When you inherit property, you have to decide whether to sell it, rent it out, or move and live in it. The most viable option for most people is to turn the physical assets into financial assets to relieve emotional pressure. However, selling inherited property can be challenging and time-consuming, especially if you have little or no prior knowledge of selling properties. Before making the final decision to sell an inherited property, below are some things you should know.
1. Subjection to Taxes
Selling an inherited house attracts taxes just like any other property, and before making any major decision, you should be aware of the different types of taxes the property attracts. When equipped with such knowledge, you will be able to make an informed decision, or otherwise, you can learn tips on how to minimize associated taxes. Inherited property can attract different taxes, including state inheritance tax, property tax, and capital gains tax if you decide to sell the property.
2. Ways to Reduce Tax Consequences
Should you decide to sell the house and there is a big difference between the purchase price and the amount you sell the home, be prepared to receive a sizeable tax bill. However, there are different ways you can avoid facing such tax consequences, including selling the property right away, renting out the property, or moving in and settling at least two years before selling it. By selling the property right away, you eliminate any chances of the property appreciating, thereby eliminating capital gains tax at the time of sale.
3. Selling vs. Moving In
Selling or renting out an inherited property may sometimes not always be an ideal option for various reasons; it might be because the house is intended to stay in the family or the decision is mentally or emotionally challenging. Consequently, you might decide to move in for different reasons; maybe you were searching for a house after all, or perhaps you are renting, and owning a house is a more viable financial decision. Whatever the case, it is important to evaluate and consider your best option before taking the next step.
4. Budget Consideration
The first budget consideration you should account for is mortgage payments. After inheriting a property, the mortgage payment responsibility shifts to you, or part of the property is used to pay the outstanding mortgage payments. Even if you can manage the mortgage payments, consider accounting for other costs of owning a property, including property taxes, utilities, or maybe any repairs and renovation costs necessary.
5. Understanding the Probate Process
Depending on your state, you have to wait until the property has gone through the probate process, which may sometimes take months or years. The preparations and decision-making process may be overwhelming, and under such circumstances, you have to be prepared. If you have the financial capacity, hiring a professional to assist and advise you in the preparation and selling process may be the best viable and attractive option.
6. Hiring an Experienced Agent Pays Off
Most people do not have a vast understanding of the real estate market. Real estate agents can help you conduct the selling process of an inherited property seamlessly. Such professionals can help you in different ways, including determining the value of the inherited property, calculating the tax burden, preparing the house for sale, making challenging decisions, speeding up the sale process, and getting a potentially good deal for your listing.
7. Preparing an Inherited House
Preparing an inherited house for sale is necessary and may sometimes prove challenging. There are many preparations required, including carrying out repairs, appraising the property, and sorting out and moving personal items. Before proceeding with the sale decision, it is important to ensure you are adequately prepared.
8. Consulting With a Financial Advisor Pays Off
If you decide to list an inherited home for sale, preparing yourself with adequate knowledge and resources is paramount. And even if you have little understanding of tax laws, seeking guidance from an experienced financial advisor is always advisable. Competent financial advisors are well-versed in tax laws concerned with selling inherited property and can help you calculate your tax burden or offer you tips to relieve the tax burden.
Conclusion
Taking your time to understand the important things that matter while deciding to sell an inherited property pays off. The above tips and concerns will come in handy when determining the fate of your inherited house.
