When you inherit a house, it can either be a welcome addition to your properties or it can be a burdensome issue. It all depends on your personal circumstances and situation. Inheriting a home gives you a few options on how to proceed. First, you can choose to live in the house. Second, you can rent out the house and earn some income as a landlord. Third, you can choose to sell the house.
If you decide to sell the house, you have a few different options of how to do that. You can hold an estate sale. You can sell it on the open market. And you can sell it as-is to a cash buyer like Jamie Buys Houses. Some of these processes require more work than others. But if you’re selling a house you inherited on the open market in Texas, here is a handy guide to show you all of the many steps and potential pitfalls that are ahead of you.
Know What You’ve Got
If you’re selling a house you inherited in Texas, the first thing you need to know is how much it’s worth. The easiest way to know is to look at similar properties in the area that have sold recently, and see what they’ve sold for. There will be differences based on the condition of homes and features included in each property, but it will give you a ballpark number.
Next, you need to know the financial situation and how that affects the value. How much is still outstanding on the mortgage? Is the home free and clear? Are there liens or potential foreclosure issues attached to the house? Are property taxes up to date or have they been adding up while the previous owner was dealing with hardships? As you answer all of these questions you’ll get a clearer idea of the true value of the house when you list it on the open market.
Before you list, you’ll also have to be clear on the ownership of the house. Are you the sole inheritor or did multiple family members inherit the house? If it’s the latter, is everyone in agreement that the house should be sold? If not, you may need to “buy out” the other inheritors in order to proceed legally. That could be an upfront payment or it could be a number contingent on the final sale price. Whatever it is, be sure that everything is documented and authorized legally.
How Will This Impact You?
When you sell an inherited house, there are lots of financial implications that you need to consider because you might not be aware of them beforehand. You might be on the hook for taxes related to the proceeds of any inherited property sale. Texas doesn’t have an inheritance tax but you will be responsible for federal taxes, which will be determined by the value of the house. The tax rate depends on how low or high the value is.
However, inherited properties do not qualify for a home sale tax exclusion unless you live in it first for two years. So that’s a bonus of the tax code that you’ll miss out on. The good news is that you can take advantage of the stepped-up tax basis. Basically this means you won’t pay capital gains tax on anything before the previous owner’s death. You are only on the hook for as long as you’ve been the legal owner of the property.
When you do make a sale, you’ll have to report the sale proceeds to the IRS because they see an inherited home sale as taxable income. The exact number is based on the fair market value as well as any improvements you make to the property. Even if no taxes are owed, you still need to make sure you report it to the IRS or you could run into issues down the road.
Prep the House For Sale
Once you’ve got the financial considerations sorted out, you need to actually prepare the house for a sale on the open market. That means you’re going to have to first get rid of any personal belongings that were left behind. If the previous owner was a hoarder then you might want to bring in a cleaning crew that handles those sorts of situations. You’ll also need to do some decluttering in order to get the house looking good for buyers. That could also mean depersonalizing rooms, hiring a stager, and hiring a photographer who understands the best way to present a house.
When it comes to removing personal items, this can be a difficult decision so it’s important to think about where everything should go. If you want to keep some mementos you should collect them right away. You also may want to check with other relatives or friends to see if they want anything. As for what’s left, you’ll need to determine which of it should be given away, which of it should be thrown away, and which items you can or should sell. Selling certain items can help defray costs or taxes related to the sale. You can also hold a yard sale or estate sale in order to find motivated buyers for furniture and home items.
The Price is Right
Pricing an inherited house can be a tough decision to make. There are a lot of factors to consider, as we’ve mentioned. The truth is that whatever you list at, you’re unlikely to get your asking price. It all depends on market conditions but buyers will often try to bring the price down based on any number of factors, especially if its a buyer’s market. The condition of the house and any of the financial issues we’ve discussed could affect how offers come in as well.
However, be sure to understand how much the house is worth so that you know what your price floor is. Buyers will try to get you to keep going lower so you’ll need to have your own pre-set conditions that you won’t budge on. Don’t let emotions or memories related to the house or the previous owner cloud your negotiations. You don’t need to make concessions just because it’s an inherited house or you’re eager to sell.
Make sure you’re staying up on mortgage payments and utilities while selling the house. You don’t want to muddy the waters with any last-minute revelations that will make the buyer decide to run. Then you’re stuck potentially starting over with less than ideal conditions that you’ll then have to deal with.
Sell the Inherited House As-Is
As you can see, there are a lot of financial implications that come with an inherited house, not to mention all of the headaches and steps you need to deal with when selling on the open market. An alternative that will allow you to sell the house without dealing with all the hassles involved is to sell it as-is to a cash buyer like Jamie Buys Houses. They’ll look at the house in its current condition, make you a fair offer, and pay you in cash for the house on your own timeline. You won’t need to make upgrades, you won’t need to declutter, and you won’t need to deal with market buyers. You get cash for the inherited house, and you get to move forward.