When a homeowner dies, they might leave their house or flat to a beneficiary named in their will. The person who inherits the home might initially think this is a welcome development financially, because they could be planning on renting out the property if they already own one.
Other people who are giving inherited homes might not want the burden of having to maintain a second property, because it will involve paying utility bills, general upkeep home, and investing in any repairs that the late homeowner did not complete. And you might be liable for having to meet monthly loan repayments if the late homeowner died before paying off their mortgage. These expenses can be overwhelming and enough to make someone want to sell the property.
However, the process of selling an inherited home can be somewhat more complicated than trying to sell a conventional property. One of the biggest issues that can arise is paying taxes, as you could be liable for paying income tax, capital gains tax, and inheritance tax. And complications can potentially occur when carrying out the terms of the late homeowner’s will before you can make any attempt to find a buyer for the property.
Many of these issues can be addressed with sufficient advance knowledge of the process. The property auction website Auction Compare, has plenty of experience with inherited houses and flats, and their experts are offering six top tips for how to navigate every step and ensure a smooth sale.
1. Make sure the will beneficiaries are quickly determined
One of the most important early moves that you can make to remove any stress from selling an inherited property is to make sure that the will is clearly understood and that there is no debate over the executor, who is the person named to handle the distribution of the deceased homeowner’s estate, and the beneficiaries, who are the ones that inherit the estate.
Sometimes an inherited home is left to just one person, but other wills designate joint ownership by several people. This can cause complications if one of the shared owners wants to sell the home but the others do not. That’s why it’s crucial to quickly establish who will inherit the property before any discussion can begin about the best way to potentially sell it.
2. Apply early for probate to speed up executing the will
The next crucial step is for the person named as executor of the will to apply for probate, which is the term used for giving them authority to distribute the deceased’s estate to the beneficiaries. Granting probate takes up to eight weeks or longer and is an absolute legal requirement that must occur before anyone who has inherited a property is able to start trying to sell it.
Probate gives executors the legal power to access the deceased’s investments and distribute them, but even after probate is granted it can still take up to six months or longer to finalise everything. The sooner that the executor of the will applies for probate, the less time the beneficiaries will have to wait before they can try to find a buyer for the home if that’s their plan.
3. Hire a legal expert to accelerate the probate process
Some executors of wills attempt to handle the entire probate process on their own, even if they have zero experience of having done so in the past. This can lead to avoidable errors in the often-complicated legal paperwork involved with estates, particularly in tricky situations where several family members are all given a stake in a home and are divided on whether to sell it.
The simplest way to prevent such problems from happening is to hire a qualified solicitor to take care of the probate process, as they will know how to deal with any major hurdles.
Further, if the person who is inheriting the property has plans to invest in significant structural changes, repairs, or any other work on the house or flat, it’s advised to pay for a chartered surveyor to review the project as soon as is feasible before any money is spent.
4. Assess your tax liability for selling the property
There are three potential taxes that you might have to pay with owning and selling an inherited property: inheritance tax, capital gains tax, and income tax. In order to remove any hassle from the selling process you should assess your liability quickly and include it in your sale budget.
Inheritance tax is charged as a percentage of the value of a property. You might not have to pay any inheritance tax on homes left in wills to spouses, charities or amateur sports clubs.
Capital gains tax applies when the value of an inherited home increases between the time that the late owner died and the time of the sale. But ask a probate professional about whether it’s possible to get an exemption from having to pay this.
Income tax might apply if the property currently has tenants that rent it any make monthly payments to live there, as this will be considered a source of new income for whoever inherited the home. Once you have successfully sold the home, this tax obligation will no longer apply.
5. Decide which method you’ll use to sell the home
An important decision to make is whether you will try to sell the inherited property via an estate agent, an auctioneer, or to a fast home buyer. Each has their own pros and cons, and the right decision will depend on your individual needs financially and how quickly you need a sale.
Estate agents will do much of the hard work of advertising the property and hosting viewings for potential buyers, but it can take many months or even more than a full year to receive an offer. And they will charge commission that can reduce the net profit expected from the sale.
Auctioneers similarly will handle almost all aspects of the sale, but there is no guarantee of the final sale price. The property might not receive any bids, in which case it won’t sell. Or it might only get a bid at the reserve price, which is the lowest value at which you’ll willing to sell. And you’ll also have to pay commission, which will you’ll have to deduct from the sale profit.
Or you could use a quick home buyer, as these companies can typically complete the purchase of a home in just a few short weeks. And the reputable fast property buyers never charge any fees, so you would get to retain all of the profit from whatever sale price you’re offered. Be sure to look for homebuyers that are members of The Property Ombudsman for peace of mind.
6. Make sure the property looks good to potential buyer
Once you’ve settled on the preferred method for selling your home, make sure that it looks presentable before trying to find a buyer. First impressions count, and if your inherited property has aesthetic problems such as an overgrown garden, chipped paint, and dirty rooms inside, this will cause many people to lose interest in making an offer to buy it.
Take the time to tidy the exterior and interior before listing the house or flat for sale, because this could make a crucial difference between it finding a buyer and remaining unsold.