Home » Blog » How to Sell an Inherited House

Published on October 21st, 2021 | Updated on December 15th, 2021

Doug Van Soest

CEO

At SoCal Home Buyers our vision is to provide you with a fast, safe and simple solution to selling your inherited home without the stress and hassle of listing it. Request a No-Obligation, All Cash Offer on your inherited home here.

Inheriting a house is a serious responsibility you may not want to deal with.

Some people are ok with determining tax liabilities, going through probate, listing the house, making repairs, staging the home and negotiating on price.

For others, inheriting a home is simply too much hassle.

Especially if you're considering downsizing, live out of state or simply don’t want to deal with the time consuming process of estate planning and probate.

If you’re asking yourself, “How do I sell my inherited home fast?” this step-by-step guide, will explain everything you need to know about selling an inherited house in Southern California for the best price and least amount of hassle.

Yes you can, however, there's certain taxes and conditions with selling an inherited house you should probably know about. 

Let's start at the beginning:

Before selling you need to know if the property has debt. You also need to know if it needs any repairs or has expenses that could decrease its value.

Things you should consider are:

If your relative appointed you as the executor in their Will, this means you're responsible for managing the affairs of the estate.

The Executor doesn’t have to be an heir of the deceased either. California gives you a lot of freedom when choosing an executor, which can be anyone who is:

If your relative didn't have a Will, California will appoint an executor.

The Executor, also manages the probate process with the court’s supervision. This process can take anywhere from nine months to one and a half years.

So you’ll have to be patient during this time.

Take a look at this chart below to get an idea of how long Probate lasts on average.

Source: (Inheritance Funding)

Probate is a technical term for the legal process a property goes through when the owner passes away. California’s probate process manages key aspects of your late relative’s estate, like:

In smaller cases – such as estates worth less than $150,000 – you won’t have to go through the probate process. 

These estates use an informal representative rather than a court-appointed one. The state usually selects the surviving spouse or any of their children as informal executors for these properties.

Inheriting a property can be stressful.

However, it can expand your investment portfolio by giving you additional monthly income as a landlord.

The problem is landlording is hard and time-consuming.  It can quickly become a full-time job if you don't have the income to hire a Property Management company.

If landlording isn't something you want to deal with, selling the house is the obvious choice. However, both have their advantages and disadvantages.

Selling an inherited house, especially if you’re selling the house 'as is', can be a fairly quick transaction.

You can request and receive an offer, close and be on with your life in as little as a week if Probate isn't necessary.

The downside is if you have to go through Probate, you won't be able to close until Probate does.

Renting on the other hand is a long-term commitment.

While it can generate Monthly income, realistically, it can be several months to years before you make a profit.

Renting out your inherited property means:

IMPORTANT: Location, Location, Location!

Another thing to consider when selling or renting out your inherited home is the location of the property.

If you live close, you may be able to manage it if you decide to rent it out.

But if you live in another state or county, renting out can be frustrating as you'll need to make frequent trips to oversee and manage the property.

Source: (Kelly Sikkema/ Unsplash)

The state of California doesn’t have estate taxes or inheritance taxes. This means you don’t have to pay taxes just because you inherited a property. 

However, there are other taxes like:

Any taxes you don’t pay can result in a tax lien against the property, which can limit your options for selling an inherited house.

However, the right real estate agent or investor can help with this.

California's Prop. 19, limits tax benefits for certain transfers of property, like an inherited home or farm, between family members.

It eliminates the exemption from property tax reassessment. 

Instead, heirs who inherit their parents’ or grandparents’ properties who intend to sell them - instead of using them as their homes - pay taxes based on the market value when transferred. 

In other words, if you don’t live in your inherited home or rent it out, you may lose out on a big tax break.

Instead of paying taxes from when your parents bought in 1978, you’ll pay the taxes during the year it’s assessed for sale.  

Proposition 19 also lets homeowners who are over 55, severely disabled, or whose homes were destroyed by a wildfire or natural disaster, transfer their primary residence’s property tax base value to a replacement residence of any value, anywhere in the state.  

You can read more about Proposition 19 here or again, talk to your real estate agent about how this affects you.

When you sell inherited property, you’ll either make a 'capital gain' or take a 'capital loss'.

If you receive a capital gain, you’ll owe taxes on this amount.

If you take a capital loss, you may be able to write it off come tax time. 

The formula for capital gains and losses is:

Sale price – inherited property value = capital gain or capital loss

For example, let's say your relative bought the house for $125,000 in 1960.

The house was worth $300,000 when they left it in their Will.

You decide to sell the house a year after you inherited it for $310,000.

Your capital gain is $10,000.

So you'll only pay taxes on the $10,000 profit.

If you sell the inherited house at a loss instead of a profit, you may be able to claim a capital loss.

However, it’s always best to talk to a tax advisor for your specific situation.

There are two types of capital gains taxes: short-term and long-term.

Long-term gains have lower tax rates.

Short-term gains have higher tax rates.

While you can’t escape taxes, you can reduce what you might owe by:

Of course, if you plan to live in the house you inherited, you can avoid the capital gains tax by making the house your primary residence.

Then you can sell it within five years and avoid the capital gains tax altogether.

Voila!

When the IRS needs to know how much tax to charge on an investment’s profits, they need a starting point for the cost.

That’s the 'basis', or what you paid for the investment.

Capital gains on property are calculated on a 'stepped-up' basis.

This means the starting point for your inherited house is when you inherited it rather than when your relatives purchased it.

Remember the example above about your relative’s house?

The 'basis' in this scenario would be the $125,000 they paid in 1960.

But the 'stepped-up basis' is the $300,000 value at the time you inherited it.

So, instead of paying capital gains on the $185,000 difference, you’ll pay it on the $10,000 profit you make when selling instead.

Hopefully this makes sense!

Selling an inherited home is a big decision.

Especially if it was your parents house or the one you grew up in.

The process can seem daunting and will probably be very emotional.

Fortunately, the process is easier than it sounds - especially if you work with the right real estate agents or investors.

How you prepare your house to sell depends on your approach.

If you plan to sell it directly to a traditional home buyer you’ll want the property in top-condition.

This can be expensive as some homes require complete rehabs or are filled with stuff.

If you’re wondering, “Can I sell a home without making repairs?” the answer is yes you can, but you'll be limited as to how much you can make.

If you want full market price you’ll need to make renovations as needed.

You'll need to check its structural integrity and internal living conditions, like:

You'll also need to focus on its aesthetic appeal and functional convenience, such as:

You’ll also need to check appliances and deep clean each room.

It’s a long and exhaustive list that can grow tedious fairly quickly.

Preparing to sell a house comes with a list of chores, but you might be able to avoid them all by simply selling the house 'as is'.

You'll avoid the time and money it takes to boost the curb appeal, clean the property, or make dozens of repairs.

If you don’t live close to the house you’ve inherited – or you just don’t want to deal with a lengthy sales process – you might find selling 'as is' a convenient alternative. 

'As is' conditions mean you receive an offer without putting in extra work to prepare for routine showings.

In many cases, you can have an offer and close the sale within a week - instead of waiting months on end, just to find an interested buyer. 

This can also save you money if the property has extensive damage, which is typical with inherited houses.

If you want to get market value for the home be prepared to put in some work.

House renovation projects have spawned an entire television network, and for good reason – these improvements can greatly enhance the value of your property.

However, if you’re trying to sell an inherited house, you might want to think twice about doing any major renovations.

The average cost to renovate or remodel in Los Angeles, for instance, is between $100 and $400 per square foot.

A modest 1,800 square foot home could cost at least $180,000. 

If you inherited a house with no mortgage and have cash for improvements, you can see a return on investment of almost 100% on some renovations. 

However, if you don’t have the money to renovate the house – or you don’t have time to deal with renovating a house – it might be a good call to sell it 'as is'.

Some might consider home improvement loans, but this just piles on your expenses.

Cleaning out a late loved one’s home can be challenging, especially if you were close.

However, this experience gives you the chance to keep things with sentimental value. You’ll also be able to figure out what you need to sell or get rid of. 

This can be a difficult experience for some people.

Approach it delicately to avoid family conflicts.

Whether you’re trying to sell the property through a real estate agent or you want to sell it 'as is', you’ll still need to maintain the property until it’s sold.

These are some of the important things you need to do during this period:

If you’re showing the house, you might need to keep the utilities connected and play with some home staging ideas until you receive an offer.

This is another aspect of maintenance – and an added cost – you'll need to consider if selling on the market.

Unless you’re a realtor or real estate investor, you likely wont know how to price your house.

Sites like Zillow and Redfin can provide you with a general estimate, but these are often misleading and inaccurate.

So what should you do?

The first thing you need to do is to get an estimate of your inherited house’s market value.

You can get estimates through several credible sources.

These sources use information from public records and the current real estate market conditions. 

Next, you should review the asking price of similar houses in your area.

Location is key here – the same sized houses in San Bernardino and Riverside will have different values and asking prices. 

The best option is to talk with a real estate agent or investor.

The right partner can help with determining a fair asking price on your home.

There’s a reason most salespeople seem to have similar personalities – selling requires a delicate balance of giving just enough to encourage a buyer to buy from you and standing firm to avoid losing money. 

While you might need to consider low offers, you should open with a higher asking price that gives you room to negotiate. 

Price your inherited house based on the most recent market value estimates so you can confidently reject low-ball offers. 

Consider getting your inherited house professionally appraised if you want an accurate value of where to start.

Whether you sell your home on the market or 'as-is', you’ll need to do certain things before you can formally sell your inherited house:

While it varies from county to county, in Southern California your buyer has around two weeks to complete the property inspection once they enter into escrow.

The buyer will pay for the inspection, but you’ll need to make sure the property is ready for inspection. 

If you’re selling the house 'as is', the property inspection might be mild because you’re not doing any repairs. This cost however, will come out of the final offer.

However, if you want the best offer and don’t want to sell it as is, you can schedule a property inspection to uncover damages that could reduce your house’s value and lower your offers.

When a family member passes emotions in the family run high.

This can drive a wedge between families if the deceased didn’t Will anything to a certain relative or if there's a lengthy battle over selling the inherited house. 

Fortunately, these simple tips can help prevent conflicts:

While there’s always room for conflict, you can reduce the emotional stress on your relatives by working with them to find the best solution for everyone.

Learn More: How to Avoid Family Feuds when Selling an Inherited House

Your real estate agent or investor is your partner in this process – that’s why you want one you can trust.

Read reviews from people who’ve sold their homes through them so you can know their concerns (if any). 

Then, spend time talking with each agent to see if you connect.

You want to find out how well they understand the real estate market in your property’s location.

You also want to get a feel of how they will interact with you.

Selling an inherited house is a lengthy process.

It doesn’t end when you receive the cash either. 

That said, there are a couple of things you’ll need to do to wrap up the sale after accepting an offer.

The sale of your inherited house should cover any outstanding mortgages or home equity loans. 

It’ll also takes care of any outstanding tax liabilities on the house.

Besides these, there might still be expenses you’ll have to pay for, like paying commissions to a Real Estate Agent if you sell on the market.

You’ll also need to settle these as soon as possible to prevent issues for the new owners.

The last thing you need to do to “close out” the sale process is to report your profits.

This is where you’ll report the capital gains or capital losses we spoke of earlier from the sale of your inherited house.

After filing this information on your taxes, you’ve officially sold your inherited house!

It can be overwhelming to sell an inherited house. You can make the process less difficult with these key tips:

With the right real estate team, you’ll have the needed tools and resources to get the best offer for your inherited house. 

If you need to sell an inherited house quickly in Southern California, SoCal Home Buyers is a credible and experience Investment company that can buy your inherited home for a fair price, without any of the hassle of listing.

If the property you inherited is in need of a lot of work, or is out-of-state give us a call and let's talk.

We'd love to see if we can help out your situation.

Or, watch the short video below to learn more about us.

We buy houses from homeowners that need to sell inherited property in Los Angeles, Riverside, San Bernardino, San Diego, and Orange County. You can either fill out our online form below or give us a call at: 951-331-3844 to find out how we can help you with selling your inherited house today!

Selling an Inherited House in CA can be a complicated process. At SoCal Home Buyers we make the process fast, simple & easy, while paying you the highest off-market price possible. Click the button below to Request a fair, no-obligation cash offer on your Inherited house Today.