Inherited property can be both a joy and a sorrow, particularly if it comes to you because a close relative died. You may also be confused about what to do with the property, especially if you have an emotional attachment to the place. Even if you want to keep the house, that option may not be financially practical. If you do decide to sell the property, you will need the guidance of experienced professionals.
When you decide to sell the property, you should first consult with an accountant or tax attorney. Estate taxes come into play if the net worth of an inherited house is more than the exclusion amount, which is $5.43 million dollars in 2015. If your inheritance is a modest one, estate taxes will not be an issue for you.
You may also have to pay property taxes almost immediately upon inheriting the property. The rate may go up from previous years because the property will likely be reassessed when you inherit it. After the sale, you will have to pay capital gains taxes on any amount you receive over the market value of the house at the time of inheritance. In other words, if the house was worth $500,000 when you inherited it, but you sell it for $700,000, you will owe taxes on the $200,000 minus appropriate deductions.
Real Estate Agent
If you and the other heirs decide to sell, you will need a good local real estate agent to help your prepare for the sale, particularly if you do not live in the area. The real estate agent can inspect the house and advise you on what needs to be done to prepare it for sale. Frequently, basic repairs will need to be completed, but the agent may also recommend some remodeling to make the home more attractive to buyers. The agent may also suggest that you sell the property as is if repairs would be too expensive. A sensitive, experienced agent can help you handle the grief issues that often come with selling inherited property while still getting you the most money possible during the sale.
Everyone enjoys a financial windfall, but selling inherited property from beloved relatives is bittersweet at best. If you decide to sell, you need to consider all the financial and practical implications. Without a good tax advisor and real estate professional, you are likely to end up with less of an inheritance than your relative meant to leave you.