On average, home sellers spend 9 to 18 months selling their inherited property.
Analyzing the current housing market trends, the average time to sell a house in the US is 55 days. Factors like house location, home size, condition, etc. can increase your home’s days on the market.
For an inherited house, the probate process is necessary to legally transfer the property. It typically takes up to 18 months but can be delayed by multiple heirs and disagreements.
key takeaways
- How Long Does It Takes to Sell? It takes an average time of 9 to 18 months to sell an inherited property, depending on the probate process.
- Taxes on an Inherited Property: You need to pay Inheritance tax in 6 US states. Other taxes are Estate tax and Gift tax.
- Taxes to Sell an Inherited Property: You need to pay transfer tax, property tax, and capital gains tax to sell an inherited property.
- Fastest Way to Sell: Selling to a cash buyer is the fastest way to sell your inherited property as is.
Can I Sell an Inherited House?
Yes, you can sell your inherited house. Your property must undergo a probate process before you sell it.
What Is a Probate Process?
A probate is a legal validation of a deceased person’s will. Probate helps to distribute the property amongst its heirs and beneficiaries.
You need to submit the owner’s death certificate and property ownership proof during the probate process. You also have to pay for several expenses such as outstanding mortgages, taxes on the property, and other bills.
An ‘Alienation Clause’ triggers when the ownership of a mortgaged property is transferred to an inheritor. So the inheritor has to pay off the full mortgage.
Almost every inherited property must undergo a probate process that can take up to 24 months. This period varies state-wise and depends on the number of inheritors and state laws.
Properties Exempted from Undergoing Probate Process
Your property will exempt a probate under the following conditions:
- Transfer-On-Death Deeds: The owner can prepare a property deed to automatically transfer the property’s ownership. This deed prevents the property from going under the probate.
- Receive a House in Trust: As a legal heir, you can inherit a house directly without probate if the owner has placed the house in a trust.
How to Sell an Inherited House?
Selling an inherited house is similar to selling any other property. The best option to sell your house for the most profit is either sell it through a real estate agent or sell it yourself.
1. Hire a Local Real Estate Agent
Real estate agents are well-versed in the market conditions. They market your property to buyers via MLS or other real estate networks to get you the most possible money for your property.
Moreover, agents can also advise you after you start receiving offers. But, agents do charge hefty commissions from 5% to 6%.
2. Sell For Sale By Owner (FSBO)
By selling FSBO, you avoid paying thousands of dollars to listing agents. But when selling FSBO, you need to handle the paperwork and closing yourself.
You have full control over your transaction to engage with the buyer and buyer’s agent. Moreover, FSBO websites help you get listed faster, typically within 24 to 48 hours.
Flat Fee MLS companies like Houzeo offer advanced technology to streamline your listing process. Houzeo’s mobile app helps you manage offers and showings at your fingertips.
Alternate Ways to Sell Your Inherited House
You have 4 options to sell your inherited home:
- List with a Discount Real Estate Broker: Discount real estate brokers offer all the services that traditional Realtors do but at discounted rates. You can also opt for a flat rate Realtor to list your home.
- Sell Your Home to an iBuyer: An iBuyer can instantly make a cash offer and help you sell your house quickly. They make offers up to 60% fair market value of inherited property. However, iBuyers have strict purchase criteria.
- Sell Your House to Cash Buyers: Companies that buy houses for cash can help you sell faster if you have a distressed property. Cash home buyers typically offer 50% to 70% of your home’s value.
- Sell Your House to a Flipper: You can sell your inherited property to professional house flippers. They offer up to 70% of the fair market value.
- Sell in an Open Market: You can list your inherited property on the MLS to market it to buyers and real estate agents.
Taxes on an Inherited Property
Inherited properties come along with taxes that you need to pay before you choose to sell the property.
1. Inheritance Tax
It is a state tax, applicable while inheriting a property in the following 6 US states:
- Iowa: Spouses, lineal ascendants, and descendants are totally exempt. For others, the tax ranges from 3% to 9% of the inheritance. Charities are exempt up to $500.
- Kentucky: Immediate family members are fully exempt. Whereas other recipients are exempt up to $500 to $1,000. The tax ranges from 4% to 16% of the property value.
- Maryland: Charities and immediate family members are exempt. Other recipients are exempt up to $1,000. After exemption, inheritors have to pay 10% as inheritance tax.
- New Jersey: The inheritance tax in New Jersey ranges from 11% to 16%. But, immediate family members (spouse, children, parents, grandparents, grandchildren) and charities are exempt. Siblings, sons/daughters-in-law are exempt up to $25,000.
- Pennsylvania: Minor children and spouses have a full exemption. Grandparents, parents, and adult children are exempt up to $3,500. The tax rate after exemption is between 4.5% and 15%.
- Nebraska:
- Spouses and charities are 100% exempt from tax.
- Immediate family members are exempt up to $100,000. But have to pay 1%.
- Other relatives are exempt up to $40,000. But have to pay 11%.
- Unrelated heirs have an exemption of up to $25,000. But pay 15%.
2. Estate Tax
The estate tax applies only to properties worth $12.92 million or more per individual. Currently, the estate tax ranges from 18% to 40%. Only 12 states and the District of Columbia charge an estate tax.
At times a part of an estate can be sold to pay off the earlier unpaid taxes. In such cases, the property sold to pay off the debts cannot be passed on or inherited.
3. Gift Tax
Gift tax is applicable when you receive a property from someone before their death. However, the person gifting the property needs to report it to the IRS (Internal Revenue Service) or pay the gift tax.
Taxes on Selling an Inherited House
Once you inherit a property, selling it is similar to selling a pre-owned property. However, certain taxes apply while selling such properties.
- Transfer Tax: Transfer tax is a one-time fee (generally costs less than 1%) that sellers pay at the time of transferring the ownership between two parties. You need to pay this tax to the local government body in your area.
- Property Tax: Property tax varies by county, but you will pay approximately 1% of the total home sale value to the government. You can claim a rebate if you have paid your property tax in advance.
- Capital Gains Tax: The IRS (Internal Revenue Service) authority levies the capital gains tax on a stepped-up basis. So this tax would only apply to the property’s appreciation after it was inherited.
» Capital Gains Exemptions: Know how to avoid paying capital gains tax on inherited property.
Selling an Inherited Property Near You
Selling a House With Multiple Inheritors
Multiple inheritors include close family members like siblings, cousins, or anyone the deceased person chooses. So, selling a house with multiple inheritors is a real curve ball.
In such cases, the first step is to come to an agreement on selling or buying out the property with the other inheritors. You can appoint a neutral party (non-beneficiary) as the head person for sale.
The neutral party will ensure a transparent home sale process for a fair distribution of proceeds amongst the inheritors.
Do All Heirs Have to Agree to Sell Property?
Yes, all heirs have to agree to sell the inherited property. If they don’t, the property cannot be sold. Chill! if majority of the inheritors are willing to sell the property they need to go through a court process.
The inheritors can file a ‘partition action’, lawsuit in the probate court. In such cases, the court enforces the sale. As a result, the inheritors have to divide the proceeds among themselves as per the will.
Let’s Sell Your Inherited House
Selling an inherited house is a complex and time-consuming process. Your inherited home might remain in probate for up to 18 months. You also have to pay several taxes while inheriting and selling the property.
To get the best price for your property, we recommend you list your home on the MLS. This provides exposure to your property to buyers and real estate agents.
With a Flat Fee MLS company like Houzeo, you can list your property on the MLS right after probate. An MLS listing via Houzeo will give your house maximum exposure, and you may even attract cash offers.
Eager to Know More About Houzeo?
Check out our exclusive video that explains everything you need to know about the platform.
» Need More Clarity? Watch exclusive Houzeo reviews and learn why it is one of the best FSBO sites in America.
Frequently Asked Questions
Can majority of the inheritors sell the property?
Yes, the majority of inheritors can sell their inherited property through a partition action lawsuit. Although they can try to convince the rest members to sell the inherited house before filing of the lawsuit.
Do I pay taxes when I sell an inherited property?
Yes, you pay 3 different taxes on the sale of an inherited property. Selling an inherited property is same as selling your pre-owned home. You pay: 1. Transfer Tax 2. Property Tax 3. Capital Gains Tax (on a stepped-up basis only).
Is there a time limit on selling inherited property?
No, there is no time limit to sell an inherited property. Once the probate process is completed the legal inheritors can sell the inherited property anytime.
How to pay-off the mortgage on inherited property?
You can pay the mortgage on an inherited asset in multiple ways:
1. You can sell the property and pay-off the debt.
2. Transfer the mortgage along with the ownership of the house in your name.
3. The mortgage lender can foreclose the property if no inheritor pays the debt.
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