I inherited a house and want to sell it, now what? Receiving a house or land in someone’s will can be both a blessing and a curse. On the one hand, you’ve been left a valuable asset; on the other hand, inheriting a house can be an inconvenience.
When you inherit a house, you have three options. You can either move into the house, rent it out, or you could sell it.
But selling a house that you’ve inherited might not be so straightforward. There are many pitfalls that you need to be aware of.
In this article, we’ll talk about what to do with an inherited house.
How Many People Are Inheriting the Property
Sometimes, when inheriting a house, more than one person will inherit a portion of the house. You will first have to speak with the other benefactors and agree on whether or not to sell the house.
Coming to an agreement can be complicated. However, if someone were to disagree, they may want to consider buying you out of your share. This can either be done in cash or by taking out a mortgage for the portion of the home being bought out.
When taking this option, the person who is buying out the other will need to pay the closing costs and for the appraisal.
If one person wants to sell and the other doesn’t, and a mortgage cannot be obtained, then a promissory note can be recorded, which will set out an installment plan for buying out the other part of the property.
If an agreement cannot be reached, then it is possible to file a lawsuit for partition. This asks a court to order the sale of the house. This can be a long and drawn-out process, and there are legal fees involved.
If you are planning on selling, you’ll need to decide on who will manage the process of selling the inherited house. You will also need to split the profits.
Find Out the Value of the House
Before you put the house on the market, you will need to find out how much the property is worth. There are many factors which will affect the value of the home; these include:
- The location
- The condition of the property
- The market conditions for the area
Call a real estate agent and get a valuation.
Is There Any Mortgage Left to Pay?
You will need to find out if there is any outstanding mortgage on the house. If you’re selling the house, you’ll need to repay any outstanding amounts. The amount that you earn from the sale will be net any mortgage settlement payments.
You will need to check whether the mortgage has a due-on-sale clause. This means that the entire loan will be due if the property transfers to someone else. You may need to either assume payments or pay off the loan in full.
Check that there is not a reverse mortgage in place. These are popular with older homeowners as they unlock the equity in the home without the need to sell up. With this type of product, there may be a limited amount of time to repay the mortgage.
If a property is underwater (meaning there is more owing than its worth), the bank will need to agree to a short sale.
If there is no mortgage attached to the estate, then you will own the home outright.
Are There Any Outstanding Debts to Pay?
Other than the mortgage, are there are any debts outstanding against the property. This might include property taxes or utility bills.
If there are any unpaid debts attached to the house, you’ll also need to pay these from the proceeds of the sale.
Do I Need to Pay Tax on an Inherited Property?
The act of inheriting a house does not, in itself, incur any automatic tax liabilities. However, whatever you decide to do with the house next will.
When selling inherited land or a house, you will need to pay capital gains taxes to the federal government. The amount that you pay will depend on the profits that you earn from the sale as well as your taxable income.
When selling an inherited home, you’ll get protection from the majority of capital gains taxes because of step-up taxes.
When you inherit a home, you benefit from a step-up tax basis. This means that you’ll inherit the house at its fair market value. When it comes to selling the property, you’ll only pay taxes based on the gains between the date you inherited it and the date you sell it.
Does the House Need Repairs?
Before you sell the house, you may decide that you want to carry out some repairs to ensure a quick sale. Homes that are in better condition will not only sell faster; they will be also more likely to attract a higher price.
Have a home inspection carried out to find out about any major works that will need carrying out.
What Are the Financial Implications of Selling My Inherited Home?
There are several key costs that you will need to cover when selling an inherited home. These include any costs relating to listing the property, such as the cost of surveys, repairs, staging, and the closing costs associated with the mortgage.
You will also be required to pay capital gains taxes on the difference between the fair market value of the house on the day that you inherited it and the sale price.
I Inherited a House and Want to Sell It
“I inherited a house and want to sell it” is something that many people will say when left real estate in a will.
Selling an inherited home can be a complicated process, and you should ensure that you’re in possession of all of the facts surrounding the mortgage before deciding what to do.
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