NAVIGATING SELLING YOUR PARENTS’ HOME AFTER THEY PASS AWAY
Introduction
The loss of a parent is a heartbreaking and emotional experience, no matter how young or old you are. To only add to the stress of the situation, you are also tasked with settling your parents' estate while still going through the grieving process.
It's not an easy position to be in after a parent passes away.
Keep reading for a step-by-step walkthrough of how to sell a house you inherited as seamlessly as possible.
Step 1: What is the current status of your parents' estate?
At the most basic level, the three ways to inherit a home from your parents are the probate process, a death deed transfer, or a living trust. Each approach has its own specific protocols and requirements to ensure a smooth transition.
Probate Process
Estates that are passed on through a will are subject to the probate process. Probate is a process wherein the court supervises all dispensing of property (including the house sale). This ensures that the intended heirs are given the right to the estate and that portions of any debts left by your parents are paid.
Probate after the death of a parent is a relatively lengthy process: depending on the state, it can take anywhere from several months to a year or more. In some states, the courts control how a home is sold in probate, so it may be helpful to seek the advice of an attorney.
Death deed
Death deeds, also known as beneficiary deeds, are one of the easiest ways to transfer property after the death of a parent. It ensures that property inheritance happens without going through the probate process; you can proceed with the house sale as soon as you feel ready.
However, the validity of these types of deeds varies by state. For some states, a completed transfer is all that is necessary; for others, a transfer is essentially useless if your parents failed to pass the property on to you in their official will.
Even though death deeds enable you to avoid probate, taxes on the home still need to be paid.
Living Trust
In a living trust, your parents are named trustees, and you are named the beneficiary. This makes the inheritance management process much simpler and quicker. A living trust is usually the best-case scenario in situations with multiple heirs.
Step 2: Identify all heirs, estate executors, and interested parties
Being an heir to your parents' home doesn't necessarily give you authority as a decision-maker when selling their house. Be sure to contact all heirs to establish who is named executor or personal representative. Sometimes the will or the probate court will actually appoint a personal representative to lead the decision-making in the selling process.
Any creditors should also be considered when notifying interested parties. These debts are often paid with some of the money acquired in the home sale. It's a good idea to request a title search from your real estate agent in addition to the information provided by the estate attorney.
It is typically easiest in situations with multiple heirs (for example, inheriting a house with siblings) when a single decision-maker is appointed to oversee the process. However, if no decision-maker is established, all heirs have equal share in deciding when and how to sell the home, which can often result in lengthy legal disputes.
Step 3: Be proactive about resolving inheritance issues and arguments
To ensure that more conflict doesn't arise in an already emotional situation, it's a good idea to proactively identify and sort out any potential disagreements that may arise.
Before moving forward, it may be helpful to get certain details sorted and out of the way; for example, establish who will prepare the home for sale, how proceeds will be allocated among heirs and family members, etc.
If you find that you're having trouble settling on an agreement, it may be worthwhile to hire a professional mediator.
Step 4: Seek help from an agent that specializes in selling inherited houses
When selecting an agent to help you navigate an inherited property sale, a few qualifications should be top priority: the agent has previous experience selling property after death, is empathetic toward the client, and is located in the same city as your parents' home.
Simplify the process by selling to a cash buyer
If you want to make the process as simple as possible, you can always choose to sell the home to a direct cash buyer. Here at Midwest Cash Offer, we'll buy your house and handle the entire home sale process as well as any associated risks. We'll keep up with any necessary repairs, calculate and pay any local government liens and taxes, and prevent you from losing money on realtor fees and closing costs.
It only takes a few minutes to fill out our Cash Offer Form. After you submit your inquiry, our team will review and write you a custom home estimate, evaluate your property, and give you a competitive cash offer for your home in a matter of days.
For sale by owner
According to a 2020 survey, the National Association of Realtors reported that 8% of homes sold were for sale by the owner. Choosing to sell your inherited property on your own is a huge undertaking that goes beyond distributing personal property and taking care of necessary repairs. Selling the home without the help of an agent would make you responsible for a myriad of other things, including dealing with potential buyers, working through the escrow process, etc.
Even though you may be able to eliminate agent commissions and realtor fees by choosing to sell the property yourself, it still may not yield the financial results you are looking to achieve. In fact, homes that were for sale by owner ended up selling for 26% less than homes sold by agents, according to the NAR.
Step 5: Organize the personal finances of your parents
Inheritance doesn't end with your parents' house; you are also responsible for tending to any debts and ongoing bills.
Gain access to necessary financial accounts and information
In the case of a direct debit, all your parents' bills are paid automatically. All you have to do is ensure the account balance is high enough to cover these charges. This will require you to gain access to your parents' bank accounts, which can be a bit more complicated if you don't jointly own the account or are not appointed as a payable-on-death beneficiary.
It is also crucial to gain access to your parents' monthly expenses so that you can manage them until the house is sold. This would require login access to their online accounts and forwarding any of their mail to you.
Title Search
Running a full title search can help identify any outstanding financial issues, such as liens attached to the home, reverse mortgages, etc.
Death certificate submission
Some creditors and bureaus require a copy of the death certificate to be submitted before moving forward. Some basic accounts and bills to stay updated on are:
Income and retirement accounts
Records of mortgage payments
utility bills
Medical bills
Credit card statements
However, once the house sells, you'll no longer have to pay these bills.
Step 6: Familiarize yourself with the house's insurance policy
Is the house going to be vacant until it sells? Keep this in mind when looking at the insurance policy. Vacant homes tend to be more susceptible to break-ins and other types of vandalism; as a result, most insurance companies do not cover damages caused by these types of instances.
If you want the house to be covered for these types of damages, you may need to get a vacant home insurance policy.
Step 7: protect and secure the vacant home
As discussed above, vacant homes are more likely to become vandalized or burglarized. Since the home sale process can be a bit lengthy, it's worth taking the time to make sure the house is secure during this waiting period. Here are a few of the measures you can take to prevent damage to the vacant home:
Find any documentation pertaining to legal and financial matters and put them in a safe place, as these documents are often crucial in the estate selling process.
Make sure that all valuables are identified and given to their proper heirs.
Regularly pick up mail to prevent an overflowing mailbox. If convenient, consider forwarding the mail to a regularly tended address.
Change the locks on the doors to prevent anyone who may have obtained a key over the years (neighbors, friends, etc.) from entering the home.
Security cameras are relatively accessible and are a great way to monitor the house remotely. Many cameras with motion detection and recording features can immediately notify you through your cell phone of any suspicious activity.
Step 8: What are the tax implications of this sale?
Some of the most common tax implications of the sale of inherited property are capital gains and estate taxes. These implications can be extremely important and nuanced, so you're probably better off seeking the help of an attorney and a tax professional to ensure everything is in line. Even though this sale comes with tax implications, you'll also receive tax breaks, potentially reducing any money currently owed on the home.
Estate and Inheritance taxes
Although estate and inheritance taxes are very similar to one another, they are two separate expenses that vary in how and to whom they are paid.
Estate tax is a tax on the overall value of the estate in question that is paid before anything else is passed on to the rightful heirs. Inheritance taxes are state taxes that the beneficiary pays from the inherited proceeds on the settled estate.
Capital gains
Capital gains are taxes on the difference between the sold price of the house and its initial purchase price. Essentially, any proceeds that come from selling your inherited property are subject to taxation through capital gains. However, tax breaks like the step up in basis can reduce the amount of capital that is subject to taxation. Step up in basis values the home at the value of the home on the date of death as opposed to the original purchase price.
Step 9: "Declutter" personal property
Before selling your parents' home, you'll need to go through and clear out all personal property inside the house. Clearing a house after death includes distributing any property to its appropriate heirs. Depending on the state, all property may need to be inventoried for court records before moving forward.
Once all heirlooms and personal property have been distributed, it's likely that there will still be a good amount of stuff that needs to be dealt with. At that point, you may want to consider hosting an estate sale or auction.
Step 10: Begin prepping the house for sale
There are a few options when it comes to actually getting the house ready for sale.
At the most basic level, you'll want to do a deep cleaning of the house and possibly take care of any necessary repairs.
Selling "as is" is another option. You may end up with a little less money, but disclosure rules tend to be much less strict for properties that have been inherited. However, you may be held responsible for big issues that aren't initially disclosed in the sale.
Be sure to disclose if a death had occurred in the house. Disclosure requirements vary from state to state.
Step 11: List and sell the house
One of the best ways to avoid pricing based on emotion is by having your agent compile a comparative market analysis, which prices the home by looking at the value of other recently sold homes, called comps. Another factor that should be considered is the tax liability and implications that come with selling an inherited house—selling the house for a little less than the comps can help you save money by avoiding capital gains and getting it sold sooner.
Conclusion
Looking for a faster and simpler way to sell your inherited property? Midwest Cash Offer gives you the opportunity to sell your home in a way that fits your life situation, no matter what it may be. With 24/7 support and an easy one-time payment, selling your inherited home has never been more convenient. Visit our homepage for more information or fill out our Cash Offer Form to get started with your journey.
