There are a lot of processes and steps to deal with whenever there's a death in the family. There are often emotional moments and arrangements that you have to take care of with their passing, and among those, you may discover that the loved one had gifted their house to you, and you now have to decide what to do with it.
If you already have a home and don't want to live on the property, and you don't want to turn it into investment rental property, one option is to successfully sell the home. If you decide to take the sales route, here are several things to consider before placing the home on the market.
Get All Siblings on Board with the Sale
If there are other siblings involved, even if the house wasn't gifted to them, you should still sit down and discuss the sale with everyone. This process can alleviate any problems or hard feelings with the rest of the family. You may also have a relative who wants to move into the house themselves and are willing to buy out your share of the property.
Figure Out Who is Executor for the Estate
The executor of the inherited estate is normally the person who handles the sales transaction of the house, unless the house has been placed into a trust. Then the trustee will handle these details. If you have been given this authority, then you can move on to the next step.
Let the Home Go Through Probate
Before taking any steps to place the property on the market, you need to wait for it to go through probate. The probate process will distribute assets to the heirs and creditors. Once the dust settles, then you can proceed with marketing the house without worrying about any creditors or liens holding up the sales process.
Treat the House like Any Other Property
It can be hard to let go of a property that may hold so many memories. It can also be a difficult thought of having the next homeowner make any changes to the house. Yet if you are selling the inherited property, you have to treat it like it will be the buyer's new home. So remove all possessions from inside the house, hold an estate sale to get rid of items that no one in the family wants, and depersonalize the space.
Also, consider hiring a real estate agent who can check the comps and help you figure out the right price to place on the property. By having a real estate professional take care of the marketing, showings and closing transactions, it can take the stress and worry off your shoulders during this trying time.
Understand All Tax Implications
There are several taxes linked to selling inherited property. You will have to deal with any estate and inheritance taxes before placing the property on the market, along with paying property taxes up until the time when a buyer places an offer on the house. Unfortunately, if you don't live in the actual house for at least two years, you won't be able to claim the home tax sale exclusion. You will also have to deal with the capital gains tax based on the amount of profits you made from the sale of the property.
Yet you may be eligible for the stepped-up tax basis so you don't have to pay exorbitant taxes on the property if the home's value has appreciated drastically over the years. It's best to speak with a tax professional regarding all tax implications for the inherited house.
Reporting the Sale
Any money that you obtain from the sale of an inherited property is considered taxable income to the IRS. So you will need to report the sale as there may be tax implications involved regarding the fair market value of the property as well as any home improvements that were made. Even if you received a lower sales price for the house due to market conditions, you should still report the sale to ensure you have accurate tax records.
Distributing Sales Proceeds to all Owners
If all individuals owning the house have agreed to the asking and sales price, then you will have to ensure that the money is equally distributed to each person. This is not the time to begin arguing about who gets what type of percentage of the money. It is vital to sit down with everyone and handle all the sales details before even placing the house on the real estate market. Then you can avoid claims and lawsuits regarding the sold property.
If you want to make the entire process easier for your family, you want to always keep them in the loop with the transaction process. Maintain open communication and gain their opinions on how to market and sale the house. That way, there's less room for arguments or bad feelings between family members.