What is an Estate Sale?
After someone you love has passed away, selling their house can be very difficult. It’s often a complex tangle of grief, memories, and logistical decisions—all multiplied by the grief, memories, and opinions of those around you. You may have to contend with family disagreements about the house’s worth, whether to sell, and what to do with the contents.
Selling a home after a parent or other relative dies is what’s known as an “estate sale.”
Not everyone involved will be following the same path to dealing with their grief, but to sell a home, whether you want to or not, you will all have to deal with each other and your varying emotional and practical needs. It’s best to keep open lines of communication, and approach everyone with compassion and understanding for the ordeal you are all going through together.
When can you sell the house?
Unless prior arrangements were made for the house to pass to beneficiaries without probate, it has to go through the probate process (with or without a will) and generally cannot be sold before probate begins. Probate determines who is legally entitled to the property, and title companies usually need proof from a probate court that the executor is authorized to sell the house before they will allow any sale to proceed.
Only the executor or administrator can sell a house during probate. The proceeds become part of the estate and, after all debts are paid, are distributed according to the will, or to state law if there is no will. The beneficiaries who inherit the house can also choose to sell after probate and split the proceeds, or one of them can offer to buy the others out.
Selling a Home After the Passing of a Parent
There are some critical considerations when figuring out how to sell an estate. Below you’ll find some things you should be immediately thinking about when selling a house after the death of a parent.
1. Transference of Real estate After Death.
If a person dies without a will or testate (with a will), then the real estate passes directly to the heirs at law or to the beneficiaries under the will.
For example, A single parent passes away, leaving behind her two children. The house has been left equally to both siblings. The two children receive equal ownership of the house upon death.
The children don’t need the court or executor to transfer the property to them – the property passes directly. If there was no will, the same thing would occur. So what happens when the home is going to be sold?
The first thing that needs to be done is to ensure the executor has been given the authority to liquidate the real estate. There should be specific instructions in the will about selling the property.
First, look to see if the executor under the will was given power or authority over the real estate. If the executor was not given control over the real estate, then the beneficiaries hold the authority and can sell the real estate without the executor’s consent.
Understanding How Probate Law Works
The most common way that a house can be legally sold without going through probate is if it was owned in a joint tenancy with a right of survivorship (a common type of ownership between spouses). In order for the surviving owner to sell the house, the recorded title to the property must first be officially transferred to their name.
How Long After Probate Can a House Be Sold?
Once a home has gone through probate, it can be sold. Typically a court will set aside a date for the end of probate, and the property should be sold before such expiration.
Another common estate planning tool that bypasses probate is a transferable-on-death deed, which transfers the house to named beneficiaries. It is not an automatic transfer, however; most states that permit TOD deeds require you to allow a certain amount of time for any challenges to the title. If mortgage payments aren’t fully up to date, the bank can foreclose, nullifying the transfer. And if multiple beneficiaries are named, they all have to agree to the sale.
How Does a Living Trust Work?
If your parents set up a living trust, selling their house after death will be more straightforward.
A living trust is a document intended to expedite the management and inheritance of your parents’ assets – particularly their house. The instrument designates your parents as trustees and you as their designated beneficiary.
If you inherit real estate where a living trust has been established, you can bypass probate and avoid some estate taxes, ultimately enabling the faster sale of the property.
Living trusts are excellent to have when multiple heirs to the property exist. When a parent’s home is in a living trust, the trust will indicate which heir is in charge of liquidating the house.
If the house was put into a living trust, that trust might hold a number of assets besides the house, and the terms might include instructions for how long a child can keep living there or how much it would cost one beneficiary to buy out the others. Some states also recognize land trusts, which are similar to living trusts but can only hold real estate.
Selling a House in An Estate That is Insolvent
If you are going to be selling an estate where there are more debts than assets, this is what’s called being insolvent. In this situation, it is crucial NOT to pay any debts you don’t have to—state law will set a priority list for you to follow. If you pay some low-priority creditors, you could find you are personally liable for the amount you shouldn’t have paid out. For example, don’t pay the landscaper or the telephone bill. These should be paid by the executor of the state once approved. Handling Inheritance Procedures and Disagreements When selling a house after the death of a parent, it is crucial to address any potential disputes immediately. Doing so will save time, money, and significant aggravation. A meeting of the minds should take place on all significant aspects of the sale. Consider things like who is taking care of the home selling expenses, who will prepare the home for sale, how much the property is worth, how the proceeds will be split, and who will be responsible for accepting an offer. Many siblings will end up assigning responsibilities in the sale. There should be an equitable distribution of the assets.
2. Pay The Bills For Your Parent’s Home.
It is in your best interest to stay current with the bills related to the home – like the mortgage, utilities, and maintenance – until you finalize the home sale.
While the passing of your loved one is essential to you, the mortgage company and other service providers still expect to be paid.
If you are dealing with the death of an older parent, it’s possible they had a reverse mortgage. If so, ensure you follow the necessary steps when selling a house with a reverse mortgage.
You can avoid complications by ensuring that all of these bills are paid until you are sure they don’t need to be – like if you let the landscaper know that their services are no longer required.
Paying the bills, however, should be done through the estate and NOT personally, as mentioned above!
3. Collect All The Necessary Documents Related to Your Parent’s Home.
One of the least enjoyable but most necessary things that those left behind need to do is collect all required financial documents.
Financial documents are essential for the distribution of the estate, including the home.
Without all the necessary documents, things become much more complicated.
You may have to search for a while to find everything you need. Often all documents won’t be in the same place. Sometimes people will stash them in hidden places.
It is worth searching everywhere, including crawl spaces, the attic, and the garage. Go through all the boxes and files, and even look under the mattress and drawers.
The documents you will want to gather may include the following:
Will – If there is a will, it will significantly simplify the distribution of the estate.
Receipts from bills – You will need to freeze your relative’s credit and contact all creditors, including the three major credit reporting agencies.
Investment documents – Your relative may have had stocks and bonds.
Insurance documents – There may be a policy from an employer or one purchased privately.
Homeowner’s policy – Keep homeowner’s insurance up to date and increase coverage if necessary.
Bank account documentation – You want accurate information on your parent’s bank accounts.
Personal documents – If your parents or relative had any confidential documents, like journals, poetry, etc., you might like to have them later for sentimental reasons.
Once you have gathered all the documents you know you’ll need, shred everything else with personal information, like social security numbers.
It is common for identity thieves to use the social security numbers of the deceased. Eliminating all documents with the number on them makes identity theft more difficult.
4. Change The Locks and Mail Delivery of Your Parent’s Property
You must completely control the property when selling a home as an estate sale. This includes forwarding the mail so you receive it timely and enhancing the home’s security.
Keep in mind there will be folks who know about the death that took place and the fact the home may be vacant.
You will be surprised how many keys have been given out on a property over the years, whether it is friends, relatives, babysitters, or contractors who have done work.
It is better to be safe than sorry.
5. Go Through Everything in Your Parent’s Home
Buyers will not be interested in most of your relative’s possessions, so ideally, you will clear out the home altogether – and have it staged for sale – or at least take out all the personal belongings and only leave behind enough furniture to aid in the sale.
You can read some additional tips on selling vacant vs. occupied to see which situation best fits your circumstances.
Clearing out an entire home of someone’s possessions, particularly if you have emotional ties to them, can be tiring and stressful. That is why it is helpful to have a process that simplifies things.
The basics of the organization require the creation of categories – what you will do with each item as you process it.
You want to keep some items, throw away other things, donate others, and maybe sell some. See how to pack a house for moving. You’ll love the advice to make getting your home ready a breeze.
If there are things that family members will want, especially items that may be disputed over, go ahead and set them aside to deal with later.
The sooner you get everything out of the home, the sooner you can put it on the market.
If your parents were in the fortunate position of owning a lot of valuable possessions, it might be prudent to hold an estate sale of these things.
Having an estate sale will allow you to maximize the value of your parent’s belongings.
Preparing the house for sale
Any real estate transaction can be stressful, and this is especially true under such emotional circumstances. When you sell a house that a loved one left behind, there can be a lot of work needed to get the property to a place where it can be sold. You will need to sort through and remove all of the belongings, maintain the physical state and security of the house, and clean and stage it for sale. So you may be dealing with the complicated emotions of grieving your loved one, reminiscing about your experiences in the house, and coming to agreement with the rest of the family at the same time that you’re undertaking a very complex logistical task. You may be dealing with the complicated emotions of grieving, reminiscing about your experiences in the house, and coming to agreement with the family at the same time that you’re undertaking a very complex logistical task.
Unfortunately, making all the necessary decisions and throwing yourself into getting the house ready for sale can prolong your grief and delay your healing process. If you need practical support, in addition to a probate attorney, a real estate agent experienced in after-death sales can help you make important decisions and meet mandatory deadlines.
Typically there’s a tax benefit to selling an inherited property soon after receiving rights to it, because when a property is inherited after a death, the property is revalued to fair market value at the time of the owner’s death.
Once you have processed your relative’s possessions, you will be ready for the sale.
At this point, you will go through the same steps as any other home seller – although some minor differences may apply.
When selling a home owned by an older relative or a house occupied for decades, extra work is often involved in prepping for sale.
This can be one of the most challenging parts of selling a deceased parent’s home.
The house may be dated, including old wallpaper, decorations, carpet, paint, etc.
It may also have damage that has gone unaddressed for a long time.
You will want to bring in a reputable real estate agent to advise you on what needs to be changed or repaired before you put the home on the market.
If you want the best possible price, you will probably need to make some changes. They may include:
Getting rid of old furniture
Changing old window coverings
Removing wallpaper
Changing carpeting or other dated floorings
Refinishing hardwood floors
Applying a fresh coat of paint
Eliminating all signs of pet ownership, like stains and other damage
Installing new fixtures
Updating lighting
In addition to any changes you make to the home, you will want to clean it thoroughly. Nothing is more critical to a home’s sale than a proper cleaning.
If you do not want to do the work yourself, ask your Real Estate agent for a reference for someone who will do a good job.
Once you have prepared the home for buyers, you can list it through your Realtor. As long as you have made the home desirable based on the current market, you should be able to sell it for a fair price.
Going on the market
Especially when multiple people inherit the house together, the first critical step is getting a realistic appraisal from a real estate agent in the home’s area. You may not be the best judge of how much the house should sell for, especially when emotions are running high.
If the estate is still in probate, the executor will decide what will happen with the house, based on the appraised value, the estate's debts, and the instructions in the will. If the property doesn't necessarily need to be sold to cover debts, it is a good idea to consult with the beneficiaries who will be inheriting the house to decide whether to sell it during probate and split the proceeds according to the will, or to transfer title to them and leave the decision to them whether to sell it after probate is complete.
In either case, a responsible agent with experience selling inherited homes will verify that the death certificate is on file and that the point of contact has legal authority to sell the house. They will investigate any possible liens on the property, and prepare an accounting of where the proceeds of the sale will go when disbursed.
If selling during probate, once everyone comes to an agreement to put the house on the market and the terms of any trusts have been fulfilled, the executor should make sure no one is living there and change the locks if they haven't yet been changed, in case there is a dispute. Because the executor is not necessarily one of the beneficiaries, it’s important to keep lines of communication open so that none of the beneficiaries decides to challenge the transaction.
Before the house is sold, costs associated with the property still must be paid, such as taxes, maintenance, and ongoing repairs. In addition, if the homeowner had a mortgage and that mortgage goes unpaid, the lender can foreclose and seize the property.
Maintaining the house in good condition is important when it is going on the market. Mourning is not often a good time for major renovations and extensive repairs, however. You can sell it as-is or make minor modifications, such as painting interiors or replacing appliances. The main thing is that the house be empty and clean.
Did Your Parent or Parents Die in The Home?
Whenever you are selling an estate sale, be prepared for the buyer to ask if the death took place in the house. For many buyers, death occurring on the property can be a problem. It gives them the creeps.
After Estate Sale, Tax Consequences
When selling an estate, one of the most important financial considerations will be dealing with taxes. See the IRS guidelines on estate sales for vital tax considerations and how they relate to your circumstances.
Having a massive unexpected tax bill is never fun. It is the last thing you’ll want to deal with after the death of a parent.
Estate and inheritance taxes are similar but differ in how they get paid. Estate taxes are levied against the value of your parent’s estate, which must be paid before any proceed are distributed to the heirs.
On the other hand, an inheritance tax is the taxes a beneficiary pays to the state based on inherited proceeds. Sometimes these tax terms can be used interchangeably.
Only half of all states have either an estate or inheritance tax.
10. Understand Capital Gains Tax Laws
Real Estate capital gains taxes refers to what you are taxed based on the purchase price vs. the sale price. With estate sales, there is a tax break known as the step-up in basis that reduces the amount of your capital gains tax.
The property valuation “steps up in basis” to when they passed away rather than their purchase date.
So you only have to pay capital gains taxes on proceeds about the death date value.
Here is a simple example. Many years ago, your parents purchased their home for $100,000. It is now worth $700,000. If your parents had sold before they passed, they would have $600,000 in capital gains.
Due to the capital gains exclusion, they would only have to pay taxes on $100,000. For married couples, the capital gains exclusion is $500,000.
So if your parent’s home was valued at $650,000 at the time of their death, there would only be a gain of $50,000 if the house was sold at $700,000. There would be no taxes owed.
If a home is sold at a loss, you could be eligible to apply for a capital loss as long as it was sold for fair market value and not to a relative at a below-market price.
Deducting capital gains is one of the significant tax benefits of owning a home.
Completing the sale
Once the sale closes, the executor can disburse the proceeds according to the instructions in the will, after any debts are paid off, including any capital gains taxes on the sale itself. Estate or inheritance taxes may also impact how much everyone receives, depending on where the property is, where the beneficiaries live, what their relationship to your loved one was, and how much is being inherited.
Throughout the process, be careful to take care of your own emotional needs. Selling a home, especially if it was your childhood home, can inflame hard feelings or even spark new grief. And the complex logistics of a sale can make it all seem harder, so go at your own pace, and involve professionals whenever possible.
If you can, also keep in mind that the rest of the family is also dealing with the same issues, and they may need to work through them in their own way. Communicate openly and calmly about your options and try to make the decisions that are best for everyone and that most fully honor the wishes of your loved one.
Final Thoughts on Selling a Parent’s House After Death
Selling a home in an estate sale after the death of a loved one can be a trying experience. Homes often conjure up happy memories that can invoke our inner emotions. It is always hard to let go of a house that has become a home.
Hopefully, the tips for selling a parent’s home after death have been helpful.
