Selling an Inherited Property in Puyallup

Selling an Inherited Property in Puyallup

Inheriting a property can be tough emotionally as well as on your bank account. Does the property need expensive upgrades and repairs? How much will you have to pay in taxes? Is there a will or will you need to deal with the probate process? But inherited properties are also a great opportunity for real estate investors and buyers looking for a discount on a property they can make their own. But what does it take for a homeowner to sell an inheritance? Are there special steps that need to be taken to deal with this type of sale? This article will explain the process of selling an inherited property to (hopefully) make a profit.

How To Sell An Inherited Property in Puyallup

So you’ve inherited a property and you’re not sure what happens next. In most states, the inherited property must go through a probate process so the courts can determine who is the legal owner. Probate is a legal process in which the Court legally transfers ownership of the estate’s assets to one or more beneficiaries and/or Heirs. Depending on the state of the will (if there was one), this process can be very fast or very slow.

  • Determine the Executor

For inherited properties with a will, establishing the executor of the estate should be straightforward. One of the most important aspects of a will is establishing an executor that is able to carry out the deceased’s wishes through the process of probate.  Any assets listed in a will can’t be sold until the will is validated by the Court but, once approved, the executor of the will is allowed to act on the wishes of the deceased. But if the will is contested or there is no will, the process might take longer as the Court gets involved. 

The probate court will appoint someone not associated with the family as an administrator to the estate. These administrators play a similar role as an executor; they are responsible for carrying out the wishes of the deceased as stated in the will, as well as paying off any of the estate’s debts and distributing any assets. They may also determine if any real estate assets will need to be sold to pay off the estate’s debts, including back taxes, mortgages, etc.

  • Working with Lawyers and Real Estate Agents

Probate is not a simple process which is why you’ll want an experienced lawyer to help you navigate the potential pitfalls of selling an inherited home. But once you have the probate court’s okay to move forward with the sale of the property, working with a real estate agent that has dealt with inherited homes before will be your next smart step. An experienced agent with probate experience will understand the nuances and regulations for this type of sale. They can help you find the right buyer to help you get top dollar for the inherited property. They also will be a helpful guide to let you know what is worth spending time and money to fix up and upgrade, and what is a waste of your time. Listening to their advice may be the difference between selling a property quickly and for a profit, or being stuck with a house that sits on the market for too long and sells for below market value.

  • Resolve Any Debts

When you hear the word “inheritance” do you think of a mysterious great-aunt leaving you a million-dollar mansion in the woods, or do you understand the reality of having to deal with a property that might have liens against the title, years of back taxes, as well as a mortgage that leaves you with the ability to make much of a profit after a sale? Sadly, dealing with a loved one’s passing often means dealing with their debt, whether that’s in the form of taxes, a mortgage, or maxed out credit cards. Any assets you inherit must go to paying off that debt first before you can see one dime of the estate. While a house may seem like a huge asset, it also can be a huge money pit. An experienced estate advisor can help you research your options when it comes to dealing with an estate.

  • Clean & Restore the Home

Once ownership has been decided and the property is considered yours, your next step will be to decide whether you want to live in it, rent it out, or sell it. Many times, when a loved one passes they leave behind a house that is not in the best of shape. Whether the property hasn’t been kept up in the past decade and needs major cleaning and repair, or there were never any upgrades done and the house will need to be completely renovated to make it “market ready”, this is the part of an inheritance that is often forgotten about.

Do all heirs have to agree to sell the property?

No, the Heirs don’t have to agree to sell an inherited house or property if ownership has been established by a will or the probate court. But if ownership has not been established, such as with an estate with no will and/or a Court-appointed administrator, then all Heirs must agree to the sale. This also includes properties that have been put up at auction by the Court to pay off the estate’s debts. If a buyer purchases a house at auction but one or more of the Heirs disagree with the sale, the purchase must be put on hold while the disagreement is worked out and a settlement is reached.

  • How to Settle a Disagreement

There are a variety of options for settling disagreements among Heirs over an estate, but the first step is making sure that a loved one has an executor. Having a point person who is there to make sure the deceased’s wishes are followed as set forth in the will can ensure that there are no arguments over how the assets will be dealt with. If there is no executor and the will is being disputed, your next step may be hiring a mediator. Having a neutral third party to help work out differences will be much more affordable than a legal battle in probate court.

  • Best Practices

But what if the issue is around the executor themselves? Disputes can occur when a family member is named as the executor or trustee of a will, causing strife with the other family members. If this has happened to you, an option is for the person to decline the appointment and choose an independent fiduciary, such as an estate-planning attorney, to administer the will. Stepping back while a neutral party steps in might not just keep arguments from cropping up, but might also give everyone the time and space to deal with difficult emotions before it permanently damages your family. 

How is inherited property taxed when sold?

State and local governments in the United States collected over $5.3 billion in revenue from estate and inheritance taxes in 2020. That’s a lot of taxes! But with laws and regulations different from state-to-state, you’ll want to do your research and contact a lawyer with knowledge and experience of taxes and estate planning as you deal with a surprise inheritance or you’re writing your own will. 

Inherited property is subject to capital gains tax when sold. The basis for this tax is the property’s fair market value (FMV) at the time of the original owner’s death. Here are the key points to consider:

  1. Step-Up in Basis: When you inherit property, its basis is “stepped up” to its FMV at the date of the decedent’s death. This means that if the property’s value increased significantly since it was originally purchased, you won’t have to pay capital gains tax on that appreciation.
  2. Capital Gains Tax: If you sell the inherited property, you will owe capital gains tax on the difference between the sale price and the stepped-up basis. For example, if the property was valued at $300,000 when you inherited it and you sell it for $350,000, you would owe capital gains tax on the $50,000 gain.
  3. Long-Term Capital Gains Rate: Inherited property is considered a long-term asset, regardless of how long you have held it. This means that the capital gains are typically taxed at the long-term capital gains rate, which is generally lower than the short-term rate.
  4. State Taxes: Some states also impose their own capital gains taxes, so you may owe additional state taxes on the sale of inherited property.
  5. Exemptions and Deductions: You might be eligible for certain exemptions or deductions, such as the primary residence exclusion if you lived in the property for a certain period before selling it.
  6. Reporting the Sale: When you sell the inherited property, you must report the sale on your tax return using IRS Form 8949 and Schedule D. You will need to provide details about the sale price, your stepped-up basis, and the resulting gain or loss.
  7. Estate Taxes: If the estate was large enough to owe federal estate taxes, those taxes would have been paid by the estate itself, not by the inheritors. However, this is separate from the capital gains tax you may owe upon selling the property.

Consulting a tax professional can provide personalized advice and ensure you comply with all relevant tax laws and regulations.

State Tax Laws

Each state has different laws regarding inheritances. In the case of the sale of an inherited property, states may take an estate tax, an inheritance tax, as well as a capital gains tax on your inheritance. Currently, twelve states have an estate tax, 5 have an inheritance tax, and one has both an estate and inheritance tax.

  1. Capital Gains Tax on Inherited Property

What is the capital gains tax and which states require it? The capital gains tax is paid on the appreciation of any assets that an heir inherits through an estate but it is only levied once the asset is sold for a profit, not when you inherit. This tax is then paid on the difference between the sale price and the purchase price of the property. Most states require this tax paid on an inherited property, but there may be exemptions for individuals selling a property for less than a certain amount. An example is Washington State, where the capital gains tax is not levied on homes and/or properties sold for less than $250,000. There may also be other legal ways to get around or reduce the capital gains tax in your state, including reinvesting the money in another property. Consult with a tax lawyer knowledgeable of the laws in the area you will be selling before proceeding with the sale of your property.

  1. Estate Taxes

An estate tax is a tax paid directly out of the estate to the state before anyone is able to inherit it. Worried that you might get a huge hit taken from the estate? Don’t worry! The estate tax has a minimum threshold which in 2023 was $12.92 million for individuals. This means that the government is not able to charge you an estate tax unless your total taxable estate is worth $12,920,001. The remainder is passed on estate tax-free. Despite having such a high threshold, each year more states repeal their estate tax laws, losing out on millions of dollars of revenue.

  1. Inheritance Taxes

Only six states have an inheritance tax, meaning that it is likely that you are in the lucky majority that won’t have to deal with this. But if you live in one of those six states – Maryland, Nebraska, Kentucky, New Jersey, Pennsylvania, and Iowa – you as a beneficiary/Heir to an estate will be required to pay taxes on your inherited assets and properties. But don’t worry – even if you live in a state that has an inheritance tax, you won’t have to pay a dime if the deceased lived in one of the 44 states that does not have this tax.

Documents required to sell an inherited property

To show legal ownership and place a property for sale, you will need to have a copy of the documents issued by the court that grant you the legal authority to act as the executor or administrator of the estate. These documents will establish your ability to manage the inherited property. Once a buyer is found and you are ready to close, you’ll need the deed, title insurance, or other relevant legal records to establish the legal ownership of the inherited property. 

Do your research regarding what additional documents may be needed to sell an inherited property! Some jurisdictions may require additional property-related documents, including previous surveys, inspections, or any other relevant paperwork that pertains to the property’s condition or history.

Selling an inherited property in Puyallup, WA involves several steps and considerations to ensure a smooth transaction. Here’s a comprehensive guide to help you navigate the process:

Legal and Financial Steps

  1. Probate Process: Ensure the property has gone through probate if it’s required. Probate is a legal process to settle the deceased’s estate, and you may need court approval to sell the property.
  2. Obtain Legal Authority: Secure documents that grant you the legal authority to act as the executor or administrator of the estate. This includes Letters Testamentary or Letters of Administration.
  3. Step-Up in Basis: Understand that the property’s tax basis is stepped up to its fair market value at the time of the original owner’s death. This will be crucial for calculating any capital gains tax when you sell the property.

Required Documents

  1. Court Documents: Proof of your authority to sell the property (e.g., Letters Testamentary).
  2. Death Certificate: To confirm the passing of the original owner.
  3. Trust Documents: If the property was held in a trust, provide the trust document and a certificate of trust.
  4. Deed: Establishes ownership and is necessary for the sale.
  5. Title Insurance: Ensures there are no legal claims against the property.
  6. Mortgage Statements: If applicable, showing any outstanding loans.
  7. Property Tax Records: Recent statements or receipts.
  8. Affidavit of Heirship: If needed, to establish the heirs of the estate.
  9. Appraisal: A recent property appraisal to determine the current market value.
  10. Disclosures: Any necessary property condition disclosures required by Washington state law.

Tax Considerations

  1. Capital Gains Tax: You will owe capital gains tax on the difference between the sale price and the stepped-up basis (fair market value at the time of the original owner’s death).
  2. Long-Term Capital Gains Rate: Typically, inherited property sales are taxed at the long-term capital gains rate.
  3. State Taxes: Be aware of any state capital gains taxes that may apply.

Practical Steps

  1. Prepare the Property: Clean, repair, and stage the property to make it appealing to potential buyers.
  2. Hire a Real Estate Agent: Choose an agent experienced in dealing with inherited properties in Puyallup, WA.
  3. Set a Competitive Price: Use the appraisal and comparable sales in the area to set a fair market price.
  4. Market the Property: List the property on real estate websites, host open houses, and use various marketing strategies to attract buyers.
  5. Negotiate Offers: Review offers with your real estate agent and negotiate the best terms.
  6. Close the Sale: Once you accept an offer, work with the buyer, their agent, and a title company to complete the sale. Ensure all required documents are in order.

Additional Tips

Additional Tips

  1. Understand Local Market Trends: Research the real estate market trends in Puyallup, WA to understand the best time to sell and the expected property value. Stay informed about local demand, recent sales, and pricing strategies.
  2. Consider Renovations: Evaluate whether making minor renovations or improvements could increase the property’s value and attract more buyers. Sometimes simple updates like painting, landscaping, or replacing old fixtures can make a significant difference.
  3. Manage Utilities and Maintenance: Keep the property well-maintained throughout the selling process. Ensure utilities are functional, the lawn is cared for, and any necessary repairs are addressed promptly to keep the property in showing condition.
  4. Secure the Property: If the property is vacant, take measures to secure it. Install a security system or arrange for regular checks to prevent vandalism or unauthorized access.
  5. Gather All Relevant Information: Have detailed information about the property ready for potential buyers. This includes floor plans, property history, zoning information, and details about any upgrades or renovations.
  6. Be Transparent: Disclose any known issues with the property upfront. Transparency can prevent potential legal issues down the line and build trust with buyers.
  7. Plan for Taxes: Set aside funds to cover any capital gains taxes or other expenses related to the sale. Consulting a tax advisor can help you plan effectively and understand potential tax implications.
  8. Consider Hiring an Estate Sale Company: If the inherited property contains valuable personal items or antiques, hiring an estate sale company can help you manage and sell these items efficiently.
  9. Prepare for Emotional Challenges: Selling an inherited property can be emotionally challenging, especially if it was a family home. Prepare yourself and any co-heirs for the emotional aspects and seek support if needed.
  10. Consult with Co-Heirs: If you are not the sole heir, maintain open communication with co-heirs. Ensure everyone agrees on the selling strategy and distribution of proceeds to avoid conflicts.
  11. Evaluate Selling Options: Consider different selling options such as selling directly to an investor, using an auction, or listing on the open market. Each option has its pros and cons depending on your situation.
  12. Document Everything: Keep thorough records of all communications, expenses, and transactions related to the sale. This documentation can be vital if any disputes or questions arise later.
  13. Understand Legal Obligations: Familiarize yourself with Washington state laws regarding the sale of inherited property. This includes understanding any disclosure requirements, probate laws, and tax obligations specific to the state.
  14. Negotiate Wisely: Be prepared to negotiate with buyers. Understand your bottom line, but be open to reasonable offers and terms to facilitate a quicker sale.
  15. Consider Timing: If possible, try to time the sale to coincide with peak real estate market periods, typically spring and summer, to attract more potential buyers.

By incorporating these additional tips, you can better navigate the complexities of selling an inherited property in Puyallup, WA, ensuring a smoother process and potentially maximizing your financial return.

Is there an easier way to sell?

Looking to sell your inherited property in Puyallup? Sell My House Now LLC is your go-to direct house buying company known for purchasing inherited houses for cash with minimal stress and fees. Contact us today to receive a competitive cash offer for your inherited house, condo, or property, regardless of its condition. We specialize in simplifying the complex process of selling a house in probate, ensuring a smooth and hassle-free experience for you.

If you have a property stuck in probate that you’re eager to sell, reach out to us at (253) 799-1210 at any time to secure a competitive cash offer. We buy properties in any state of disrepair, irrespective of the estate’s financial circumstances. Whether the house has endured recent storm damage or requires extensive upgrades to be market-ready, our team will manage all necessary repairs post-sale. Trust us to streamline the sale of your inherited property and alleviate any burdens you may be facing.