With an average cost of $1,784 per month, housing is the largest expense for many Americans. So when you find yourself inheriting a home from your parents or other relatives, you either feel relief or a bit of dread because owning property is such a huge responsibility. If you feel more of the latter, don’t worry, we’ll talk through everything you need on how to sell a house your inherited in Texas.
Your parents or your partner’s left you their home. It’s bittersweet because they still found a way to take care of you and your family even when they’re long gone. The house is their legacy, and you could also pass it on to your heirs. It’s a fixer-upper, but it’s manageable now that you’re no longer renting or paying a mortgage.
The opposite is that instead of a fixer-upper, you inherit property that is rundown, and it’s looking like it’s due for major renovations or a rebuild. Plus, it’s far from work or school and still has a mortgage on it. Things you would not like to commit to as of the moment. It doesn’t fit your current lifestyle.
You have decided to sell and not live in the house. How do you go about it? How to sell a house you inherited? While this blog explores the options, we highly recommend seeking the advice of a lawyer.
What Happens In Texas When You Inherit A Property
Before you even get the home, there will be a several month legal process in order to transfer ownership.
Probate
The probate process is a legal process in which the probate court in the jurisdiction of the deceased reviews their will to determine whether it is authentic and valid. Probate also refers to administering a deceased person’s will or a dead person’s estate without a will. In Texas, the probate process takes about six months. The presumed heir or executor must maintain the deceased’s property by paying property taxes, utilities, and vacant home insurance.
Taxes
Texas does not have inheritance taxes. But if the estate’s taxable income is worth over $5.34 million, you might have to pay federal estate taxes. Federal estate taxes are taxes on property transferred from departed persons to their inheritors. What is inherited property? Inherited property could be stock, real estate, cash, or other assets. The average tax rate paid is 17%.
Evaluating The Inherited Home
Once the property is in your name, you will want to evaluate what you’ve actually inherited.
Is There A Mortgage?
Perhaps you’ve been renting and haven’t been lucky getting approved for a mortgage. It’s silly because rent is usually higher. Your personal finances are in order, and you can obviously make the payments. Unfortunately, a family member suddenly dies. They leave their primary residence to you along with the mortgage. Upon checking with the lender, it seems you can keep the original terms – or not. Or you find out that they have a reverse mortgage, which is not what you’re aiming for. They offered to refinance or revise the loan. But ultimately, the property is not your cup of tea, and you would rather sell the home and use the sale of the inherited house to buy your dream home. You reach out to a lawyer to help you on how to sell a house you inherited.
Are There Any Liens?
What if, instead of a mortgage, you discover that there is a lien against your inherited property? As if losing a loved one isn’t bad enough, here comes a creditor threatening to sue because your in-laws, who left your partner the house, apparently have an unpaid debt. They demand that you and your partner continue making payments or pay the debt in full to avoid legal action and foreclosure. You don’t want anything to do with this obligation. You would rather sell the house. But selling a house you inherited with a lien is not an easy feat. Your real estate agent and attorney advise you to sell to a house buying company that will make a cash offer on the property with its encumbrances. The other piece of advice that they give is negotiating a sale price with the creditor, so you can keep the inherited home if you want to.
Does The Home Need Repairs?
You found out that you’ve inherited your favorite aunt’s home; you were her favorite, too. From what you remember, it’s a bit of a drive, but you’re still excited. Your jaw dropped to the floor upon entering. You didn’t expect that she would leave it in such a state.
The roof is leaking and mold is visible. You dare not even go into the attic. There’s apparent water damage on the walls. The whole house could use a lick of fresh paint. Flushing the toilet is a nightmare. Everything needs replacing or repairing.
You say a silent prayer of forgiveness to your aunt. You’re thinking of talking to a real estate attorney about selling an inherited home. You were not planning on moving this far and spending a fortune on renovations.
Before You Sell The Home
Let’s say after your evaluation of the home and your options (like moving into it or renting it out), you decide that you best step is to sell the home. Here are some things you should do first:
Remove All Personal Property
You made the difficult decision of selling your inherited property. You were not on good terms with the previous owners and would like to close this chapter properly. As heir, it is your responsibility to care for the home until you have sold it. It would be best if you were on top of any fees and maintenance like lawn care. You may also reach out to a professional estate sale company if you need help disposing of unwanted items.
Review The Insurance Policy
Unlike a mortgage, the deceased homeowner’s insurance on the inherited property does not pass on to you. The best way to go about this is to call their insurance agent and get a policy of your own. The same thing with the buyers of your inheritance; they would need to contact your insurance and get a new policy.
Secure The Home
We understand that you may be grieving, and the last thing on your mind is getting vacant home insurance and spending time securing your newly inherited home. While in transition of selling your property, take these steps to avoid insurance canceling the policy and other hassles in the future:
- drain the water system;
- forward the mail;
- make sure all security devices and locks are working;
- install a CCTV monitoring system.
Selling The House
There are a few methods to selling the house. Each one has advantages and some disadvantages.
Selling On The Market
This is the method of selling a home most people are familiar with. You will find a realtor to list your home on the market. This is a good option if the inherited property has no lien against it and you are willing to finance the repairs needed before the sale. This option will typically get you the best market value, but you it will take some time and you will have to give up some of your profits to fees in closing.
Selling To An Investor
If you want to sell the home as-is, or you live in another state and don’t want to be troubled with the tedious process, the next right thing is to sell to a cash home buyer or a real estate investor. This is the best option if you want to get close to market price but without the expense of fees or repairs, or if you just need to get a deal done quickly and without the risk of buyers backing out.
Taxes On The Sale Of An Inherited Home In Texas
Remember when we mentioned that there was no inheritance tax in Texas? It is important that we call out that you will still have to pay some taxed when you sell the home you inherited. There are two things you should know.
First, if you live in it for two years, you can qualify for a home sales tax exclusion. Second, you only pay capital gains taxes. You can minimize this through the stepped-up tax basis. This means that you only pay taxes on the increase value of the home from the moment you inherited it. Of course, always consult with an accountant to understand your tax liability.