While an inherited property comes with a lot of perks, selling it also has additional costs. The biggest expense is real estate agent commissions. Home sellers in Chicago pay around 5% to 6% in real estate commissions.
Add to that 4% to 5% for repairs, 6.25% to 9% for seller closing costs, and property taxes, and the total can exceed $10,000. These costs can quickly add up. But if you want to sell your property for a profit, now is a great time.
Home sales have increased by 0.6% indicating high buyer demand in Chicago. This means you can sell your house fast for a profit. To maximize your profit, consider going FSBO and listing your house through a Flat Fee MLS service like Houzeo.
With Houzeo, your home can be listed on the MLS in 48 hours. You save up to $10,000 in listing agent fees, reach a wider audience, and earn maximum profit.
What Is an Inherited Property?
Inherited property refers to assets or possessions that are passed down by a deceased person to their heirs. It is outlined by a legal document such as a will. Inheriting a property in Chicago often involves a probate court. This court validates the will and distributes assets to heirs, overseeing the process.
Selling an inherited property involves legal complexities such as tax implications or any outstanding debts, for a smooth transaction. Understanding legal and financial aspects is crucial for a smooth and well-informed selling process.
Steps to Take After Inheriting a Property in Chicago
Once you inherit a property, there are legal and financial tasks you must perform:
- Finish The Probate Process: Probate is a legal process that validates the deceased person’s will and distributes assets. The probate process takes several months to one year to complete. You must wait for the probate process to end before you list the property for sale.
- Get A Property Assessment: Assess your property for foundation, structure, and wiring issues through a home inspection or appraisal once you own the house (after probate).
- Clear Debts and Liens: You must pay off remaining debts like outstanding mortgages or property taxes on the home before selling it.
- Begin The Selling Process: Once the necessary legal and financial tasks are complete, you can begin the process of selling the inherited property.
How to Avoid Chicago Probate Court Before Inheritance?
Understanding how long after probate can a house be sold is crucial, as you must wait until the probate process is finalized before you can list the property for sale. However, skipping the probate court saves time and cuts legal costs.
In Chicago, property owners can use these methods to transfer assets directly to you:
- Create a Revocable Living Trust: This allows the person to retain control over their property while alive and transfer it to its recipients upon death. Placing assets in the living trust avoids probate, and transfers it directly to the inheritor.
- Use Joint Ownership With Right of Survivorship: This is a legal arrangement where multiple owners share the property. But when one owner dies, the surviving owner inherits the house without any probate court involvement.
Ways to Sell An Inherited Property in Chicago, IL
Once you get complete ownership of the property, you can start the selling process. Selling an inherited Property in Illinois is just like selling any other house. Here are ways to sell an inherited property:
1. For Sale By Owner (FSBO) Method
In For Sale By Owner, you can sell your inherited property without a real estate agent. It gives you full control over the sale process. By avoiding the agent fees, you can save up to $10,000 or more on an average home sale.
To boost your chances of success in FSBO, you can list your property using a Flat Fee MLS service. This service allows you to list your home on the MLS giving it the same exposure as agent-assisted properties.
Moreover, Flat Fee MLS Illinois companies like Houzeo help you get on the MLS, within 24-48 hours. Once listed, your property appears on Zillow, Redfin, Realtor.com, Homes.com, and local Illinois real estate websites.
2. Opt for a Discount Real Estate Broker
Discount real estate brokers charge lower commission rates than traditional brokers. They offer similar services as full-service agents, like listing on the MLS and handling paperwork. As a seller, you can save more through these brokers.
Listing with an Illinois discount real estate broker lets you control the selling process and keep more profit. For example, instead of paying the 5% to 6% commission, you only pay 1% to 2% with a discount real estate broker.
3. Sell Your Home to an iBuyer or a Cash Company
iBuyers purchase homes from sellers and provide quick cash offers. However, iBuyers have strict purchase criteria. Illinois cash companies buy homes with cash in as-is condition without requiring additional repairs or renovations.
You also avoid the listing, staging, and showings by selling your inherited property to a cash buyer or iBuyer. Another perk is that you get to sell your house fast without waiting for a buyer financing approval. But depending on the condition of your house you could get a lower value for your property.
However, cash companies often pay just 50% to 70% of your home’s value. You can use a fair market value calculator to find the FMV of your home. This free tool gives you an accurate estimate in few seconds. It helps you make informed decisions and get the best possible price.
4. Hire a Local Real Estate Agent
Real estate agents are well-versed in changing market conditions. They provide a comparative market analysis to help you set a competitive price, and maximize your profit. Realtors also market your property to buyers via the MLS for a wider reach.
Moreover, they can also advise you after you start receiving offers. But, they do charge hefty commissions from 5% to 6%. This can significantly impact your profits from the home sale resulting in lower net proceeds.
Documents Required for Selling an Inherited Property in Chicago, IL
Here are the most common documents you will likely need:
- Proof of Ownership: This document proves you now own the house. You will get this document after the probate court proceedings.
- Death Certificate of the Deceased: It verifies the death of the previous owner. Title companies, lenders or parties involved ask for the death certificate to finalize the sale.
- Property Title Records: The property title tracks who has owned the house over time. Title records also inform about existing liens or mortgages on the property that must be paid off before the sale.
- Property Tax Records: These ensure all property taxes are paid and there are no outstanding liens. It may be required by buyers, mortgage lenders, or title companies to verify the property’s tax history and ensure compliance with local tax laws.
- Photo ID: You’ll need your photo ID for paperwork throughout the selling process to verify the identity of the seller or the inheritor.
- Seller Disclosure: In Illinois, you’ll need to tell buyers about the house’s condition by law. You will need to fill out the seller disclosure accurately to inform about the property’s condition.
Challenges to Selling an Inherited Property in Chicago, IL
Here’s a breakdown of some common hurdles sellers face:
Multiple Inheritors
When selling an inherited property with multiple owners, each inheritor may have a different opinion on the listing price or choice of real estate agent. This can lead to delays in the sale.
So, do all heirs have to agree to sell the property in Chicago? No, but it’s ideal for all owners to be on the same page regarding the sale.
In case of any conflict among the inheritors, a neutral third party, like a real estate attorney, is appointed to facilitate decisions.
Outstanding Mortgage
If you are inheriting a house with a mortgage then it must be paid off before you proceed with the sale. Doing this reduces your potential proceeds from the sale, and impacts your ability to maximize the profit.
You can negotiate with the lender to assume the existing mortgage or refinance the loan. Alternatively, consider exploring options like a short sale or loan assumption to sell the property without fully paying off the mortgage balance.
Property Condition
Structural issues or needed repairs make inherited houses less appealing to buyers. This limits the number of buyers and reduces the house’s market value. Consider hiring a Chicago home inspector to assess the property’s condition and recommend repairs to enhance the property’s market appeal.
Taxes on Selling an Inherited Property in Chicago, IL
Here are the taxes you have to pay when selling an inherited property in Illinois:
- Transfer Tax: A transfer tax is a fee the government changes when real estate ownership changes. In Chicago, it is at a rate of 50 cents per $1000 of the sale price.
- Property Tax: It is an annual fee you pay to your local government based on the value of your property. Like any other real estate, inherited property incurs property tax. Illinois property tax rate is 2.23%.
- Estate Tax: Illinois has no state estate tax. The federal estate tax only applies to very large estates exceeding $13.8 million in 2024. It’s a tax on the estate itself, not the inheriting individual.
- Inheritance Tax: The inheritance tax rate depends on the beneficiary’s relationship to the deceased and the inheritance amount. Inheritance tax doesn’t apply to Illinois.
- Capital Gains Tax: The IRS applies capital gains tax based on a stepped-up basis. This tax applies only to the property’s appreciation after inheritance.
» Capital Gains Exemptions: Know how you can be exempt from capital gains tax.
Bottom Line
Inheriting a house in Illinois involves a probate court which can take 6-9 months to finish and transfer the ownership. Additionally, there may be capital gains, estate, or property taxes to pay which can reduce your profit potential.
If you want to maximize the profit from your inherited house then list it on the Illinois MLS. This exposes your property to more buyers and agents, increasing your chances of selling at the highest price possible.
With an IL Flat Fee MLS company like Houzeo, you can list your property on the MLS right after the probate. This gets your house maximum exposure, attracting more buyers who might compete for the best price.
5 Easy Steps to List on MLS
Check out the following video to understand how to list your house on Houzeo and save on commissions.
» Need More Clarity? Watch exclusive Houzeo reviews and learn why it is one of the best website For Sale By Owner in America.
Frequently Asked Questions
How do I avoid capital gains tax on an inherited property in Chicago?
To avoid capital gains tax on an inherited property in Chicago, you must sell the house quickly before its value appreciates. You will have to pay capital gains tax on the increased value after you inherit the house.
Do you have to pay taxes on inheritance in Chicago, IL?
No, you don't have to pay taxes on inheritance in Chicago, as it isn't applicable in the state.
Is there a time limit on selling an inherited property in Chicago?
No, there is no time limit on selling an inherited property in Chicago. Once the probate process is completed and you are legally the owner, you can sell the property whenever you choose.
Do you have to pay taxes on the inherited property you sell?
Yes, you will have to pay taxes when selling an inherited property in Chicago. These taxes include transfer tax, property tax, and capital gains tax. Transfer tax applies to property ownership changes, property tax covers annual dues, and capital gains tax affects profit from the sale.
How long after probate can a house be sold in Chicago?
You can sell the house after probate once you gain full ownership. Typically, the probate process takes several months to a year.
