What Happens When You Sell an Inherited House?

Inheriting a house often comes at an emotionally difficult time, and figuring out what to do with the property can add another layer of stress. Selling an inherited home is common, but the process typically involves a few extra steps compared to selling a home you've owned and lived in yourself.

Confirming how title passed to you

Before a sale can move forward, the title to the property generally needs to be clear, meaning it's evident who legally owns it. Depending on how the previous owner held the property, this might happen through a living trust, a transfer-on-death deed, joint tenancy with right of survivorship, or through the probate court process. Each path has different requirements and timelines, and a probate or estate attorney can help confirm where things stand for your specific situation.

If the property is going through probate

If the home is part of a probate proceeding, California generally requires certain court procedures before or during a sale, which can include court confirmation of the sale price in some cases. This process can add time, and not all buyers are familiar with or willing to work through probate requirements. Buyers experienced with probate sales may be more equipped to navigate the additional steps and timeline.

Selling with multiple heirs

It's common for a house to be inherited by siblings or other family members jointly. Selling in this situation typically requires agreement among all co-owners on price, timeline, and terms. Disagreements among heirs are common and can slow down or complicate a sale considerably. In some cases, one heir may want to sell while another wants to keep the property, which may call for a broader conversation, possibly with legal guidance, about buyout options or other resolutions.

Condition of inherited homes

Inherited homes are often older and may not have been updated in years, particularly if the previous owner lived there for a long time or the home sat vacant for a period before being sold. Heirs frequently don't have detailed knowledge of the home's maintenance history, which can make it harder to complete typical seller disclosures with confidence. Selling as-is is a common approach for inherited properties, since it avoids requiring heirs to invest money and time into repairs and updates for a home they may not have lived in themselves.

Tax considerations

Inherited property can be subject to specific tax rules, including how the property's cost basis is calculated for capital gains purposes, and potential property tax reassessment depending on how and when it's transferred. These rules can significantly affect your financial outcome, so it's worth consulting a CPA or tax professional before finalizing a sale.

Steps that generally apply

• Confirm how the property is titled and whether probate is required.
• Gather any available documentation about the home's condition and history.
• Get agreement among any co-heirs on how to proceed.
• Consult a tax professional about potential tax implications.
• Decide whether a traditional listing or a direct as-is sale better fits the heirs' timeline and goals.

Choosing how to sell

Some heirs prefer to invest time and money into preparing an inherited home for a traditional sale, particularly if it's in a desirable area and could benefit from updates. Others prefer a faster, simpler process, especially if the home needs work, is located far from where the heirs live, or if multiple parties want to settle the estate without prolonged involvement. Both are reasonable choices, and the right one depends on your family's circumstances, timeline, and the property itself.

This article is general information, not legal, tax or financial advice. For advice about your specific property or circumstances, speak with a qualified professional.