Published May 3, 2022

Selling Inherited Property: What You Need to Know

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You’ve inherited property and are not sure what to do next. Here is what you need to know to make the best decision.

Why do you want to sell?

Selling an inherited family home is complicated. There may be several dynamics at play and it’s important to be honest about why you are selling. If there are other family members involved in the decision, agreeing on the why will help minimize family drama. 

Perhaps, the house is the cause of family strife and you want to find the fastest, most painless exit.

Do you want it to remain in the family? If so, which family member is best positioned to purchase and ensure it stays within the family? 

Does it matter what happens to the house after you sell? 

What condition is the house, and do you care whether the next owner invests in a remodel or converts it into a rental property? 

Do you just want to get the maximum amount of cash? Or do you want to sell it as quickly as possible?

First Things First: How Soon Can You Sell Inherited Property?

The ownership of an inherited property typically must be transferred to heirs through the probate process. In most counties, this process begins by going to the county chancery clerk office. The process will depend on several factors, including whether or not the deceased left a will. 

Depending on the will or lack thereof, the time required can also be affected by the number, location, and motivations of the heirs. The process can take days or years, depending on the complexity of the situation. 

Can you sell an inherited property before probate is completed?

In order to sell an inherited property there must be a buyer, and any buyer will require a clear title. Title companies play an important role by ensuring a title is not clouded, meaning there are no other parties who could assert a claim or encumbrance on the property. 

Before transferring ownership, title agencies will make sure no lenders, contractors, local governments, state governments, the IRS, Medicare, state medicare, nursing homes, or any other party has a claim against the property. Just because probate is complete does not mean there is a clear title. Oftentimes, a state agency will have provided health care benefits in return for an interest in the property. In other cases, there may be unpaid federal taxes that could cloud the title to a property. 

If you have inherited a property, you may not know about such debts until you go to sell the property. It can be a good idea to purchase a title search through a title agency or real estate attorney to see if there are any issues that need to be resolved. 

Selling Inherited Property: Your Options

You have three primary options when selling an inherited house. 

Selling an inherited property to a family member or sibling

There is often one sibling or family member who wants to own or rent the house for either emotional or financial reasons. This can get emotional, so you should have a rational process to protect the family relationships from resentment. Agree to get a third party appraisal while the family member gets a pre-qualification from a lender. To ensure the family member is serious, she could pay for the appraisal cost. You can get a realtor’s opinion, but keep in mind the realtor is incentivized to get the listing. 

Oftentimes, the sibling who wants to purchase the inherited house cannot afford it. Avoid creative financing (i.e. rent to own) with a family member. Creative financing rarely ends in success. The most common mistake families make is renting an inherited property to a family member. If you choose to do this, you also need to decide who will have the responsibility and authority to evict the family member. In our experience, there is a high likelihood that such arrangements end in a courtroom. Make sure the sibling has a lease and there is someone with the authority to evict. 

Selling an inherited property via a realtor

Listing the property with an agent is often the best way to get the most cash from the house, but it’s not always the fastest or the most painless. If the inherited property has deferred maintenance, the buyers will likely have inspections that will lead to another round of negotiations or a canceled contract. Many inherited properties need expensive updates and the inspection is a common reason for contracts to fall apart. 

Make sure someone has the responsibility and authority to negotiate during the process, but be prepared for the closing to take time as most purchases will be contingent upon the buyer’s financing and home inspection. You’ll also need to assign responsibility for getting the house ready for listing photos. The right agent can provide helpful guidance and negotiation through the process, but expect to pay 6% of the proceeds in commissions for their expertise.

You might consider remodeling the property to maximize the sales price, but know this option can also maximize your pain. If the family chooses to do this, make sure and answer the following questions:

  • Who will have the authority to make the design and budget decisions? 
  • Who will manage the contractors and permits? 
  • If a family member is contributing project management or construction skills, how will they be fairly compensated for their time? 
  • How will you manage disagreements and resentment between family members? 
  • Who will fund the construction and who will assume the risk of going over budget?
  • Who will fund the holding costs such as utilities, mowing, and property taxes? 
  • Are all the stakeholders in agreement on the timeline and who will have responsibility if the remodel isn’t completed on budget or on time? 

Selling an inherited property for cash (no realtor)

Selling an inherited property for cash without a realtor is a popular choice because it is often the fastest and most painless option. With legitimate cash buyers, there won’t be any inspection or financing contingencies so they can close the sale of the property within one week. 

Cash buyers can be an especially good option if the house needs work. The right cash buyer is able to add value through construction expertise that neither you nor homeowners can create. 

Beware, however, of wholesalers. Wholesalers don’t add value to your property by investing in the property. Wholesalers don’t flip houses. Wholesalers flip contracts. Wholesalers act as a middleman by negotiating a contract with you and then selling (or assigning) that contract to an actual flipper. You can put the most money in your pocket by bypassing wholesalers and selling directly to a cash buyer who is going to add value to the house. 

Many of the “We Buy Houses” yard signs you see at intersections are actually wholesalers. Ask any cash buyer for examples of houses they have purchased and remodeled. If they can’t provide multiple examples, they are likely a wholesaler who is going to sell your contract to someone else for a profit. If the wholesaler can’t find a buyer for your contract, they will walk away from the contract. 

Instead of selling to a middleman, bypass the wholesaler and sell directly to a reputable flipper.

Considerations When Selling Inherited Property

Market Conditions

If you consider delaying the sale of the property for better market conditions, keep in mind the costs of holding a property. In addition to property taxes, mowing, utilities, insurance and maintenance, vacant houses don’t age well and are very vulnerable to vandalism. This is why it’s so expensive to get insurance on a vacant property.

Renting is an option, but there are significant holding costs with that, too. Unless you intend to hold the property for over 5 years, the best time to sell is probably now, because the condition of the property will only deteriorate unless someone is caring for the inherited house. You can always take the cash and invest it in another investment vehicle that doesn’t require mowing, plumbers, and property insurance. 

Condition of Home  

When you inherit a house, understand water is the enemy. Water is the enemy of all houses and especially so in non owner-occupied houses. Termites and mold are the biggest risks in vacant houses and the cause of both is water. If you inherit a house, keep the gutters cleaned out and downspouts flowing away from the foundation. Most water damage can be traced to poorly maintained gutters, but that’s not the only source. 

Make sure pipes are properly winterized in any vacant house, because a burst pipe can go unnoticed for days or weeks when a property isn’t occupied. Mold grows really fast where heat pumps are not circulating air. If there are upstairs bathrooms or air conditioning units in the attic, be sure the pipes are turned completely off because the worst kind of leak is the one that’s on the second floor. 

The second worst is the one in the crawl space because termites are subterranean and bore vertically from the ground to the roof. If you are renting a house, the renters have no reason to check the crawl space for water intrusion and that is of critical importance. If the roof is old, consider replacing it, because this will both protect the property and add value to it. 

Squatters in Inherited Property

Squatters are people who live and often do business in vacant houses. While you are deciding on how to sell your inherited house, keeping the yard mowed and lights on will help deter squatters. If you find someone living in the property, do not confront them without authorities present. Squatters have rights and you can be liable for handling the situation improperly. Worse, there might be drugs or drug related business occuring that could put you in harm's way. 

Have Questions About Selling Inherited Property?

There’s a lot to consider, so start by answering the first question. Why are you selling? If you choose to sell with an agent, choose a quality agent who will prioritize your interests. If you are determined to sell to a family member, make sure you do it in a professional way so the house doesn’t end up damaging your family relationships.  

If selling to a cash buyer, choose a reputable firm like New Again Houses® that has the expertise to close the transaction quickly and add real value with a quality remodel.