supreme Guide to Selling an Inherited Home



Inheriting a home from a loved one can be an extremely difficult time in one’s life. Prior to inheriting the

home, you were probably dealing with a family member who has been battling a sickness or moving on

from old age. The last thing you are thinking about during this period of time is what you will do with

their property. However, when the house becomes yours, figuring out what to do with it can present

emotional and financial distress.

You will be placed with the tasks of deciding which choices need to be made to sell your deceased

family members property. There are several different topics that we will discuss. We will go over the

best practices of each of these topics to help assist you through the sales process. Some of the

categories that we will be talking about are:

• The tax implications of the sale of an inherited home

• Your selling options for the property

• How to prepare for the sale

• The art of pricing your home & its importance

• The closing process and what to expect

• And much more…

This post is intended to educate you on the process of selling your inherited home and answer any

questions that you may have as you work through the process. The process of selling an inherited home

can become very complicated. There are different procedures we have to work through before we can

sell this property. The more you know on the specific topics, the easier it will be for you to manage the

sale. We hope that this information clarifies some of your questions that you may have and helps to

create a hassle free sale for all members who may be involved.

You Just Inherited A Home – Now What?

The initial steps of selling an inherited home are where the major differences come into play when

comparing this process to a traditional sale. Most people think that inheriting a home is an easy process,

providing the members or beneficiaries with a type of reward. However, the truth is that being willed

real property offers several unique challenges. The initial steps of this process can be the most

aggravating and stressful as this process can take the courts many months or more to divide deceased

person’s assets, including their real property. These steps will help you know what to look out for in the

initial months after you inherit a home.

Is There A Valid Will?

The first step in the process will be to determine whether the deceased individual has a valid will.

When a person dies and they leave a will they are referred to as a “testate”. If the decedent passes

without leaving a will, they are referred to as an “intestate”. There are typically 3 different estate

proceedings that will be followed, they are:

• A Small Estate – If a person died with less than $30,000 worth of personal property. A simpler and

less expensive way of dividing up decedent’s estate.

• Probate – If the person who died had a will, then you will be forced to go through probate to divide

up the assets in question.

• Administration – If the person dies without a will, then you will file for an administration and the

property will be divided by law.

Probate is the court process by which a will is proved either valid or invalid.

This process is held in the hands of the surrogate court and they will need to see that the Will is proved

to satisfaction. Once the Will is deemed valid, the Executor, who is named in the Will, will be appointed

to distribute the estate. At this time they will attempt to move forward with the wishes of the individual

who passed.

Filing for Probate

According to NYCourts.gov “The individual who has been deemed the Executor will file the original will

and a certified copy of the death certificate with the probate petition and other supporting documents

in the Surrogates Court in the county where the Decadent person had their primary residence”.

Be sure that you list all of the “heirs” on the probate petition. The “heirs” must also be served with a

notice. Once this happens, the Surrogate courts will not have control over the “heirs”. At this point, the

notice that was delivered will make the “heirs” aware that the executor has filed for the authority of the

estate. If the will has beneficiaries that are due to receive assets in the Will, they must be notified of the

probate proceedings.

What Are The Tax Implications of Selling an Inherited Home?

Before we get into your options to sell, I want to discuss the tax implications of the sale of your

property. This will give you a better idea of what vehicle you would like to use when selling. If you

decide to go ahead and sell the property that was passed down to you, you should understand how the

taxes work when dealing with this situation. You will have to share the information of the sale to Uncle

Sam because you will owe income tax on a gain or profit from the sale. However, if you sell for a loss you

may also be eligible for an income deduction. This is all going to depend on how you handle the property

and when the decedent passed away.

Capital Gains Tax on Gains or Losses

The sale of your inherited home will be treated as a capital gain or a loss for tax purposes. You will have

to pay capital gains taxes if you plan on using this property for investment purpose (such as selling). If

you plan on living in the home you may be eligible for the home sale tax exclusion (this is if you live in

the home for more than 2 years). This means that you will not have to pay any tax on the profit from the

sale of the property on anything under 250,000 (if single) or anything under 500,000 (if married). The

good thing is that if you plan to use this property for investment purposes you will only pay tax on the

difference between the sales prices and the stepped up basis at which you inherited the property.

Stepped Up Basis

The properties “stepped up basis” is the full market value of the property at the date of your loved

ones death. This is very beneficial to the new owner because now you will only be paying tax on the

difference between the final sales price and the stepped up basis price or full market value. For example

supposed you inherit a property that was purchased for $100,000 and it is now currently worth

$200,000. You will receive a step up from the original cost basis from $100,000 to $200,000. If you were

to sell the property right away for the $200,000 or full market value then you would not have to pay a

capital gains tax. However, if you ended up selling the property for $250,000 a year later than you would

have to pay capital gains tax on the difference (50,000).

Reporting the Sale Proceeds to the IRS

The IRS requires those who sell their property for a gain to report that gain as taxable income. So your

first step is going to be to subtract the amount you sold the property for from your stepped up basis

price. From here you will know the total amount that you are going to be required to file for. You will

then report this gain or loss on your schedule D. This is the form used to calculate capital gains or losses.

Finally, you will have to copy the gain or loss over to your form 1040 tax return.

Even if you do not end up paying capital gains tax on this property it is still a good idea to report the

sale to the IRS.

Your Options When Selling Your Inherited Property

At this point, we have the specifics out of the way in regards to the inherited sale process. Those initial

steps can become very complicated. It is best if you take the extra step and continue to educate

yourself, so you will be more comfortable throughout the process. We hope that you now understand

the preliminary steps and the tax implications of the sale.

When it comes to the sale of your real property, there are a couple options that you can consider. Each

option offer’s its own unique benefits to the new homeowner. The option you choose will depend on:

• The market conditions

• Your current financial status

• The condition of the home

• The location of the home

• Your knowledge of Real Estate

• Your intentions for the home

There are 4 primary options that you have when it comes to selling your property. These 5 options are:

• Listing with an agent

• Selling to a real estate investor

• For sale by owner

• Renting the home out

Listing With An Agent

Selling your home with a real estate agent is the traditional route that most homeowners use to sell. If

this is the vehicle that you intend to use, I recommend that you hire a real estate agent who has works

with this specific situation. Hiring a real estate agent does not mean that you are no longer involved in

the transaction. You should do some research on your local market. This will help you better understand

the market conditions. Find out if we are in a buyer’s market or seller’s market.

The benefits of listing your home with a real estate agent are:

• They do understand the market & the conditions

• They have the tools to price your home right

• They will handle all the negotiations

• They are in charge of the showings/open houses

• They handle the marketing & paperwork

• They should have a network of other agents, who can bring potential buyers

• Have access to the MLS to list

The negatives of listing your home with a real estate agent are:

• Home can sit on the market for months

• The longer your home sits the more holding costs you have to pay

• Have to prepare the property for sale

• Closings can take months

• If the property is run down, will be hard to find a buyer

• Will have open houses/ showings – people walking through property often

• Have to pay real estate commissions on sale

Selling To A Real Estate Investor

Selling your home to a real estate investor offers a lot of appealing benefits to people who have just

been willed a property. Before you decide to move forward with this selling vehicle, we suggest that you

do some preliminary research to find a company that is trustworthy and responsive while having the

ability to meet your needs. The process of selling to a real estate investor is a bit different from selling

the traditional route, solely due to the fact that you will be more involved with the process. Even though

you will be more involved in the process, real estate investors make home sales very simple. This is the

process of selling to a real estate investor:

• Seller contacts real estate investor (internet search)

• Real estate investor collects property to date and seller information

• Real estate investor sets up appointment to meet owner and evaluate property

• Real estate investor will run his numbers

• Real estate investor will propose a no obligation cash offer

• If you agree, seller will sign purchase contract

• Paperwork will be sent to attorney

• Closings within 21 days – Seller has check within 21 days of signing

The benefits of selling to a real estate investor are:

• Quick sales

• Cash offers

• Fast closings

• No repairs

• No commissions

• No hidden fees

• No open houses/ showings

• Limited holding costs

• You have a buyer

The negatives of selling to a real estate investor are:

• Discounted sale price

• Seller in charge of negotiations

• Investor’s do not need a license to buy – do your research on the investment firm that you choose to

move forward with

This option offers several unique benefits to the seller of an inherited home. If you have a reputable

investment firm in your local community it is worth taking a look into. The offers that they give you will

be obligation free so you will not have to accept what they offer and you can negotiate off of that price.

We would suggest experimenting with this process before listing with a real estate agent to see if you

can come to an agreement on price since this will be your easiest option.

Selling For Sale By Owner

Selling for sale by owner will be your most difficult option and I do not recommend using this vehicle

unless you have educated yourself on what this process entails. However, with that being said, it is

definitely possible to go this route. Selling for sale by owner entails that you will be involved throughout

the whole process – from the market research to the closing. The more you are prepared for the sale,

the better the plan you have put together, the better odds you will have of selling your home for sale by

owner. Here are 5 topics that you should begin to educate yourself on if you are considering selling for

sale by owner:

1. Comparable Market Analysis

2. Flat Fee MLS Listing

3. Marketing

4. Paperwork

5. Preparing to show/ Open Houses

The benefits of selling for sale by owner:

• No real estate commissions

• No contracts

• No middle man

• Get rewarded for your hard work

• Can capitalize on low equity situations

The negatives of selling for sale by owner:

• All of your own research

• Handle all negotiations

• Home Pricing

• Marketing of home

• Handling all of the paperwork

• Showing the home

• Preparing the property for sale

• Takes up a lot of time

If you choose to go this route, make sure that you educate yourself on all of the different steps of this

process. Try to come up with a game plan on how you will approach each step and execute the plan. If

you are prepared and aware of how this process plays out, you will have good odds of executing a

successful sale.

Renting Your Inherited Home

Another option that you have at your disposal is renting the home out. If you have experience in being a

landlord or would like to make some extra money, this can be a route that you consider. If you do not

have experience with being a landlord, we suggest that you also begin to educate yourself on how to

evaluate a property, screening tenants, hiring property management and hiring construction work for

necessary rehabs. If you do decide to rent your inherited home out, do some due diligence.

• Run the Numbers – Cap Rate, Net Operating Income, Rental Rates, Cash Flow, Repair Costs, Expenses

• Check and see if there is a mortgage on the property

• Understand the current rental market

• Is the property in a good location?

• What is the average rent going for comparable properties

• Will you be able to put manageable tenants in place

The benefits of renting your inherited home:

• Extra Income

• If you have mortgage – can build equity

• Tax Advantages

• Learn How to Landlord

The negatives of renting your inherited home:

• Possible Costly Repairs Prior and During Occupancy

• Disputes with Tenants

• Evictions

• Business Expenses – Renovations, Tenant Turnarounds, Property Management

Consider both the pros and cons to renting your inherited home. If you are in a good financial position,

then this may be a good option for you.

How to Prepare For The Sale Of Your Inherited Home

This step of the process is never easy. You will be tasked with managing your emotions while also

handling the sale of your loved ones belongings. This will be an emotional and physically draining task,

that will force you to make quick decisions on what to keep and what to throw away. However, this is an

important part of the sale of the home you inherited. Getting your inherited home in good condition

and following some best practices will leave you with a better opportunity to complete a hassle free

sale.

Cleaning Out Personal Belongings

When you inherit a home from a loved one, you will be tasked with the challenge of cleaning out the

residence that she once lived in. Depending on how your loved one lived, this job has the capabilities of

being very labor intensive and challenging. Here are some tips that will help make this part of the

process a little easier on you and your family.

• Divvy up the physical labor

• Be meticulous, even when you are tired

• Hire a professional estate appraiser to value certain belongings

• Locate all financial statements

• Keep all sentimental photos and memorabilia

• Consider a liquidator

Although this process will be very difficult for you and your family, it will be an opportunity to say your

final goodbyes and remember your most cherished memories with the loved one who passed. Do not

rush this step of the process, make the most of it and use this time make a final connection with the

residence and your loved ones.

Estate Sales

An estate sale is an inevitable situation that each and every one of us will find ourselves in someday. At

some point in time, a relative is going to pass or move into a nursing home. During that time the

survivors will be responsible for deciding on the best route to liquidate these assets, both items, and real

property.

This can be a very difficult period in your life because in a sense you will be mixing your emotions with

business while trying to sell belongings that still hold meaning.

An estate sale by definition is a sale that occurs when a homeowner dies or moves to an assisted-living

facility. Those who inherit the home get the proceeds from the sale. If the owner dies without naming

someone in the will to sell the house, an estate sale is called a probate sale, because a probate court

appoints a relative or friend of the deceased to handle the sale.

You will have several different mediums that you can use to sell both household items along with the

property that is in consideration. Your first option to consider will be hiring an estate sale company

(which we will touch on later), you can sell your household items on craigslist, eBay or an auction house.

In regards to real property that is in question, you can list with a real estate agent, sell FSBO or receive a

quick sale from a real estate investment firm. Here are some quick tips to consider when handling an

estate sale.

1) Hire an Estate Sale/ Liquidation Company - It can be very time consuming and possibly costly to try

and manage and run an estate sale by yourself. There are professional services that have years of

experience dealing with these types of circumstances. Connect with a firm that has experience in this

field, read reviews and do your research on the best local companies around you. The biggest benefit to

hiring this type of service is the pricing, organizing and display work they put together for your sale.

There are some concerns that you need to overcome before choosing a firm to hire:

• Some estate sale firms have minimums regarding the total value amount of possessions

• Commissions can run up to 30% of proceeds to advertise and manage the sale

• Understand each company there requirements, since they all are different

2) Convenient Sales Dates - Choosing dates that are not on around holidays will be beneficial to your

estate sale.Typically when events are held around holidays, they see less foot traffic than if they were on

specifically chosen dates with no contradictions. You should also try and plan around the weather.

Obviously, we do not want to hold an estate sale on the day where it is rainy or really windy.

3) Do Not Throw Anything Away - I understand that you may think that there is no value in some of the

items that have been left behind but a customer at your estate sale may disagree. Do not try and guess

on the value of items that will be sold at the estate sale. If you are hiring a liquidation company to

organize and price your items, let them decide the value of all of the items in the home. If you are going

to manage the estate sale yourself, I recommend that you do your research so you better understand

the value of all of the items that you will be selling.

4) Greet Every Customer - Just like any other business or sale, customer service is the most important

aspect of the transaction. You will make each customer more comfortable and willing to ask questions if

you welcome them to your sale. You will also mitigate some of the risks of customers trying to steal. For

some reason, customers have a hard time stealing from people that they have just looked in the eye

(not all of them, though). Make sure that you are friendly, honest and helpful throughout the whole day

and try to get an understanding of what customers may be looking for. Try to ask questions and listen to

what they have to say. Treat this like a business transaction even though it is under the current

circumstances of an estate sale.

5) Marketing / Advertising - Whether you decide to go with a liquidation company or manage the sale

yourself, one of the most important aspects of the sale will be creating a good amount of foot traffic. In

order to create this foot traffic, we must do a good job of marketing and advertising. In today's day and age

there are several different mediums we can efficiently market on that are either free or very low cost. If

you do end up hiring a liquidation firm to make sure that you ask questions on how they intend to

market.

This is for 2 reasons:

1) You want to understand their marketing plan and how they are going to bring people through the

doors

2) You want to make sure that you are not double dipping on any of the marketing techniques they

intend to use.

Determine the Price of Your Inherited Home

There are two reasons that a home doesn’t sell. One is due to the condition and the other is due to the

price. These two variables correlate with each other. If your inherited home is in poor condition, it is

obvious that you will need to price your home below market value. If the home is in great condition, you

will be able to sell at or above market value depending on market conditions. Remember that your main

goal in this situation is to choose a price point that will allow you sell at a reasonable price in a short

amount of time.

One thing is for sure, pricing your home right is one of the most important components in the selling

process. If you set the price too high, you run the risk of:

• Turning off potential buyers

• Your home will not compare favorably with other properties

• Buyers may not see the listing since they will be using lower price points

Comparable Market Analysis

Pricing your home based on condition, location, and amenities of comparable properties in your area

while also taking into consideration market conditions will allow you to price your home competitively

to sell.

A comparable market analysis is an evaluation of similar, recently sold homes (pending sales) that are

located near the subject property in question.

A detailed comparable market analysis will take into consideration several different features to

determine an accurate price for you to list your inherited home:

• Similar Square Footage

• Similar Age of Construction

• Similar Amenities, Upgrades & Condition

• Location

• Market Conditions

• If Necessary: Repairs Report

Be sure to take your time with this step. If you are going to sell the traditional route, consult with a

professional realtor. If you decide to sell to a real estate investor or by yourself, do your research and

come up with a price range that you feel your home is worth.

Finalize the Deal | The Closing Process

When either buying a house or selling a house, you will finalize the sale of the home through the closing

process. Once your offer has been accepted, the inspection has been completed and financing is in

order you will then have to attend the settlement or closing (In NY if you are selling, you do not need to

attend). Once you have reached this point in the sale, a lot of the work is out of your hands and in the

hands of the attorney. (so choose a good one)

However, there are points throughout this process where a deal could fall through.

Here are the top 4 reasons a deal could fall through after a contract is signed:

• Buyer financing - lack of commitment from the bank - cash offers are the best.

• Home doesn’t appraise - this will probably not apply to the sale of your inherited home.

• Hiccups in Title Work - Liens, unknown mortgages, violations and such can hold up a sale.

• Investors / Buyer’s Remorse - Some buyers get cold feet throughout the process and pull out of the

purchase

The Closing Process

Now that you understand the reasons a sale could fall through, let’s talk about how the closing process

actually works. If you are selling to a real estate investor or a cash buyer, typically closings will take less

than a month depending on title, abstract and survey availability. If you are selling to a homeowner who

needs financing from a lender, closings could take anywhere from 45 days to 120 days (with much better

odds of the deal falling through). The closing process consists of several different components that we

should touch on so you have a better understanding of what tasks your attorney will be performing.

1) Title Search- The title search is run prior to going to the closing table. This ensures that the seller of

the property has clear title to the property, that there are no liens/judgments on the property as well as

other information that is important to the closing.

2) Survey- This goes along with the Title Search. If the seller has the survey he will be required to give it

to the title company for review for closing.

3) Preparation for the sale of your inherited home -The buyers attorney begins preparing the

paperwork for changing the title/deed and will prepare title insurance, and a final closing date is

scheduled on or around the date indicated in the contract.

• If you are buying the property you will be required to bring the total discussed amount needed to

close to the closing table.

4) Final Walk Through- A final walkthrough will be performed prior to the closing to ensure that the

property is in the same condition as when the process began.

5) Closing Table- At the Closing table, the buyer (and seller) sign all closing documents, including the

HUD-1, and the final loan documents.

6) Down payment- The buyer pays the remaining funds in their down payment to an attorney or a

representative of the title company (who is present at closing) via cashiers check

7) Record- The representative from the title company or your attorney will then record the transaction

and deed with the appropriate municipality.

8) Keys- Buyer receives the keys and is granted ownership to the property.

The closing process, for the most part, is fairly simple. As with anything, educate yourself on the process

prior to going to the closing table. Be sure that you are prepared in order to make this process go as

smooth as possible. Make sure you communicate with your buyers, realtors and title company

throughout the process.

Wrapping It Up

When it comes to selling an inherited home – it is no easy feat. As you can see, there is a specific process

that you need to go through. As you go through this process, you will have several different choices that

you will have to make. We want to make sure that you have a great understanding of how selling an

inherited home will play out and make sure you choose the best option for you and your family.

In the comment section below, let us know if you have any further questions or there is anything else

we can assist you with.

Do you have an inherited home that you may be looking to sell? If so, contact us at 315-516-8023 or fill out the simple form below to begin the process.

Start The Simple Selling Process Today

HS Property Funds

Funds to Help, Problems to Solve

315-516-8023

www.hspropertyfunds.com


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315-516-8023

5701 East Circle Drive #163

Cicero NY, 13039

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