Texas has the seventh-highest property taxes in the country, which means inheriting a house isn’t always the windfall you might expect unless you plan to live in the home.
If you already have a home, the holding costs on an additional property quickly mount up, which makes selling an inherited house an attractive option for some.
Selling an inherited home isn’t always as simple as it seems. Keep reading to find out more about the home-selling process for inherited properties.
Understanding the Probate Process
The process for selling an inherited home may vary depending on the value of the decedent’s estate and where you live in Texas. In most cases, the house must pass through probate before you can own it.
What’s Included in the Probate Process?
Whenever someone passes away, all their belongings become part of their estate. The probate process refers to the legal steps required to transfer assets from the deceased to their heirs.
An executor oversees this process and handles all the following tasks:
- All necessary paperwork
- Paying any debts owed by the deceased
- Handling relevant tax returns
- Distributing assets to the heirs
It can take several years to wind up a large, complex estate, especially if there are disputes over who should inherit the assets.
When you inherit a home, the executor arranges to transfer the title into your name, and you become the owner of the house.
From then on, you’re responsible for all expenses related to the house, including any outstanding mortgage payments and the upkeep of the property.
House Sales During Probate
If the money owed by the deceased exceeds the cash value of the estate, the executor might need to sell the home to settle these amounts. In this case, the heir will not inherit the property.
This type of deed allows for the transfer of the house before finalizing the probate process. This helps speed up the process, but the new owner becomes responsible for all debt associated with the house on transfer.
Not all states allow this type of arrangement. In Texas, this type of deed supersedes the will.
Houses Placed in Trust
Property held in any kind of trust may pass on to its new owner without passing through probate. Only the trust can give instructions related to these properties.
Find Out Where the Mortgage Stands
Is the property free and clear of a mortgage? Outstanding payments will impact the selling process.
If the decedent is the only person on the mortgage, the estate must continue making the loan payments. Upon deed transfer, the heir must take steps to transfer the mortgage into their name and continue making payments.
Unless you undergo this process with an inherited home, you can’t sell it.
Selling a home without a mortgage is simpler. As long as the new owner settles any outstanding property taxes and utility bills, they can sell the home as soon as their name appears on the deed.
Don’t Forget the Taxes
Inheritance tax is one last financial consideration when you inherit a home. Most estates aren’t subject to inheritance tax, but you might end up owing the IRS some money when you sell the house.
This only applies if you sell the asset for a gain. For instance, if the inherited house value is currently $200,000 and you sell it for more than that, you’ll need to pay capital gains tax on the extra money you earn.
If you sell it for the current home value or less, you don’t pay any taxes. Often, the executor of the estate will get a home appraisal during the probate process.
If they don’t, it’s worthwhile getting the home appraised before you start the home sales process. Knowing how much it’s worth can help you avoid paying taxes unnecessarily.
You don’t pay a state inheritance tax in Texas, but people over the age of 65 may defer payment of their property taxes until their executor settles their estate. This could affect the value of your inheritance.
In most cases, you don’t need to report an inheritance to the IRS unless you inherit a home worth more than $100,000 from a foreign or alien estate. If this happens, you should fill out Form 3520 to advise the IRS of your windfall, even if you aren’t liable to pay tax on the property.
When in doubt, it’s best to consult a tax attorney about the best course of action.
Reach Consensus With Other Interested Parties
If you’ve inherited the property along with other people, you’ll need to get all of them to agree that selling the home is a good idea. There are just as many reasons for selling an inherited home as there are for keeping it.
Planning and communication are vital components of selling a home that’s owned by multiple heirs. There are many factors involved in preparing a home for sale, and you’ll need to agree on all these aspects first.
Another thing to consider is that you’ll need to clean out and get rid of all your loved ones’ possessions. To streamline this process, it’s important to delegate a single point of contact for all communications related to the sale.
If you can’t get all the parties to agree, it’s best to hire a mediator to help you navigate this tricky situation. If they don’t manage to persuade an unwilling heir, they could negotiate a settlement figure to buy them out.
A mediator can also help you come to a consensus over necessary home improvements before offering the home for sale.
Preparing an Inheritance Home for Sale
If you want to get top dollar when you sell your inherited home, it makes sense to present it in the best light. It’s rarely a good idea to undergo an expensive home refurbishment process, but it pays to spruce the place up a little before placing it on the market.
Here are some ideas for your to-do-list:
Going through a loved one’s belongings after they’ve passed away is often an emotional task, but you must remove their items before you list the inherited house.
Be sure to invite other family members to take part in this process, as some of them may have an interest in items of sentimental value. It’s best to sell everything you don’t want to keep via an estate sale or individually.
A professional estate sale company can help you with this, or you can sell the items at a garage sale or using online platforms like Facebook Marketplace, OfferUp, or Craigslist.
Make Small, Impactful Improvements
Elderly folk rarely keep their homes updated according to the latest trends, so there’s a good chance you might need to update the property before you try to sell it.
Deep cleaning the home is a good place to start, but you can also try the following affordable fixes:
- Mow the lawn and weed the garden, or hire a landscaper to upgrade the yard
- Paint the house with a neutral color, inside and out
- Install affordable wood-look flooring in place of old linoleum and carpet
- Remove dated details like window valances, faux plants, and old-fashioned furniture covers
- Clean the light switches and replace dated light fixtures
These small fixes can have a major impact on the appearance of a home and help you find a buyer faster.
Find a Real Estate Agent to Help You
When you sell an inherited home, it’s important to work with a real estate agent who has experience selling probate homes. Many of these agents can help you net as much equity from the sale as possible.
Always interview candidates before you hire them. Ask them for details about previous home sales and their marketing tactics for selling your home.
An experienced real estate agent can also provide plenty of helpful advice about preparing your home to make it more attractive to buyers.
Working with a realtor to sell your inherited house means you’ll need to pay them a commission on the proceeds from the sale, plus a few extra costs.
Selling an Inherited House the Easy Way
Does the above procedure seem like a lot of work? You can sell your home to a cash investor instead of via the usual channels.
If you can’t afford to pay the mortgage or other holding costs for an extended time, a cash sale can save you a lot of money and anxiety. You won’t need to spend time and money upgrading the property either, as most cash buyers buy homes as-is.
Opting for a cash sale is simpler, faster, and less stressful than selling an inherited home on the open market.
Do you need more help selling an inherited house? Reach out to receive a cash offer today.