If you’re selling an inherited property in California, there are tax considerations to think about, and if you’ve inherited a share in a house the matter can be even more complicated. Furthermore, the sale of a home with family history can be an emotional journey, which makes proceeding with care important.
While you have options when it comes to selling an inherited house, selling to a California real estate investor (like us) for cash is the simplest and fastest approach there is. And because we buy properties as is, you can leave the fixing up to us.
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Selling inherited property in California: A guide
What happens when you inherit a house in California?
To begin, you may feel an emotional connection to the inheritance, and you may have no idea how or where to start when it comes to selling a house that you’ve inherited. In fact, it’s not unusual for people who inherit homes to be at a loss in terms of what comes next. If you need to sell inherited property in California quickly, you’ll need to know a few basics.
First, your options for selling the inherited property include selling the house on your own, going through a realtor, and selling to a real estate investor.
If you choose the real estate investor, you can expect to sell your house quickly for a fair cash offer and bypass the many complications that usually go with selling an inherited home via the other methods.
- You can go through a Real Estate Agent
Working with a real estate agent who has considerable experience selling inherited properties comes with all the following advantages:
- The realtor will help you avoid conflicts with any additional heirs.
- The realtor will help you make the right decisions for you throughout the sales process — with an eye toward the big picture, which is maximizing your return.
- The realtor will help you smoothly navigate the complex process of selling an inherited property.
- The realtor has the insight to help you complete the process as effectively and efficiently as possible — in light of the many complications that often arise.
By listing your home with a realtor, you leave the complicated sales process in their knowledgeable hands.
However, hiring a realtor in California to list your inherited home might involve paying significant commissions and fees, which can impact the overall proceeds you receive from the sale.
These expenses could reduce the amount of money you ultimately receive compared to selling the property on your own or through alternative methods.
2. You can sell the home yourself
You also have the option of selling your home yourself, which is referred to as For Sale by Owner (FSBO). In fact, the National Association of Realtors says that a full 10% of home sales in the United States were FSBO in 2021, which is up from 7% in 2020.
This approach comes with pros and cons of its own.
For example, selling your home as “For Sale by Owner” (FSBO) gives you complete control over the sales process, allowing you to set the price, market the property according to your preferences, and negotiate directly with potential buyers.
This autonomy can be advantageous if you have a strong understanding of the local real estate market and are comfortable handling the various aspects of the transaction.
However, opting for a “For Sale by Owner” (FSBO) approach can require a substantial amount of time, effort, and expertise on your part. You’ll need to handle tasks such as pricing the property accurately, creating effective marketing materials, coordinating showings, managing negotiations, and understanding the legal and contractual aspects of the sale.
Without the guidance of a professional realtor, you might encounter challenges and potential pitfalls that could lead to delays, legal issues, or a lower sale price than you initially anticipated.
3. You can sell to a Real Estate Investor
If you’re in the market to sell the house you inherited as quickly and efficiently as possible, working with a real estate investor like SoCal Home Buyers is the way to go.
We take care of all the details, guiding you through probate and ensuring that you get the best cash offer we can make on your property, and speed up the process considerably.
You’ve lost a loved one, and the strain of dealing with your grief and the hassle of selling property at the same time can make the ease of working with a real estate investor an excellent option to ease the burden your home may be causing.
Looking to sell your inherited house fast?
At SoCal Home Buyers, we understand that many people who inherit something as personal as a home are torn about what comes next.
We are professional real estate investors who have the knowledge, experience, and, most importantly, the compassion to help you get up to speed on everything you need to know about selling your inherited home without the complications of listing.
Here’s what our client Isabel W. said after selling her inherited home with us:
As one of Southern California’s most trusted home buying companies, we’re able to walk you through an otherwise complicated process, and help you remove the burden your inherited home may be causing you.
We’re an excellent solution if you live out of state, don’t want to pay two mortgages or simply don’t have the time to keep up on the property. If you’d like to learn more about how we can help you sell your inherited home without the hassle of having to list it, we’re ready to help.
Call us Now: 951-331-3844 or simply Request a fair cash offer below and a representative from our team will be in contact with you shortly:
Is there a time limit on selling inherited property?
There’s no time limit on selling an inherited property. Not everyone is ready to sell as soon as they inherit, and this is understandable. Once probate is settled and you’re named the legal inheritor, the timing is up to you.
Should I sell my inherited house or rent it out?
Is it better to sell or rent an inherited house? The answer is a resounding, “it depends” since each option comes with pros and cons.
The pros of selling an inherited home
The pros of selling an inherited home include the following:
- Financial Gain: Selling provides immediate cash for various needs, investments, or debt reduction.
- Avoid Maintenance Costs: Eliminate ongoing expenses like repairs and property taxes.
- Asset Diversification: Convert property value into diversified investments.
- Emotional Relief: Alleviate emotional ties and memories associated with the property.
- Estate Simplification: Streamline asset distribution among heirs.
- Market Timing: Capitalize on favorable market conditions for better sale outcomes.
- Tax Benefits: Potentially avoid long-term tax obligations from prolonged ownership.
- Decision Flexibility: Make choices uninhibited by property management responsibilities.
The cons of selling an inherited home
The cons of selling an inherited home include all the following:
- There are significant tax implications to consider, including capital gains tax.
- People who inherit a property can feel an emotional tug to keep it in the family, which can leave you with mixed feelings about selling the home in the first place.
- You have to consider market fluctuations and whether it’s a good time to sell.
The pros of renting your inherited property
Some people who inherit property are very interested in keeping it in the family or simply don’t want to sell, and there are advantages and disadvantages to renting the property out.
Let’s consider the advantages:
- By making the property a rental, you turn it into an investment property that can become a steady source of income.
- You keep the property in the family.
- You avoid the challenges associated with convincing multiple heirs to sell their share.
- Because California has no inheritance tax, renting the home out allows you to avoid the tax burden associated with selling it.
The cons of renting your inherited property
As a rental property owner, you’ll also face considerable responsibilities that can translate to disadvantages:
- You will be responsible for ensuring the property is up to code as a rental.
- You will be responsible for making all necessary home maintenance and repairs as they arise.
- You will be responsible for addressing any issues your tenants encounter, which can end up being a lot more work than you bargained for.
- If you later decide that it’s best to sell the rental property, you may have a tenant lease to deal with, and selling rental property in California comes with tax complications of its own.
Do I have to report the sale of inherited property?
You do have to report the sale of any inherited property to the IRS for the year that you sell it — there are taxes associated with any profit you make above the property’s value when you inherited it. The tax liability related to inheriting property in California is naturally complicated, which makes proceeding with professional guidance a good plan.
Do you have to pay taxes on inherited property that you sell?
In the State of California, you won’t owe any inheritance tax on the property, but if you sell the home, you’ll likely owe capital gains tax on any value that exceeds what the house was worth at the time of your relative’s passing.
Tax concerns become more complicated from here.
You may have to pay income tax on the sale of an inherited property. This will depend on whether or not you turn a profit on the property — or sell it for an amount that exceeds its fair market value at the time your loved one passed away. Other deductions that can be taken before profit is calculated include:
- The cost of any home improvements you made
- The selling costs, such as the commission to your real estate agent
This establishes how much profit or loss you experienced in the sale of your inherited property, which are called capital gains and capital losses. If you took a loss, you won’t owe any income tax on your inherited property. If you made a profit, however, you’ll be taxed on the proceeds from the sale according to how long you’ve owned the property.
- Less than a year: If you held on to the house you inherited for less than a year, you’ll be taxed at the same rate that you are on your regular earnings.
- More than a year: If you kept the property for more than a year, the profit you made will be taxed at a considerably lower rate.
How much tax do you pay when you sell an inherited house?
When you inherit a house, you typically aren’t taxed until you sell it — only then will you pay capital gains tax on any profit made. This involves a step-up cost basis, which means you will pay tax only on the property’s increase in value since the time of your inheritance.
The taxes on selling an inherited house
When you earn money or your assets increase, the government generally expects you to pay tax on your gains, and inheriting a home in California is no exception. Depending on where you live in the United States, state taxes, estate taxes, and inheritance taxes can apply, but this isn’t the case in California. There are, however, other taxes to consider.
California property inheritance tax
You’ll be very glad to learn that there is no inheritance tax on real estate in California.
While this is one concern you can cross off your list, it’s important to note that inheritance taxes vary by state, and if you are a California resident who inherits a property in one of the states that does impose an inheritance tax, it will apply to your inheritance.
Capital gains tax on inherited property California
If you decide to sell the house you’ve inherited, you will need to address the matter of capital gains tax, which comes into play only if you make a profit on the sale. When it comes to paying taxes on selling inherited property in California, this is your primary concern.
Capital gains refer to profit.
If the sale price you receive on your inherited property exceeds its value at the time that your relative died and left it to you, capital gains tax may apply to your profit. This is known as the step-up basis, and it allows you to subtract specific costs — such as those related to improvements and sales expense — from your profits before they’re taxed.
How do I avoid capital gains tax on inherited property in California?
You may want to avoid paying capital gains tax altogether. You have three options:
Live in the house
If you live in the house you inherit for at least two years prior to selling it in California, you’re off the hook for both federal and state capital gains tax in most situations. If making the home you inherited your primary residence works for you, it can be very helpful financially.
Rent out the house
Another option when it comes to avoiding capital gains tax is turning the home into a rental, which bypasses the issue of capital gains tax and allows you to benefit from the rental income.
Sell your property as is
“I want to sell my house fast,” you say, “but don’t know how to make that happen.”
At SoCal Home Buyers, we not only hear you, we’re here to help. We buy houses as they stand, which means you won’t need to make repairs, to tidy the place for showings, or to address any of the other hassles that go with selling a property.
Selling your inherited home as is to us helps take all the pressure off you. We streamline the process by conducting our own inspections and making our best offers on the spot, which makes selling your inheritance property about as easy as it gets.
Call us Now: 951-331-3844 or simply Request a fair cash offer below and a representative from our team will be in contact with you shortly:
How to sell inherited property
You have options when it comes to selling an inherited house in California. Let’s take a closer look at the possibilities.
1. Reach out to a professional real estate investor
You’re selling a house you inherited, and you naturally want the process to go as seamlessly as possible. The professional real estate investors at SoCal Home Buyers know how challenging selling an inherited property can be and are here to help.
There’s no need to spruce the place up, to endure the hassle of putting the place on the open market, or to do any of the rest. We offer a one-and-done process that allows you to focus on what comes next in your life.
Selling your inherited home to a real estate investor for cash can be an ideal choice, especially when any of the following apply:
- You don’t live near the inherited property and would like to avoid the inconvenience of a long-distance responsibility.
- The property you inherited isn’t in ideal condition for sale.
- You’re interested in skipping the hassle of listing and selling the property quickly.
2. Sell the inherited house yourself
Many people sell inherited homes themselves, and it can be a decent option.
You should know, however, that the amount you’re able to sell for will likely be less than it would be if you worked with local agents who know the market. The legal process for selling a home on your own is complicated, which makes this an option you shouldn’t jump into without careful consideration.
The basic steps when it comes to selling an inherited house yourself — or for sale by owner (FSBO) — include the following:
- Pricing the property: this involves paying attention to market trends and doing neighborhood research.
- Marketing the property: which means skipping the multiple listing service that only real estate agents can use.
- Holding an open house.
- Negotiating: Negotiate a fair price with any interested parties, including addressing matters like closing costs and buyer stipulations.
- Paperwork: Process the extensive paperwork involved.
- Closing: Successfully navigate the closing and escrow.
When you sell a property yourself, it’s important not to lose sight of all the details you’re responsible for managing — and there are a lot of them.
3. Work with a real estate agent
Working with a real estate agent is a safe option. You can count on your professional agent to handle the details and keep things moving in the right direction. There are, however, significant sales expenses involved, and the process is generally quite lengthy.
4. Sell the inherited property to family members
Inheriting a house with siblings tends to significantly complicate the matter of selling it.
For example, you may want to sell, but if you and your siblings can’t come to an agreement on the matter, it puts you in a bind.
Forcing the sale can lead to bad blood between family members at an already difficult time. This generally makes reaching a mutually acceptable agreement worth the effort. Selling your share of inherited property to a sibling may be a good compromise.
The documents required for selling inherited property
Selling an inherited house is a complex process that requires careful documentation regarding the transfer of ownership. This is why, if you’re inheriting a house in California, you’ll need to access specific documents, and the better prepared you are, the smoother the process will be.
The manner in which the inheritance comes to you will help determine the documents you need to sell the property.
The most straightforward path toward the inheritance of a home is through a living trust, which requires no probate court approval.
In fact, the living trust document makes the property yours to sell whenever you choose to do so.
A transfer-on-death deed is a document that allows ownership of a house to pass directly from the original owner to someone else without going through the probate process.
The transfer-on-death deed fills the same role that a living trust does when it comes to the inheritance of a real estate property, but it does not have as many applications.
When a home is a person’s primary asset, a transfer-on-death deed tends to be the right choice in terms of leaving it as an inheritance, while a living trust is often better suited to someone with a more considerable estate.
As the new owner of an inherited property, you need to know where the mortgage stands, and the responsibility of continuing to pay the mortgage also passes to you. If there are any lingering financial concerns related to the mortgage balance, now is the time to address them.
In order to obtain mortgage papers from the mortgage company, you’ll need documentation that identifies you as the owner by inheritance.
If you inherit a property through probate, you will very likely need your loved one’s death certificate to begin the probate process. You can access a copy at the California Department of Public Health — Vital Records.
Copy of the Probated Will
If your inheritance comes to you through the probate process, it means that your loved one left you the property in their will or that you inherited it as a result of California’s laws of inheritance — if there was no will or if the will did not address the property. This is generally the most time-consuming, least direct, and most costly inheritance method.
Probate refers to the court process in which the assets of someone who’s died pass to others. If the decedent — or the person who passed away — did not name an executor of their will, the court will appoint one to help guide the probate process, including:
- Assessing the decedent’s assets
- Paying off the decedent’s outstanding debts and liabilities
- Distributing what’s left to named beneficiaries — or in accordance with California’s laws in those instances when the will fails to address specific assets or when there is no will
Probate can take a considerable amount of time, but once it’s finalized, you’ll need a copy of the probated will in order to sell the property you inherited. You can obtain this document from the court in the California County where your loved one last lived.
Sale of inherited property when more than one party is involved
If you’re not the only owner of the inherited property that you’re interested in selling, it complicates the matter considerably. Ultimately, you’ll all need to agree to sell before the property can be sold, and reaching an agreement can be a challenge. Selling a property with multiple owners requires more caution and care, but it can be done.
Each of the following can become a sticking point in the sales process when multiple people inherit the property involved:
- One of you may not be ready to let go of the property for sentimental reasons when the rest of you have made your peace with the idea.
- Agreeing to an asking price or to an offer becomes more complicated.
- Simply coordinating the sale can be a challenge.
- Selling a property together as a group requires considerable organization and effort.
- The more people there are involved in the sale, the more potential there is for things to go wrong.
Making it work
If you believe that the home you’ve inherited with other people should be sold, there are steps you can take to help get your co-owners on board.
A cash offer from a real estate investor
A great way to make your case is by letting the other owners know how easy the process can be if you sell your property for cash to a professional real estate investor. Sharing all the following benefits may help sweeten the deal for any holdouts among you:
- Real estate investors buy properties as is, which means you won’t need to make costly repairs or put a lot of effort into selling.
- Real estate investors work quickly — making fair cash offers on the spot after conducting property inspections — which speeds the process up immensely.
- Real estate investors are interested in making the process as painless and profitable for sellers as possible, which — in turn — allows them to make deals quickly and keep their investments moving forward.
- Real estate investors have the insight, experience, and resources to accurately assess a property’s value and to make well-considered cash offers that often make selling less difficult.
- Real estate investors take the question marks out of selling an inherited property. They accept all the risk while you proceed without the burden and responsibility of co-owning an inherited property, which could be more than any of you bargained for.
Taking a cash offer to someone who owns an inherited house with you could help you make your best case without saying a word.
The real estate agent route
Working with a real estate agent generally takes significantly longer and is more costly than other approaches. Having an experienced real estate agent on your side, however, helps to ensure that the many details will all be well taken care of and that the sale will proceed as smoothly as possible.
Any holdouts in your group may be comforted by the idea of bringing in a real estate agent, which can work to your advantage. A point you may want to share with your co-owners is that houses sold by real estate agents — as opposed to houses sold by their owners — statistically bring higher prices.
The co-owners of your inherited property may be interested in cutting out the middleman and selling the place yourselves, which is referred to as for sale by owner. This is the most challenging approach, but it does keep things directly in your collective hands, which may inspire those with lingering doubts to get on board.
Is inheriting rental property in California any different than inheriting residential property?
If you are inheriting rental property — or investment property — it can indirectly affect the way you’re taxed on the inheritance.
Using the property as an investment
You don’t owe any taxes on a property that you inherit until you decide to sell it.
If you choose to sell the rental, the only potential tax you face is on any profit you make, which means any amount that exceeds the value of the rental at the time of your loved one’s death, the cost of repairs and maintenance that you put into it, plus any sales expenses such as the realtor’s commission that you paid.
You’ll be required to pay capital gains tax on this profit, and the amount will depend upon the amount of time you keep the property before selling.
If you owned the inherited rental property for less than a year, you will be taxed at the same rate that your income is. If, however, you kept the rental property for more than a year, you’ll be taxed at a set rate that is based on your tax bracket, which will be considerably less than your income tax rate.
If you continue to use the investment property that you inherited as a rental property, you’ll owe tax on the income it generates. In the United States, nearly all income is taxed, and rental income is no exception.
Using the property as a residence
if you don’t use the investment property that you inherit as a rental, you won’t owe any tax unless you choose to sell, and at that point you’ll be taxed on your capital gains — or any profit you make — as described above. This is true whether you make the property your main residence, you use it as your extended family’s vacation home, or it stands empty.
You should know, however, that if you make the investment property that you inherit your primary residence for at least two years before you sell it, you’re likely home free in the tax department and won’t be required to pay any capital gains tax.
Show me how to sell my inherited property fast!
At SoCal Home Buyers, we are well aware of how confusing selling an inherited property can be, and we understand why you might be motivated to do so quickly. We are real estate investors with an impressive track record for helping people in situations just like yours sell their inherited properties with the confidence of knowing they’re in good hands.
The process involves just a few simple steps:
- Give us a call at 951-331-3844—or fill out the short form below—to request your fair cash offer.
- Await our prompt response to discuss your property in greater detail and schedule a one-time inspection that allows us to offer the highest amount possible.
- At the time of the inspection, our in-house inspector will quote you a fair cash offer, and if you’re on board, you can consider your home sold!
- Choose your closing date, and leave the rest to us. You can choose payment via check or money order. It simply doesn’t get any easier.
Can the majority rule in selling an inherited property?
Yes, if more of you want to sell the inherited property than don’t, you can take the matter up in court, and the court will rule on the side of the majority — barring a compelling legal reason for deciding otherwise. But this fails to take everything into account.
If you inherited a property together, you’re likely siblings or close relatives, and taking one another to court in the face of a significant loss like the death of a loved one is something you should only turn to as a last resort.
This is a vulnerable time for everyone involved, and it’s not unusual for families to fracture over inheritance concerns. Avoiding this outcome is obviously preferable.
The best path forward is exploring your best options, taking everyone’s opinion into careful consideration, and trying to find a middle ground — which could mean allowing yourself to be bought out, attempting to buy out any holdouts, or considering innovative alternatives that might work for everyone.
Not pushing the matter is often the best strategy. In the end, it might take some of your co-owners longer to come around to the idea of selling, and giving them the space they need to do so can prove invaluable.
If you sell inherited property, is it taxable?
If you sell an inherited property in California, it’s generally not taxable. The only taxation involved is on the capital gains, which refers to any increase in the property’s value over its value at the time of your relative’s death — once specific costs are subtracted.
If you owned the inherited property for less than a year before selling, you’ll be taxed on your capital gains at the same rate you’re taxed on your income. If you owned the property for more than a year, however, you’ll be taxed at a special rate that is less than the rate your income is taxed at.
And if you used the property as your primary residence for at least two years, you won’t be taxed on your capital gains at all.
Is selling inherited land any different than selling an inherited home?
In general, there is no difference between selling an inherited home and selling inherited land. You won’t be taxed on either property unless you sell, and you’ll only be taxed on the profit that you clear — over the value of the property at the time of inheritance.