Inheriting a home from a loved one can be an extremely difficult time in one’s life. Prior to inheriting the home, you were probably dealing with a family member who has been battling a sickness or moving on from old age. The last thing you are thinking about during this period of time is what you will do with their property. However, when the house becomes yours, figuring out what to do with it can present emotional and financial distress. You will be placed with the tasks of deciding which choices need to be made to sell your deceased family members property. There are several different topics that we will discuss. We will go over the best practices of each of these topics to help assist you through the sales process. Some of the categories that we will be talking about are:
- The tax implications of the sale of an inherited home
- Your selling options for the property
- How to prepare for the sale
- The art of pricing your home & its importance
- The closing process and what to expect
- And much more…
This post is intended to educate you on the process of selling your inherited home and answer any questions that you may have as you work through the process. The process of selling an inherited home can become very complicated. There are different procedures we have to work through before we can sell this property. The more you know on the specific topics, the easier it will be for you to manage the sale. We hope that this information clarifies some of your questions that you may have and helps to create a hassle free sale for all members who may be involved.A Small Estate – If a person died with less than $30,000 worth of personal property. A simpler and less expensive way of dividing up decedent’s estate.
Probate is the court process by which a will is proved either valid or invalid. This process is held in the hands of the surrogate court and they will need to see that the Will is proved to satisfaction. Once the Will is deemed valid, the Executor, who is named in the Will, will be appointed to distribute the estate. At this time they will attempt to move forward with the wishes of the individual who passed.
Filing for Probate
According to NYCourts.gov, “The individual who has been deemed the Executor will file the original will and a certified copy of the death certificate with the probate petition and other supporting documents in the Surrogates Court in the county where the Decadent person had their primary residence”. Be sure that you list all of the “heirs” on the probate petition. The “heirs” must also be served with a notice. Once this happens, the Surrogate courts will not have control over the “heirs”. At this point, the notice that was delivered will make the “heirs” aware that the executor has filed for the authority of the estate. If the will has beneficiaries that are due to receive assets in the Will, they must be notified of the probate proceedings.The market conditions
There are 4 primary options that you have when it comes to selling your property. These 4 options are:
- Listing with an agent
- Selling to a real estate investor
- For sale by owner
- Renting the home out
Listing With An Agent
Selling your home with a real estate agent is the traditional route that most homeowners use to sell. If this is the vehicle that you intend to use, I recommend that you hire a real estate agent who has works with this specific situation. Hiring a real estate agent does not mean that you are no longer involved in the transaction. You should do some research on your local market. This will help you better understand the market conditions. Find out if we are in a buyer’s market or seller’s market.
The benefits of listing your home with a real estate agent are:
- They do understand the market & the conditions
- They have the tools to price your home right
- They will handle all the negotiations
- They are in charge of the showings/open houses
- They handle the marketing & paperwork
- They should have a network of other agents, who can bring potential buyers
- Have access to the MLS to list
The negatives of listing your home with a real estate agent are:
- Home can sit on the market for months
- The longer your home sits the more holding costs you have to pay
- Have to prepare the property for sale
- Closings can take months
- If the property is run down, will be hard to find a buyer
- Will have open houses/ showings – people walking through property often
- Have to pay real estate commissions on sale
Selling To A Real Estate Investor
Selling your home to a real estate investor offers a lot of appealing benefits to people who have just been willed a property. Before you decide to move forward with this selling vehicle, we suggest that you do some preliminary research to find a company that is trustworthy and responsive while having the ability to meet your needs. The process of selling to a real estate investor is a bit different from selling the traditional route, solely due to the fact that you will be more involved with the process. Even though you will be more involved in the process, real estate investors make home sales very simple. This is the process of selling to a real estate investor:
• Seller contacts real estate investor (internet search)
• Real estate investor collects property to date and seller information
• Real estate investor sets up appointment to meet owner and evaluate property
• Real estate investor will run his numbers
• Real estate investor will propose a no obligation cash offer
• If you agree, seller will sign purchase contract
• Paperwork will be sent to attorney
• Closings within 21 days – Seller has check within 21 days of signing
The benefits of selling to a real estate investor are:
- Quick sales
- Cash offers
- Fast closings
- No repairs
- No commissions
- No hidden fees
- No open houses/ showings
- Limited holding costs
- You have a buyer
The negatives of selling to a real estate investor are:
- Discounted sale price
- Seller in charge of negotiations
- Investor’s do not need a license to buy – do your research on the investment firm that you choose to move forward with
This option offers several unique benefits to the seller of an inherited home. If you have a reputable investment firm in your local community it is worth taking a look into. The offers that they give you will be obligation free so you will not have to accept what they offer and you can negotiate off of that price. We would suggest experimenting with this process before listing with a real estate agent to see if you can come to an agreement on price since this will be your easiest option.
Selling For Sale By Owner
Selling for sale by owner will be your most difficult option and I do not recommend using this vehicle unless you have educated yourself on what this process entails. However, with that being said, it is definitely possible to go this route. Selling for sale by owner entails that you will be involved throughout the whole process – from the market research to the closing. The more you are prepared for the sale, the better the plan you have put together, the better odds you will have of selling your home for sale by owner. Here are 5 topics that you should begin to educate yourself on if you are considering selling for sale by owner:
- Comparable Market Analysis
- Flat Fee MLS Listing
- Preparing to show/ Open Houses
The benefits of selling for sale by owner:
- No real estate commissions
- No contracts
- No middle man
- Get rewarded for your hard work
- Can capitalize on low equity situations
The negatives of selling for sale by owner:
- All of your own research
- Handle all negotiations
- Home Pricing
- Marketing of home
- Handling all of the paperwork
- Showing the home
- Preparing the property for sale
- Takes up a lot of time
If you choose to go this route, make sure that you educate yourself on all of the different steps of this process. Try to come up with a game plan on how you will approach each step and execute the plan. If you are prepared and aware of how this process plays out, you will have good odds of executing a successful sale.
Renting Your Inherited Home
Another option that you have at your disposal is renting the home out. If you have experience in being a landlord or would like to make some extra money, this can be a route that you consider. If you do not have experience with being a landlord, we suggest that you also begin to educate yourself on how to evaluate a property, screening tenants, hiring property management and hiring construction work for necessary rehabs. If you do decide to rent your inherited home out, do some due diligence.
- Run the Numbers – Cap Rate, Net Operating Income, Rental Rates, Cash Flow, Repair Costs, Expenses
- Check and see if there is a mortgage on the property
- Understand the current rental market
- Is the property in a good location?
- What is the average rent going for comparable properties
- Will you be able to put manageable tenants in place?
The benefits of renting your inherited home:
- Extra Income
- If you have mortgage – can build equity
- Tax Advantages
- Learn How to Landlord
The negatives of renting your inherited home:
- Possible Costly Repairs Prior and During Occupancy
- Disputes with Tenants
- Business Expenses – Renovations, Tenant Turnarounds, Property Management
Consider both the pros and cons to renting your inherited home. If you are in a good financial position, then this may be a good option for you.Cleaning Out Personal Belongings
When you inherit a home from a loved one, you will be tasked with the challenge of cleaning out the residence that she once lived in. Depending on how your loved one lived, this job has the capabilities of being very labor intensive and challenging. Here are some tips that will help make this part of the process a little easier on you and your family.
- Divvy up the physical labor
- Be meticulous, even when you are tired
- Hire a professional estate appraiser to value certain belongings
- Locate all financial statements
- Keep all sentimental photos and memorabilia
- Consider a liquidator
Although this process will be very difficult for you and your family, it will be an opportunity to say your final goodbyes and remember your most cherished memories with the loved one who passed. Do not rush this step of the process, make the most of it and use this time make a final connection with the residence and your loved ones.
An estate sale is an inevitable situation that each and every one of us will find ourselves in someday. At some point in time, a relative is going to pass or move into a nursing home. During that time the survivors will be responsible for deciding on the best route to liquidate these assets, both items, and real property. This can be a very difficult period in your life because in a sense you will be mixing your emotions with business while trying to sell belongings that still hold meaning. An estate sale by definition is “A sale that occurs when a homeowner dies or moves to an assisted-living facility. Those who inherit the home get the proceeds from the sale. If the owner dies without naming someone in the will to sell the house, an estate sale is called a probate sale, because a probate court appoints a relative or friend of the deceased to handle the sale.” You will have several different mediums that you can use to sell both household items along with the property that is in consideration. Your first option to consider will be hiring an estate sale company (which we will touch on later), you can sell your household items on craigslist, eBay or an auction house. In regards to real property that is in question, you can list with a real estate agent, sell FSBO or receive a quick sale from a real estate investment firm. Here are some quick tips to consider when handling an estate sale.
1) Hire an Estate Sale/ Liquidation Company. It can be very time consuming and possibly costly to try and manage and run an estate sale by yourself. There are professional services that have years of experience dealing with these types of circumstances. Connect with a firm that has experience in this field, read reviews and do your research on the best local companies around you. The biggest benefit to hiring this type of service is the pricing, organizing and display work they put together for your sale.
There are some concerns that you need to overcome before choosing a firm to hire:
- Some estate sale firms have minimums regarding the total value amount of possessions
- Commissions can run up to 30% of proceeds to advertise and manage the sale
- Understand each company’s requirements, since they all are different
2) Convenient Sales Dates. Choosing dates that are not on around holidays will be beneficial to your estate sale.Typically when events are held around holidays, they see less foot traffic than if they were on specifically chosen dates with no contradictions. You should also try and plan around the weather. Obviously, we do not want to hold an estate sale on the day where it is rainy or really windy.
3) Do Not Throw Anything Away. I understand that you may think that there is no value in some of the items that have been left behind but a customer at your estate sale may disagree. Do not try and guess on the value of items that will be sold at the estate sale. If you are hiring a liquidation company to organize and price your items, let them decide the value of all of the items in the home. If you are going to manage the estate sale yourself, I recommend that you do your research so you better understand the value of all of the items that you will be selling.
4) Greet Every Customer. Just like any other business or sale, customer service is the most important aspect of the transaction. You will make each customer more comfortable and willing to ask questions if you welcome them to your sale. You will also mitigate some of the risks of customers trying to steal. For some reason, customers have a hard time stealing from people that they have just looked in the eye (not all of them, though). Make sure that you are friendly, honest and helpful throughout the whole day and try to get an understanding of what customers may be looking for. Try to ask questions and listen to what they have to say. Treat this like a business transaction even though it is under the current circumstances of an estate sale.
5) Marketing / Advertising. Whether you decide to go with a liquidation company or manage the sale yourself, one of the most important aspects of the sale will be creating a good amount of foot traffic. In order to create this foot traffic, we must do a good job of marketing and advertising. In today’s day and there are several different mediums we can efficiently market on that are either free or very low cost. If you do end up hiring a liquidation firm to make sure that you ask questions on how they intend to market.
This is for 2 reasons:
- You want to understand their marketing plan and how they are going to bring people through the doors
- You want to make sure that you are not double dipping on any of the marketing techniques they intend to use.
Determine the Price of Your Inherited Home
There are two reasons that a home doesn’t sell. One is due to the condition and the other is due to the price. These two variables correlate with each other. If your inherited home is in poor condition, it is obvious that you will need to price your home below market value. If the home is in great condition, you will be able to sell at or above market value depending on market conditions. Remember that your main goal in this situation is to choose a price point that will allow you sell at a reasonable price in a short amount of time.
One thing is for sure, pricing your home right is one of the most important components in the selling process. If you set the price too high, you run the risk of:
- Turning off potential buyers
- Your home will not compare favorably with other properties
- Buyers may not see the listing since they will be using lower price points
Comparable Market Analysis
Pricing your home based on condition, location, and amenities of comparable properties in your area while also taking into consideration market conditions will allow you to price your home competitively to sell.
A comparable market analysis is an evaluation of similar, recently sold homes (pending sales) that are located near the subject property in question. A detailed comparable market analysis will take into consideration several different features to determine an accurate price for you to list your inherited home:
- Similar Square Footage
- Similar Age of Construction
- Similar Amenities, Upgrades & Condition
- Market Conditions
- If Necessary: Repairs Report
Be sure to take your time with this step. If you are going to sell the traditional route, consult with a professional realtor. If you decide to sell to a real estate investor or by yourself, do your research and come up with a price range that you feel your home is worth.Buyer financing – lack of commitment from the bank – cash offers are the best.
The Closing Process
Now that you understand the reasons a sale could fall through, let’s talk about how the closing process actually works. If you are selling to a real estate investor or a cash buyer, typically closings will take less than a month depending on title, abstract and survey availability. If you are selling to a homeowner who needs financing from a lender, closings could take anywhere from 45 days to 120 days (with much better odds of the deal falling through). The closing process consists of several different components that we should touch on so you have a better understanding of what tasks your attorney will be performing.
- Title Search – The title search is run prior to going to the closing table. This ensures that the seller of the property has clear title to the property, that there are no liens/judgments on the property as well as other information that is important to the closing.
- Survey – This goes along with the Title Search. If the seller has the survey he will be required to give it to the title company for review for closing.
- Preparation for the sale of your inherited home – The buyer’s attorney begins preparing the paperwork for changing the title/deed and will prepare title insurance, and a final closing date is scheduled on or around the date indicated in the contract. If you are buying the property, you will be required to bring the total discussed amount needed to close to the closing table.
- Final Walk Through – A final walk through will be performed prior to the closing to ensure that the property is in the same condition as when the process began.
- Closing Table – At the Closing table, the buyer (and seller) sign all closing documents, including the HUD-1, and the final loan documents.
- Down payment – The buyer pays the remaining funds in their down payment to an attorney or a representative of the title company (who is present at closing) via cashier’s check
- Record – The representative from the title company or your attorney will then record the transaction and deed with the appropriate municipality.
- Keys – Buyer receives the keys and is granted ownership to the property.
The closing process, for the most part, is fairly simple. As with anything, educate yourself on the process prior to going to the closing table. Be sure that you are prepared in order to make this process go as smooth as possible. Make sure you communicate with your buyers, realtors and title company throughout the process.
Wrapping It Up
When it comes to selling an inherited home – it is no easy feat. As you can see, there is a specific process that you need to go through. As you go through this process, you will have several different choices that you will have to make. We want to make sure that you have a great understanding of how selling an inherited home will play out and make sure you choose the best option for you and your family.
This post was provided by our friends at HS Property Funds, who are cash home buyers in Syracuse NY.
In the comment section below, let us know if you have any further questions or there is anything else we can assist you with.