The average inheritance in America is $295,000. This could be cash, investments, or even property. If you’ve recently experienced a loss, you may find yourself the new owner of a house you never planned on inheriting.
Selling an inherited house is one solution that you have available to you. However, there are several factors to consider when inheriting a house, and you’ll want to make the best financial decision for you.
This guide will help you understand what’s involved in selling an inherited house.
What Is Your Tax Liability?
The simple act of inheriting a house won’t cause you to incur a tax liability automatically. However, what you decide to do with the house can trigger tax liabilities. These liabilities can change if you decide to move in, rent it, or sell it.
You Decide to Sell
When you sell property, you pay a capital gains tax. This is a tax on the difference between the amount you purchased the home for and the amount you sell it for. Thankfully, for inherited homes, there’s a step-up tax basis.
Your grandmother bought her home in 1965 for $50,000, and now it’s worth $450,000. It would be unfair for you to pay tax on the $400,000 difference. Instead, you inherit the home at the fair market value and then pay taxes on the difference between that and the selling price.
Is There a Mortgage?
Pay close attention to the mortgage that may be on the property. Some require payment in full when the property transfers to another person. Your inheritance of the property would trigger this.
A reverse mortgage typically requires payment in full within six months of the original owner moving out. If you don’t have the ability to pay the outstanding debt, you may be forced to sell the home to generate the necessary funds.
Condition of the Property
What if you’ve inherited a home that needs major repairs? You can’t move in, you can’t rent it, and the required repairs will make it difficult to sell it. Thankfully, there’s another option.
Selling your house for cash is a fast and easy way to liquidate the asset. So if you’re inheriting a house with siblings, this allows you to divide the inheritance evenly and quickly.
If you find yourself saying, I need to sell my house fast, then a cash buyer can help. There are several situations where selling to a cash buyer is a smart option.
- Reverse mortgage
- Due-on-sale clause
- Mortgage paid off by estate
- Extensive repairs
- Multiple beneficiaries
Cash Sale Process
With this type of home sale, you contact potential cash buyers and provide them information about your house. You’ll receive an offer that you can either accept or reject. If you accept, it’s just a matter of doing some paperwork, and you’ll sell the house.
Consider Selling an Inherited House
If you find yourself in the position of selling an inherited house, then selling for cash can be a smart option. A cash buyer will process the sale quickly so that you can address any financial burden that may accompany the home.
Browse our other consumer resources for more advice on handling financial decisions.