Are you going to inherit a property you cannot afford to keep? Is it in probate? Probate is a legal process by which the estate’s debts are settled. It also ensures all beneficiaries receive what is promised to them in the will.
You can reject your claim by signing a disclaimer of interest, but a property is not something you just set aside. It has value, and you can sell it, even in probate. There are strict sale procedures outlined by the probate court and real estate law in your area. You may want to check with these first, but here are the basic steps to sell a house in probate.
Step 1: Hire a Probate Attorney
A probate attorney advises you and helps prepare legal documents. They can represent you in probate court, sparing you the stress, and handle important matters involving title, insurance, and tax returns.
If you hope to sell, and the house is in good shape, a real estate agent who knows the ins and outs of probate can also help. They can evaluate the condition of the property and assess what needs to be done to make it sellable. They also recruit appraisers and inspectors and navigate buyer negotiations on your behalf.
Steps 2 and 3: Appraise Property, and File a Petition with Probate Court
To sell a property in probate, you must file a petition with the probate court. With your petition, you must also provide an appraisal that estimates the current value of the property. It is only with the court’s approval can you list the house on the market or auction it off.
Step 4: List for Sale
If you decide on an open market sale, offer buyers disclosure. You must disclose the house is in probate, all material issues, and that the purchase agreement is dependent on approval from the court. Waiting for court approval can add a month or more to the sale timeline; so will repairs and necessary upgrades.
If a buyer makes an offer, collect a 10% deposit from them.
Steps 5 and 6: Petition Court for a Hearing, and Advertise the Sale
Petition the court to confirm the sale. The court (or you) publicizes the date in local news to give others a chance to bid on the property. This is to get the best price for the estate, which helps if there are debts to pay.
Should someone outbid your prior prospective buyer, you will refund them their 10% deposit. The winner will present a cashier’s check for a deposit to the court. If the court accepts a buyer’s bid, their deposit applies to the purchase price.
Step 7: Close on the Sale
Only the executor or the court-appointed representative can sign real estate documents. This is on behalf of the deceased. Check the legal description of the property before the deed is recorded with the county.
Make sure the buyer’s financing is sufficient. The full amount goes into the estate fund, and once the debts are paid, the remainder of the funds is divided among the beneficiaries.
Step 8: Report Sale to IRS
You must pay capital gains taxes from the sale of an inherited property. The IRS taxes the difference between the fair market value and the price at sale.
For example, if the house is valued at $200,000, but you sell it for $250,000, you pay capital gains taxes on the $50,000.
There are ways around paying taxes, and you can ask your probate attorney for solutions.
Need to Sell Fast? Skip the Hassle
You can forgo some of these steps by selling the inherited property to an investor. Our investors have knowledge and experience buying real estate in probate. They will buy the house “as-is,” whether it is degraded, vacant, or mid-renovation, for cash.
They also pay all closing costs and fees associated with the sale. You choose the closing date, which can be as soon as you have the court’s approval of the investor’s offer.
