How to sell an inherited house stress free in Maryland
If you want to quickly sell inherited house in Maryland - the easiest way is to sell to a cash buyer like Easy Outs Homes. Inheriting a house from a loved one can be a wonderful gift or a challenging inconvenience. Depending on your individual circumstances you basically have three choices on what you can do with the home: move into it, rent it out, or sell it. Many times, families will move into an inherited home and sell their own properties that they’ve been living in. In other cases, those who inherit a home will either rent the property out as an income property, or they hold an estate sale to sell off unneeded items, then sell the property itself. If you’re planning on selling an inherited home this guide is sure to help you avoid the usual pitfalls and avoidable obstacles that waste time, cost money, and add to your frustration.
Understand the Variables of Inheriting a home
Know the worth of the home. Online tools like home value estimators are a great way to get an initial understanding of the inherited home’s worth compared to similar properties in the area. However, the amount you see doesn’t necessarily mean you will be able to sell the house for that amount, a lot depends on the condition of the house itself as well as the overall market conditions for that area.
What’s the outstanding mortgage? You’ll want to also find out how much is left to pay against the mortgage or loan on the house, and then use a home sale proceeds calculator to find out what selling the inherited house will net your family.
Are there other outstanding debts? Besides what’s left on the mortgage, are there any other outstanding bills you need to account for? Were property taxes paid every year or did they slowly pile up and now you have to use the proceeds from selling the home to pay them off?
How many are inheriting property? A lot will depend upon how many individuals might inherit a portion of any given property. Do all involved agree that selling the inherited property is the right choice, and who’s going to manage the process of the estate sale and selling the house itself?
Capital Gains and Other Tax Implications of Selling an Inherited Home
One of the first things you’ll need to evaluate when considering selling an inherited home is how the sale will impact you financially. In other words, you may be subject to taxes on any proceeds from the sale or from the inheritance of the property itself. While laws may differ from state to state, the following resources will help you understand the tax implications of selling an inherited property.
Inherited properties do not qualify for the home sale tax exclusion. Typically, when you sell a property you’ve lived in for at least two of the previous five years, you can take advantage of a tax exclusion. That means up to $250,000 of proceeds for a single homeowner is tax-free, and married couples can avoid paying taxes on up to $500,000 in proceeds. Unless you plan to live in the home you’ve inherited for at least two years, you won’t be eligible for this exclusion.
Inherited properties can take advantage of the stepped-up tax basis. Ordinarily, proceeds are calculated using the purchase price plus any improvements made to the property during ownership. In the case of inherited property, the tax basis is the fair market value of the property at the time of the previous owner’s death. This prevents those who inherit property from owing substantial taxes on properties that have appreciated dramatically in value over the past several decades. In a nutshell, you won’t pay capital gains tax to the point of the previous owner’s death. If you ended up holding onto the property for a while before you sold it, you would then be liable for taxes on any increase in the value of the property while you owned it.
Know where and how to report sale proceeds. The IRS requires those who sell an inherited property to report proceeds as taxable income. The specific amount that will be taxable is based upon the fair market value and other improvements used to calculate the basis. This publication from the IRS describes where to find instructions and which forms to use. Even if you don’t have to pay taxes on the sale, it is still a reportable event. It’s still a good idea to report the sale of an inherited home even if no taxes will be owed.
There’s a difference between inheritance tax and estate tax, and even some differences among individual states. Tax law is by no means simple, so it’s best to seek the advice of an accountant or attorney to figure out the many nuances related to the financial obligations that come with inheriting real estate.
Prepare the Inherited Property for Sale
After understanding the financial implications and determining that selling the property is the right course of action, you’ll need to prepare the home for sale. That means clearing out personal belongings, de-cluttering when necessary, and de-personalizing the rooms. Here are some tips for preparing an inherited home for a sale:
Clean out personal belongings. One of the most emotionally challenging aspects of inheriting a home is going through your parents’ or loved ones’ most personal belongings, often bringing back many memories. Though you can’t combine a lifetime’s worth of belongings with yours, you should find a few cherished mementos for yourself and other family members then start organizing stuff into piles: what to give away, what to throw away, and what to sell.
Hold a yard sale or estate sale. After divvying up cherished possessions to heirs, you may opt to hold a yard sale or estate sale for the rest of the belongings. Homes show better on the market when clean and empty and then staged. You can also think about making small upgrades at this point to help the house sell for more. However, if the strain is too much considering everything else that is going on, there are concierge type services that can do this for you.
Wait for the estate to go through probate. The estate must go through probate (the official proving of the Will) before you may sell the property. Most states have a summary probate process, but this is available only to small estates ranging in value from a few thousand to a few hundred thousand dollars. Most estates that include real estate and other assets will exceed this threshold.
Determine who holds the legal responsibility to handle the transaction. If the property owner left a Will, the executor is the person who has the responsibility and ability to distribute the assets of the estate, including real estate. If the property is in a Trust, the trustee holds this same power. In situations where siblings have inherited property together from their parents, one person often has the ultimate authority and responsibility to handle the real estate transaction.
Choose the right real estate agent. While it’s often tempting to choose a real estate agent based on who you know, enlisting the services of friends or family members to coordinate the sale of an inherited home is probably not the best idea.
Pricing Your Inherited House and Negotiating Offers
Pricing an inherited home to sell is one of the biggest decisions you’ll make, and it hinges on many factors such as if there’s an existing mortgage, other remaining debts, as well as the condition of the current real estate market. The following tips and resources will help you determine the best listing price for your inherited home and negotiate with buyers to get the most out of the property.
Image via Flickr by Mark Moz
Don’t expect to get your asking price. Most people selling a home base the listing price on comparable properties that have sold recently, but depending on market conditions (whether it’s a buyer’s market or a seller’s market), offers may be tens of thousands of dollars below your asking price. Ultimately, the negotiation process determines the final selling price, so choosing a real estate agent who will advocate for you and negotiate on your behalf is important.
Don’t price the property too high. Ideally, you want to list the property at a realistic price – but at a higher price than you’re willing to settle for. A high or unrealistic listing price turns prospective buyers away, while a lower, more reasonable price can attract buyers. A low listing price is sometimes even used as a strategic move to attract a multitude of buyers who may then enter a bidding war, meaning the seller ends up with a higher sale price at the end of the day. Price it low enough that it’s attractive to prospective buyers but high enough that you have room to negotiate.
Don’t settle for less than the property is worth. Buyers want to get a home for the lowest possible price, while sellers naturally want to get the maximum price for the property. This is particularly true when the home is an inherited property that was once a family home where the sellers have many childhood memories. This is why offers are sometimes countered and buyers and sellers end up agreeing on a final sale price somewhere in between the two extremes.
Don’t be too eager to make concessions. Offers from potential buyers will often ask for a lower selling price, seller assistance with closing costs, or even funds placed in escrow for certain repairs or improvements.
Don’t accept the first offer you receive. Unless you’re lucky enough to get a full-price offer on the property (in a hot seller’s market, this can happen if the property and price are right), don’t be too hasty in accepting the first offer you receive. In most cases, buyers will make an initial offer that is less than what they’re actually willing to pay and below – sometimes tens of thousands of dollars below – the listing price.
Educate yourself on negotiation tactics buyers tend to use and decide what you will and will not compromise. If you’re prepared with the knowledge of what to expect from buyers and already know what you’re willing to compromise and on what you intend to stand firm, you’re better equipped to make counter-offers and clearly convey your expectations. It will also be easier to walk away from a deal that doesn’t meet your needs.
What to Expect During the Sale Process
The process of selling a home can take weeks to months, depending on the condition of the property, market value and market conditions, and other factors such as the season and even the skills of your real estate agent. From the offer to closing, these resources outline what to expect while you’re selling an inherited home.
Selling a home is a multi-step process beginning with market research and ending with a closing. This article from NOLO outlines the process of selling a home step-by-step. NOLO also offers a list of useful resources that are helpful for researching the market and comparing listing prices in your local area.
The property inspection is one of the most important steps in a real estate transaction. A certified home inspector will inspect and investigate every inch of the property to look for problems such as rotting structures, broken pipes, cracked foundation walls, and other problems that could spell financial trouble for the buyers in the near future.
When multiple family members are involved, legal nuances and personality conflicts may arise. This resource provides answers to a variety of questions related to handling the sale of inherited property, transferring ownership of properties between relatives, tax implications, and many other questions people who have inherited property may encounter.
Your real estate agent may hold a broker’s open house or a general open house. After listing a property, some real estate agents like to hold open houses to generate initial interest in the home. This article describes several things that typically happen after listing a property for sale, including open houses and the typical six-week “wall” sellers hit if there hasn’t been any interest in the home after six weeks on the market.
Just because you’ve listed a home on the market doesn’t mean your expenses and obligations have stopped. If the property has a mortgage, those payments must still be made on time. Utility bills, such as water and sewer, electric, trash removal, cable, and any other connected utilities must also be paid. You may also encounter additional expenses and even demands on your time for lawn maintenance and other household maintenance tasks.
Hidden Hurdles When Selling an Inherited Home
Any real estate transaction can have its share of ups and downs, and the process of getting from offer to close is often rife with obstacles. Selling an inherited home is certainly no exception; in fact, you may be more likely to encounter some surprises simply because the circumstances are different or you’re not as familiar with the property as you think you might be.
Image via Flickr by Mark Moz
Executors can keep an estate in probate for years. This enables the executor or other beneficiaries to have use of the home and other assets, without actually transferring ownership of the property. This is a temporary situation, however, as all property must eventually be transferred to another party, as this article explains.
Handle equal distribution carefully. Many personal Wills specify that the estate must be divided equally between siblings or beneficiaries. This means the value of the estate must be distributed equally, but challenges arise when it comes to agreeing on the value of assets such as sentimental belongings. This article suggests ways to handle the equal distribution of assets among siblings.
Try not to feel guilty about items you choose not to keep. Not only is it emotionally draining to sort through decades of cherished possessions and memories, but heirs are often riddled with grief and guilt about not holding onto every belonging that carries a memory.
If the property is “underwater,” you may have other options. This article explains that heirs may choose not to accept an inherited home at all if there are environmental concerns or more money is owed on the mortgage than the home is worth. You’ll also want to check to ensure there are no liens on the property before putting it on the market.
You may be facing more repairs than you realized. If the home was occupied by an elderly loved one who was unable to keep up with regular home maintenance adequately, the property you’ve inherited could have both visible and hidden problems that will almost certainly arise during a home inspection. These issues, depending on their severity, can cost you thousands of dollars – or even a sale.
You and your sibling(s) may not agree on things like the purchase price, who gets to live in the inherited house, how necessary repairs should be handled, or really anything involving the property you’ve inherited jointly. The truth is even siblings who otherwise get along quite well can find themselves in a heated argument about their former family home. This article offers tips for handling a home you’ve inherited with a sibling.
Selling a home you’ve inherited from a loved one who has passed carries much responsibility. It’s already an emotional process and adding the typical stress that comes with selling any property can easily be enough to send even the calmest, coolest, and most collected person over the edge. Arming yourself with the information and resources provided in this guide will prepare you for any obstacles that may cross your path, making the sales process smoother and more bearable.
To sum up, if keeping an inherited property is too much for you financially and emotionally - get a no obligation cash offer from Easy Outs Homes and you will be able to quickly sell your house as-is, without paying realtor's fees, or closing costs.