While serving as the executor of an estate, selling an inherited home may be one of the most challenging and sensitive real estate transactions an executor will encounter. An executor must balance the legal, financial, and family elements within the real estate markets.
Even if you are an executor for the first time, this article will prepare you for the most important steps and considerations for selling inherited real estate.
Table of Contents
Understand Your Role and Authority as the Executor
The executor of an estate may be named in a will or appointed by a court. The executor must locate and assemble estate assets, settle outstanding debts, taxes, and other obligations, and transfer the remainder of the net estate value to the designated heirs.
Legal confirmation is important before selling the home you inherited. Although this is probably the first step you take to selling the home, the legal process called probate must be completed. In some places, the law demands you get the court approval before you list or sell the home. You will need documents such as the Letters of Administration or Letters of Testamentary, which probate courts issue, to sell the estate. You need these documents to prove you are the representative of the estate.
Ownership of the home must also be established. Understand how the home was owned before planning your next step. In the simplest case, the deceased was the sole owner, which means the property will enter probate. In another case, homes owned jointly with a right of survivorship means the surviving owner will inherit the home while skipping probate. If the property was owned with others as tenants in common, it means only the deceased’s share of the estate will enter probate. You will probably need legal assistance or help from a title company to resolve the home’s ownership before you list it for sale.
Safeguard and Look After the Property
You have a responsibility to ensure the estates various assets, including the real estate included in the estate. That means some of the following steps: changing the locks and notifying the homeowner’s insurance company, ensuring that the utilities are kept on (or turned off, if appropriate), keeping landscapers or cleaners to maintain the property, and checking the property for any damage or vandalism, or vacant. Unsightly and improperly maintained homes tend to have the home reduced or the liability issues may increase with the extended vacant periods.
Get a Property Appraisal or Valuation
For the purposes of selling the property and determining the fair market value of the home, a property valuation will serve many purposes. This will help in determining the listing price and will help in estimating the capital gains for tax purposes and will serve the probate court for estate tax purposes. You may obtain a certified property appraisal, a real estate agent’s comparative market analysis (CMA), or check the sales of comparable homes in the vicinity. For tax or legal purposes, a formal appraisal will be appropriate.
Get a Property Appraisal or Valuation
For the purposes of selling the property and determining the fair market value of the home, a property valuation will serve many purposes. This will help in determining the listing price and will help in estimating the capital gains for tax purposes and will serve the probate court for estate tax purposes. You may obtain a certified property appraisal, a real estate agent’s comparative market analysis (CMA), or check the sales of comparable homes in the vicinity. For tax or legal purposes, a formal appraisal will be appropriate.
If you’re unsure where to start, you can easily get a free property valuation report to get an accurate estimate of your inherited home’s market worth. It’s a simple way to make informed decisions before you proceed with listing or negotiations.
Consult with Professionals
When dealing with the sale of an inherited home, it can be necessary to work with a few different specialists. An estate attorney can help you with the probate process and any legal responsibilities. Tax advisors and CPAs can clarify the tax consequences. Realtors manage the listing, the marketing, and the negotiating. A title company can ensure there won’t be any lien or title problems that could slow down the sale. When it comes to professionals, you should ensure that they have a good reputation in order to prevent costly mistakes. A cohesive group can make the process efficient.
Decide Whether to Sell As-Is or Make Repairs
On your timetable, condition of the home, and inventory in the area will determine whether you sell as-is, which very well could be a lot faster especially when the home requires a lot of repairs, or make improvements and/or repairs to increase the home to sell. Talk to your real estate agent about which improvements might yield a good return on the investment. Sometimes, small repairs and changes, like new paint, or new plants, can really help the home sell for more.
Communicate with Beneficiaries
The executor has a duty to safeguard the interests of the beneficiaries. This means keeping them updated on the timeline for selling, the status of the sale, the sale proceeds, and financial dealings, and not harboring any conflicts of interests. The involvement of multiple heirs can escalate matters emotionally. Such situations require five-star communication and transparency to reduce the chances of a legal face-off. Occasionally, one or more heirs will express a desire to purchase the home. In these situations, it is crucial to treat the transaction neutrally and charge the fair market value to mitigate any potential accusations of unfairness later.
Prepare the Home for Sale
To achieve the best sale price and entice buyers, you’ll want to prepare the home for sale and market it. Start with decluttering and depersonalizing the home by smoothing over the space, removing personal items, and taking out family photos and furniture. You can even consider home staging to create an inviting ambiance and help potential buyers envision themselves in the space. Invest in quality photos for the listing; they are an essential marketing tool. If the home is outdated or in poor condition, consider marketing it to investors or cash buyers who are comfortable with fixer-uppers.
Manage Sale Proceeds Correctly
The proceeds from a home sale won’t go to you unless you’re a beneficiary. It will go to an estate account first. From there, any outstanding debts, legal fees, and taxes will be paid. The remaining amount will be distributed to the heirs as indicated in the will and/or by state law. Be sure to maintain accurate and detailed records of all transactions and coordinate with your attorney to ensure completion of your fiduciary duties.
Think About Tax Liability
There are tax implications for the estate and the heirs when an inherited home is sold. Generally, heirs get a stepped-up basis, meaning the home’s value resets to its fair market value when the owner dies, which helps reduce the capital gains tax when the property is sold. Most estates are under the federal estate tax limit, but you should still check with a tax professional. Some states do have inheritance or estate taxes that would apply. One of the executor’s duties is to also file final tax returns for the estate. For more detailed legal insights on managing estates, refer to PBL Legal’s guide on wills and estates.
Conclusion
As an executor, selling an inherited home involves different challenges. There are legal, financial, and emotional challenges that come with selling an inherited home. Executors need to know the law and the wishes of the deceased and ensure that the selling process is ethical and effective.
Assigning various responsibilities to different professionals, communicating the selling process to the various beneficiaries, and organizing the various steps of the selling process eases the executor’s role and selling the home with professional care equals to emotional support for all parties involved, providing closure and an effective transition all around.
