Selling an inherited house can feel overwhelming. You might not know where to start.
You might be wondering:
- Do I have to pay taxes?
- What steps do I need to take?
- How do I sell it quickly and easily?
Don’t worry. This guide will explain everything in simple terms so you can navigate the process with confidence.
Understanding Taxes When Selling an Inherited House
Taxes can feel confusing, but here’s the deal:
There are three main types of taxes you should know about when selling an inherited house.
1. Capital Gains Tax
When you sell something for more than you paid for it, the government charges a capital gains tax on the profit.
But here’s the good news:
When you inherit a home, you don’t have to pay capital gains tax on its entire value. Instead, you only owe taxes on the increase in value from the date you inherited it until the date you sell it.
This rule is called a stepped-up cost basis, and it can save you a lot of money in taxes.
2. Inheritance Tax
Most states do not have an inheritance tax. But if the home is in Iowa, Kentucky, Maryland, Nebraska, New Jersey, or Pennsylvania, you might have to pay a tax based on the home’s value.
3. Estate Tax
Estate taxes only apply to estates worth more than $13.61 million (as of 2024). If the estate is smaller than that, you don’t have to worry about this tax.
Steps to Selling an Inherited House
Selling an inherited home is different from selling a home you own. Here’s how to do it the right way.
1. Find Out If Probate Is Required
Probate is the legal process that transfers ownership of a property after someone passes away.
If the house was held in a trust or jointly owned, you can usually skip probate.
But if the property wasn’t in a trust, you may have to go through probate before selling it.
Want to know more? Check out this guide on selling a house without probate.
2. Get a Property Appraisal
An appraisal tells you how much the home was worth at the time of inheritance.
Why is this important? Because this value is used to calculate capital gains taxes when you sell the home.
An appraiser will look at things like location, size, and condition to determine the fair market value.
3. Clear Out the Home
Sorting through belongings can be emotional, but it’s necessary before selling the home.
One way to make it easier is to divide items into three categories:
- Keep – Sentimental or valuable items
- Sell or Donate – Furniture, clothing, and appliances in good condition
- Throw Away – Items that are broken or outdated
Hiring a junk removal service or estate sale company can help make the process easier. Here’s how to handle removing items before probate.
4. Decide Whether to Sell As-Is or Make Repairs
Does the house need work? If so, you have two options:
- Make improvements – If the home only needs minor upgrades (like fresh paint or new flooring), small changes can help you sell for a higher price. Here’s a guide on the best fixes to sell a house.
- Sell as-is – If the home needs major repairs, selling as-is can save you time and effort. Many investors buy homes in any condition.
5. Hire an Experienced Real Estate Agent
Selling an inherited home can be tricky, so it helps to work with an agent who has experience with estate sales.
Look for someone who:
- Knows the local market
- Has sold inherited properties before
- Can help you with pricing and paperwork
Here’s why cash offers are better for sellers.
6. Set the Right Price
Setting the right price is crucial.
A real estate agent will perform a Comparative Market Analysis (CMA) to find out what similar homes have sold for in your area.
Pricing too high can cause the home to sit on the market for too long. Pricing too low means you might not get what the home is worth.
7. Market the Home for Sale
Now:
Your real estate agent will list the home on real estate platforms, schedule showings, and possibly hold an open house.
One tip? Avoid listing the home as an “inherited property”. Buyers may assume you’re in a rush to sell and make a low offer.
8. Review and Accept Offers
Once you start receiving offers, consider these factors:
- Price – Is it in the range you expected?
- Financing – Cash buyers often close faster, but buyers using loans may offer more.
- Contingencies – These are conditions buyers want met before they finalize the sale (such as a home inspection or appraisal).
- Closing Timeline – A shorter closing period can help you avoid extra costs like property taxes and maintenance.
9. Close the Sale
After accepting an offer, the buyer will complete their final steps, like inspections and financing.
Once everything checks out, you’ll sign the final paperwork, and the home will officially be sold.
What to Do After Selling the Inherited Home
1. Handle Taxes
To make tax season easier, keep these documents:
- Appraisal Report – This shows the home’s value when you inherited it.
- Final Sale Statement – Lists how much the home sold for.
- Receipts for Repairs or Upgrades – Can be used to lower capital gains taxes.
A tax professional can help you determine how much you owe and how to pay it. Want to know how inheritance tax works in different states? Read this guide on California inheritance tax.
2. Distribute the Proceeds
If multiple heirs are involved, ensure that the profits are divided fairly.
If there’s a disagreement, an estate attorney or mediator can help resolve any issues.
3. Close Out the Estate
Before you move on, be sure to:
- Pay off any remaining debts or taxes.
- Cancel utilities, insurance policies, and subscriptions.
- File any final paperwork if the property was part of a probate case.
Mistakes to Avoid When Selling an Inherited Home
Here’s what not to do:
- Spending money on unnecessary repairs – Not all renovations add value. Talk to a real estate agent before making changes. Check what not to fix before selling.
- Accepting the first offer too quickly – Investors love buying inherited homes at low prices. Get multiple offers before deciding.
- Skipping legal or tax advice – Estate sales have special tax rules. A real estate attorney or tax professional can help you avoid costly mistakes.
Final Thoughts
Selling an inherited home doesn’t have to be stressful.
By understanding taxes, following the right steps, and working with experienced professionals, you can sell quickly and for the best price.
Want a fast and hassle-free sale?
Big and Small Properties buy inherited homes as-is for cash. No repairs, no waiting, no stress.
Call us today for a free cash offer!
