Everyone works hard day and night to secure a bright future and have the fortune to leave behind for their children. Among the most common things that children or family inherit is the house which comes with its ups and downs. People are different and have different perceptions regarding inherited homes; while the majority may prefer to rent it out, some will sell it and others will move into it. An inherited house is a treasure and while many families decide to move in it to remind them of their loved ones, others consider it a source of income and rent it out, while others sell the entire property. Whatever the case, an inherited property holds a special place in everyone’s heart and here is a guide on how to sell a St. Louis inherited home.
Understand the variables of inheriting a home
· Recognize the worth of the home
First things first, you need to understand the worth of your home in order to know the expected selling price. You can make the internet your best friend and use online tools such as home value estimator to understand how much it’s likely to cost in comparison to other similar properties in that area. But, you should not entirely depend on these tools because the cost of your inherited home will depend on other factors such as the overall market consideration in your area and the condition of the house.
· The outstanding mortgage
If you want to sell a St. Louis inherited home effectively, you must determine the total amount left to pay against the loan or mortgage. Once you get the figures, make good use of home sale proceeds calculator to determine how much you’ll make as net profit after selling it out.
· Discover if the property has other outstanding debts
In addition to what’s left on the mortgage, you’ll always need to know if the property has other additional bills to be paid off. Do research to determine if the property taxes were paid accordingly every year and how much you are likely to pay after selling your inherited home.
· Determine the number of people inheriting the property
When the deceased die, many are the times when they leave a will highlighting how many people will inherit their property and when selling it out, you must know the number of people involved. Most importantly, it’s worth considering whether all the individuals inheriting the property agree in one accord to sell it out, and who among them will manage the estate sale process.
Capital gains and any other tax implication of selling an inherited home
Selling an inherited home may have a strong impact on your finances mainly because of federal tax implications. Besides, real estate agent commission, lawyer fees, repairs, and monthly/regular payables are additional expenditure you’ll be expecting to add up. Without a doubt, laws differ from one state to another and if you are planning to sell an inherited property, the following are some of the most important resources that will help you understand the tax implications involved.
· The inherited property doesn’t qualify for the home sale tax exclusion
If you decide to sell a home that you’ve been living in for not less than two of the previous 5years, you should be glad that tax exclusion will take effect. Nearly $250,000 of proceeds for one homeowner is usually tax-free, meaning that if you are married, you’ll avoid paying taxes of nearly $500,000 in proceeds. But, you do not qualify for tax exclusion unless you live in your inherited property for not less than two years.
· An inherited property may take advantage of the stepped-up tax basis
Ordinarily, the profit you get from a property sale is arrived at using selling price and any other improvement made during ownership. For inherited properties, the tax basis is usually your property’s fair market value at the time the person who previously owned it died. This ensures that those who inherit the property do not incur significant taxes on the property that have piled up over the past few years. In other words, you are not allowed to pay capital gains tax to the point when the person who owned it died. If you decided to hold onto the property for sometimes before selling it, then you’ll be liable for taxes on which the value of the property increased when you owned it.
· Understand when and how to report sale proceeds
If you decide to sell an inherited property, the IRS requires you to give an account of proceeds as taxable income. You need to understand that the taxable amount will depend on the improvements made to the property as well as the fair market value. The publication from IRS depicts the right forms to use and where exactly you can find the instructions. It is always recommendable to report when selling an inherited property even if you don’t owe any taxes. Most importantly, inherited homes come with different financial obligations and hence important to work closely with an attorney or accountant to understand what’s expected of you.
Preparing the inherited home for sale
Once you and the people you’ve inherited the property with agree to sell it out and after understanding the financial obligations involved, the next thing you need to do is to prepare your home for sale. This process will involve de-cluttering if need be, clearing out all the personal belongings, and depersonalizing the rooms. Generally, preparing the property and making it attractive to the buyer is not an easy task but the following tips will get you started.
· Cleaning out your personal belongings
Inherited homes are loaded with personal belongings that trigger the memories of our loved ones. If it could be possible, you would keep your loved ones or parents’ personal stuff for a lifetime to remind you of the good times you had together, but the person buying the property will not need them. Therefore, go through all the rooms and organize the stuff into different piles and determine what to throw away, what to give out as charity, and what to sell.
· Hold a yard sale or estate sale
After deciding the stuff to keep for memoir, hold a yard sale or estate sale to sell the rest of your belongings. From there, clean the house and do some necessary upgrades to make it eye-catching. Basically, a clean and well-maintained home will always attract buyers and you are likely to sell at good prices.
· Wait for the estate to go through probate
Before you can successfully sell a St. Louis inherited home, it should first go through probate, a legal process where the property must be settled according to the will and testament of the previous owners. Any asset in the name of the previous owner at the time of death should go through probate. And given that every state has a different probate process, it is recommendable to understand the details about the probate process in the area the property is located.
· Determine the right person to handle legal responsibility and manage the transaction
If the previous owner of the property left a will, the executor will distribute the assets of the estate. But, if the inherited home is in a Trust, it means that the trustee will be responsible for holding the same power as the executor. In the case where the children inherited the property together from their parents, then one person will have the authority and responsibility to manage all the real estate transactions involved.
REI Home Buyer Group