Can You Sell Inherited Property? | When Can You Sell an Inherited Property? | Do You Need Probate? | Selling Inherited Property with Multiple Owners | Selling Inherited Property with a Mortgage | Selling Inherited Property to Family | Capital Gains Taxes on Inherited Property | How To Make the Most of Your Sale
Inheriting property can be a major financial windfall, but it can also mean being buried in legal paperwork, taxes, and complicated emotions that come with it.
Before you sell, read on to learn about probate, taxes that apply to the sale, and special situations like selling a home with a mortgage or multiple owners.
Selling an inherited property involves more legal terminology than most people care to know, and it can get complicated quickly. Even if you’re not quite ready to list, connect with a real estate agent and real estate attorney right away.
A real estate attorney can help you make sure ownership is legally and properly transferred. A real estate agent will make sure beneficiaries get the most out of their loved one’s investment.
Our partners at Clever Real Estate can connect you with local agents to help make selling inherited property as simple as possible. Clever’s licensed concierge team is available to answer your real estate questions for free, and they’ll match you with experienced real estate agents in your area from brokerages like Keller Williams, RE/MAX, and more.
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Can You Sell Inherited Property?
Yes, you can sell inherited property, but you have to wait until you officially have ownership and authority to sell. In order to sell, you’ll need to be:
- The beneficiary on a transfer-on-death or beneficiary deed
- The trustee of a trust where the property is held – this allows you to sell the property as if it were a normal sale
- An owner identified through the probate process (via court)
When Can You Sell an Inherited Property?
You can sell an inherited property as soon as you become the legal owner of the house, which can take anywhere from one day to several years depending on your situation.
If you inherited the property through a trust or a beneficiary deed, you won’t need court approval and can sell the property immediately.
But if you inherited the land through probate, your sale timeline could be much longer. Talk to the estate administrator and your probate attorney to get a better idea of when you can move forward with the sale.
» Learn: How Long Does an Executor Have to Sell a House?
Do You Need Probate to Sell an Inherited House?
Probate is usually necessary, even if you’re named as the beneficiary in a will, because most states require that wills go through probate.
|⚖️ What is Probate? ⚖️
Probate is a common legal process that transfers assets from a deceased person to a new owner and appoints an executor to sell the house. Probate law can vary by state, and it can be complex, costly, and time-consuming because the estate may have multiple beneficiaries, and it’s settled in court, which typically means hiring an attorney.
However, most states have a simplified probate option called a small estate. The small estate probate process can transfer assets with minimal court involvement and without the help of an attorney, but it isn’t always an option used when the real estate has a particularly high value.
For example, in Michigan, you can only use the small estate process if the assets are valued at $25,000 or less. But in Louisiana, the small estate probate process is available for assets up to $125,000.
When Is Probate Not Required?
You can avoid probate – along with its lengthy process and expenses – if:
- The deed names more than one owner with “joint tenancy with right of survivorship” or “tenancy by the entirety.” Here, the property automatically passes to the surviving owner(s) without probate.
- The homeowner had a beneficiary deed to transfer ownership upon their death.
- The property was in a trust, and a new trustee took over when the original owner passed away.
Can You Live in a House During Probate?
If you lived in the house when the homeowner died, you can continue to live there during probate. If not, you’ll need permission from the estate administrator (the person the probate court names to manage the estate) before moving in.
Selling Inherited Property with Multiple Owners
In most cases, all heirs will have an equal share of the property unless otherwise stated in the will. Heirs can jointly agree to keep the property, sell it, or one heir could sell their share to another.
With multiple heirs, you may come up against conflict around whether or not to sell the property, how much to sell it for, or when to sell it.
If this becomes an issue, follow these steps.
- Identify the estate administrator (if probate is involved) and the beneficiaries of the home.
- Hire a mediator if you and the other beneficiaries can’t agree.
- Take it to court as a last resort. Remember: court can get expensive quickly, so try to resolve it outside of court if possible.
Can Majority Rule in Selling an Inherited Property?
Depending on what state you’re in, one or multiple owners may be able to force a sale even if all owners don’t agree. In California, Ohio, and many other states, one co-owner can force the sale, through a partition action lawsuit.
If you can’t come to an agreement as a group, talk with an attorney about the options in your state.
Selling an Inherited Property with a Mortgage
When an inherited property has a mortgage, the estate administrator is in charge of making mortgage payments on behalf of the estate. If left unpaid, the bank or lender can foreclose on the property.
Selling inherited property with a mortgage is similar to selling any house with a mortgage.
Before you sell, find out the mortgage balance and how much equity is in the home. You can run a title search to look for liens or judgments from unpaid taxes, a home equity line of credit, or a reverse mortgage.
🧠 Keep in mind: The mortgage may have a due-on-sale provision that requires the balance to be paid in full if the property is sold or transferred to a new owner. Certain mortgage companies may allow you to continue paying the monthly payments and take over the title of the home without triggering the clause.
Selling a house with a mortgage can require additional expenses and legal procedures. It’s best to talk with the estate administrator and your probate attorney for help with the next steps.
» Read More: Can You Sell a House With a Mortgage?
Selling Inherited Property to Family
If a family member wants to buy the inherited property, you can sell them the house and skip the hassle of listing, staging, and finding a buyer — one of the most strenuous parts of selling a house.
But keep in mind that negotiation between family members can get contentious, and you may want to hire a real estate agent to broker the deal. An agent can help ensure a smooth process and avoid tricky situations that could damage family relationships.
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Our friends at Clever Real Estate can connect you with a top agent who can help you sell for more money on a timeline that works for you.
Will I Be Taxed on the Sale of Inherited Property?
The IRS will most likely levy a capital gains tax on the sale of inherited property, unless:
- You used the property as your main home for two out of five years (not required to be consecutive) before the sale, and;
- The gain from the sale is under $250,000 ($500,000 if married filing jointly)
But even if you don’t fulfill those requirements, there are ways to pay less in capital gains taxes.
Capital Gains Taxes on Inherited Property
A capital gain is when you sell an asset for more than what you originally paid. For example, a house bought for $221,900 in 2010 and sold for $440,300 in 2022 has a gain of $218,400. Under normal circumstances, the IRS could tax the entire profit of $218,400.
When you inherit property, your gain is calculated differently. Instead of being taxed based on the property’s value when it was bought, the value is “stepped up” to the market value on the date you inherit it.
So, let’s say your Aunt Mary paid $221,900 for a house in 2010. You inherit the property in 2021 when she passes away. Instead of being taxed on the increase of the property since 2010, the property value is “stepped up” to match the current market value of when you inherit it, making the value $369,800.
Then, suppose you sell it for $440,300 in 2022. So, you’d only pay capital gains taxes on the $70,500 between the value at the time of inheritance ($369,800) and what you sold it for ($440,300) rather than the $218,400 difference between the value when your aunt bought the property ($221,900) and the current sale price.
How To Make the Most of Selling Inherited Property
Depending on your goals and timeline, you have a variety of options to make the most of the sale of your inherited property.
To sell fast, you can use an iBuyer or other cash buyer, a company that buys the house as is. The property may not sell for as high a price, but it’s a quick, easy process. An iBuyer can take as little as a week, and you get cash in hand right away.
To make the highest profit, you’ll want to work with a full-service realtor to list your home on the open market for a sale price at (or above!) market value. Make sure to seek out a real estate agent who has experience selling inherited property.
You can make even more profit by working with our friends at Clever Real Estate. They’ll connect you with top local agents who know the ins and outs of selling inherited property AND will list your home for just 1.5%. The average Clever customer saves $7,000!
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Frequently Asked Questions About Selling Inherited Property
Do all heirs have to agree to sell property?
In some states all heirs have to agree to sell property, but in others, one co-owner can file a partition action lawsuit to force the sale if the others don’t want to sell. Learn more about selling inherited property.
Can you live in a house during probate?
Yes, you can live in a house during probate, but only if you were living in the house full-time before the probate period. Learn more about selling inherited property.
How do I avoid capital gains on an inherited property?
You can avoid capital gains on inherited property if the property you are selling has been your primary residence for two of the past five years (it doesn’t have to be consecutive). Learn more about selling inherited property.