Selling Inherited Property – Everything You Need To Know
Someone may be faced with selling inherited property after a death in the family. A home is often inherited by relatives or friends, leaving them with the ultimate choice between keeping or selling the property.
If you’ve just inherited a property, it may well be a difficult time for you. The emotions of having lost a loved one may be adding confusion to questions you have about what you should do next.
Depending on your circumstances, inheriting a house can be a blessing or a challenge; either way you are likely to be unfamiliar with the whole process.
An inherited property can be an amazing gift from a loved one, however, inheriting a house after death can bring all sorts of practical, financial and emotional challenges. For this reason, many people want to make the process of selling an inherited house as straightforward as possible.
Most people who have inherited a property will start thinking about their immediate options:
Move into the property: If the property you’ve inherited meets your personal needs you could decide to live in it yourself?
Rent it out: Deciding to rent the property could provide a reasonable source of income, but becoming a landlord also brings certain responsibilities. It’s important to remember you will need to pay tax on any profit you make from renting your inherited property.
Sell your inherited property: Many beneficiaries of property, decide selling inherited property is the easiest route for them and their family. Although you will have to pay inheritance tax, the costs of maintaining a second property can be a financial burden.
You may decide selling inherited property is the right route for your situation, however, before you even start thinking about selling inherited property, there is a process you need to follow called probate.
What is Probate?
Probate is the process of dealing with the estate of someone who has died, including money, possessions and property, their credits and liabilities, including loans, mortgages, debts and their final wishes.
Who can complete the probate process?
If the deceased left a Will, they should have specified an executor who is expected to “execute” the Will and complete the probate process. If no executor is named, responsibility will generally fall to the beneficiaries or a blood relative.
Obtaining the Grant of Representation
To execute a Will, a ‘grant of probate’ or ‘letters of administration’ are normally required. The grant of representation will make it possible for you to access all of the deceased’s assets, such as their bank accounts. You can obtain the ‘grant of probate’ or ‘letters of administration’ by contacting your local probate registry. You will then need to provide a copy of the death certificate and complete the required documents.
Once you have granted representation, for tax purposes you need to get a probate house valuation. This establishes an open market value for the property. Once the deceased estate has been valued, you will need to contact HMRC to pay any inheritance tax on house.
How long does probate take?
On average, probate takes between six and nine months to complete. However, complications (such as a Will being contested) can cause the process to take considerably longer.
What happens after probate has been granted?
Once probate is granted, you can proceed with the sale of the property or with transferring the ownership. However, it is important that both the wishes of the deceased and the beneficiaries are considered. If you are inheriting a house from your parents, with siblings, there may be some disagreement about what to do with the property, so it is important that you listen to each other’s feelings and opinions.
Keeping your inherited property secure, maintained and insured
Until the property is sold or transferred, someone needs to take responsibility for the ongoing maintenance of the property. This could include organising and paying for garden clearance, house cleaning, re-decoration and general maintenance.
Security of your inherited property is your responsibility. Vacant properties are more at risk of break-ins, winter pipe bursts and squatters. You must check the house insurance covers the property when vacant; many do not. You should also organise regular trips to the property to ensure everything is OK.
My inherited property has an outstanding mortgage. Do I still have to pay it?
If the deceased sis not have a life insurance to pay off the mortgage on the property, this responsibility passes to the inheritor(s) along with the property. If you inherit the mortgaged property, but plan on keeping it to live in or rent out, you will need to continue to make these payments once the property is registered to you. Your other option is to sell the property. This usually generates enough funds to pay off the mortgage – and what’s left will be shared amongst the beneficiaries.
Methods of selling inherited property
If you decide to sell your inherited property, there are steps you should take to ready the house and maximise the amount the beneficiaries receive.
Have the home re-valued
As part of probate you will have had the property valued. However, if time has passed you may choose to get an up to date valuation from a reputable estate agent.
Decide on the method of sale
Once you have reached the decision to sell the home you have inherited, you will need to decide on the right method of sale for you and your situation.
Selling inherited property through the open market: Listing your inherited property on the open market is the most common and traditional way to sell a house. Estate agents will guide you every step of the way and can provide you with a property valuation, organise any viewings, help in negotiations and support in any situations that arise once you have a buyer in place.
That said, selling your house on the open market comes with no guarantees. The average house sale on the open market takes between 6-9 months, depending where you live. Add to this conveyancing and probate time, and you are easily looking at over a year!
Selling inherited property directly to a home buying company: Selling directly to a professional home buying company, enables you to guaranteed the sale of your inherited property and offers a quick, hassle free solution with the added benefit of no viewings. As long as you are dealing with a genuine cash home buyer, money can be in your bank in as little as 7 days!
There is no other alternative house sale method that can guarantee a speedier house sale, than selling direct to a home buyer! Home buying companies will always buy a discounted rate in return for a guaranteed, fast house sale!
As the cash home buying industry is unregulated, it’s vital that you do your due diligence before you engage with any company. There are over one hundred companies online claiming to be genuine cash home buyers, the reality is, there are only three companies in the whole UK that can offer the service!
Selling inherited property at a property auction: You may also wish to sell your inherited house at a property auction. Ultimately, in a property auction atmosphere, there is an uncertainty on the price your house will sell for, and your house will ultimately sell at the final bidder’s offer.
Auction fees vary from house to house, but you will still be liable for these fees regardless if your inherited property sells or not.
Tax implications of inheriting a property
Once the property has probate valuation the inherited home tax can be confirmed, this is then settled by the executor from the assets of the estate.
If the beneficiaries keep an inherited property as their main residence there is no capital gains liability. However, if they decide to rent, keep vacant or develop the property they will have a capital gain liability. The liability is based on the profit you make between the person’s death and the point of eventual sale.
Capital gains tax kicks in at profit over £11,300*. You will then pay either 18%* or 28%* capital gains tax on any profit over this amount, depending on your overall income. *Figures all for 2017/18 tax year.
Issues to consider if selling inherited property
- You will need to continue to insure, secure and maintain the property until the sale completes.
- The property could well require expenditure to get it in a saleable condition, you may have to outlay your own cash and time to get this done.
- If the property holds a sentimental attachment, the prolonged sale process of viewings, visits and negotiations may be difficult.
- Often the property you inherit will not be local. Multiple visits during the sale process, can become frustrating and expensive.
- Dealing with estate agents and solicitors can often be a frustrating process. If you are selling a vacant property that is some distance away from you, this frustration can be amplified.
- Time it will take to sell will vary by area, but, on average, it will take between 6 and 13 months for a sale on the open market. This is on top of the 6-9 months it takes to get probate.
What happens once the inherited property is sold
Once the inherited property has sold, it is the executor’s responsibility to repay any outstanding liabilities of the estate such as mortgages and inheritance tax. After that, the executor will distribute the remaining money to the beneficiaries as per the will. The beneficiaries will not have individual tax to pay in the sum inherited.
I’ve inherited a property, now what?
Sandra Aspinall wanted to sell an inherited bungalow after her father passed away. As an existing homeowner, Sandra knew she didn’t want the responsibility or cost associated with owning two properties, so took steps to sell her father’s former bungalow with an estate agent.
After two years on the market, and several different estate agents, the bungalow had failed to attract a buyer, which is when Sandra decided to give the UK’s Leading home buyer, Quick Move Now a call.
As a homeowner myself, the cost of maintaining an additional property was becoming too much to handle. I had not expected the property to stay empty for as long as it did, and soon was faced with a 50% increase on council tax, on top of existing insurances and energy bills. These monthly costs impacted my quality of life and took place priority over other things I should have been enjoying.
Selling inherited property directly to Quick Move Now was easy! As the industry leader, I knew I was in good hands and I’m pleased at the value I received on the property. I’ve already recommended their services to my friends!
Quick Move Now was also able to help Matt Higgs sell an inherited bungalow in Hemel Hempstead.
Are you selling inherited property?
Selling inherited property directly to Quick Move Now couldn’t be easier, once you’ve made the decision to sell, money could be in your account within 7 days! For a free, no obligation, cash offer call one of our experienced property buyers today on 0800 068 3366 or complete our online estimate form.
Assets that are left behind upon your death become your inheritance.
If you have any assets or wishes after your death then it is important to setup a Will. In your Will, you can then specify who will inherit your property. If no Will exists, it is likely that the property will pass to your legal partner, or, if you don't have a partner, your closest blood relative.
If you have decided to sell an inherited property, you should ready the property as you would any other property prior to putting it on the market. This means you should look at decluttering and clearing out items, depersonalising the space, redecorating and making any cosmetic updates, repairs and maintenance, and any other improvements that may boost the property’s appeal to buyers.
This ultimately depends on your reason for selling. If you are sure that you don’t want to keep the home and want a fast, hassle-free transaction, selling for less than market value is one way to achieve this. The loss of a loved one can be an emotionally difficult time as it is, and so a guaranteed, quick sale may be preferable to entering into a lengthy, unpredictable sale process.
If you and other family members cannot agree about whether to sell the property, providing all parties are equal beneficiaries, no one party can force the others to sell. You may, however, approach the courts and ask them to order a sale.
To do this, you will need to demonstrate that you have already approached the other parties (either directly or via solicitor) in writing outlining reason for the sale and giving them an opportunity to refute the reasons. It is wise to keep in mind that a court order has the potential to cause a significant family rift, so it is advisable to explore all other mediatory options before resorting to this measure.
Inheritance tax (or inherited home tax, as you may sometimes hear it called) is the tax payable on an estate (the deceased person’s financial assets and property) before it can be passed down to the beneficiaries.
If you are inheriting a house from your parents it works the same as any other inherited property. The executor of the Will is usually responsible for calculating the inheritance tax payable, but you may find this information on the government’s website helpful in understanding the process.
Inheritance tax will only be payable if the deceased’s estate is assessed to have a value greater than a certain threshold, currently £325,000. Inheritance tax for estates worth more than the threshold is set at 40 percent.
The estate heirs are responsible for paying any inheritance tax due. Any inheritance tax payable is due within six months of the death of the deceased. After the six-month deadline, HMRC will begin applying interest to the amount due.
Capital gains tax is payable on the profit you make when selling something that has increased in value. It is payable when selling a property that is not your main home. This includes an inherited property.
Tax will be payable on the profit you make from the sale (the price you achieve from the sale of the property minus the price you paid for it). Because you will not have paid for an inherited property, you will instead need to use the property’s value on the date of death of the person who bequeathed the property to you.
If a property is gifted to you while the owner is still alive and you decide to sell it after their death, capital gains tax may still be payable. Capital gains tax will be applied on the sold price minus the value of the property at the time of it being gifted to you, rather than the value at the time of the previous owner’s death.
You will be liable for capital gains tax if a property you have inherited increases in value between the time of you inheriting it and the date that you sell it.