Selling an Inherited Property in Washington

Selling an inherited property can be a complex process, but with the right approach, it can also be straightforward. Here’s how to navigate the process in Washington

Inheriting a property can be an emotional challenge as well as a financial one. You might face questions like: Does the property require costly upgrades or repairs? What are the potential tax implications? Is there a will, or will you need to navigate the probate process?

However, inherited properties also present a valuable opportunity for real estate investors and buyers seeking a bargain they can personalize. So, what does it take for a homeowner to sell an inherited property? Are there specific steps to follow for this type of sale? This article will outline the process of selling an inherited property, guiding you toward a successful and profitable transaction.

How To Sell An Inherited Property in Washington

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.

Understand Your Rights
Ensure that you have the legal right to sell the property. If there are multiple heirs, all parties must agree to the sale. Review the will and consult a probate attorney if necessary.

Assess the Property’s Condition
Conduct a thorough evaluation of the property. Determine if repairs or upgrades are needed to enhance its market value. An inspection can help identify any issues that need addressing.

Get an Appraisal
Consider hiring a professional appraiser to assess the property’s value. This will help you set a competitive asking price and inform your selling strategy.

Determine Tax Implications
Understand the tax implications of selling an inherited property. Consult a tax advisor to discuss potential capital gains taxes and other financial considerations.

Choose Your Selling Method
Decide whether to sell the property traditionally through a real estate agent or to a cash home buyer. Selling to a cash buyer can be quicker and may require fewer repairs.

Prepare the Property for Sale
If you opt to list the property, take time to clean and stage it. A well-maintained home can attract more buyers and lead to a faster sale.

Market the Property
If working with an agent, they will handle marketing. If selling independently, use online listings, social media, and local resources to reach potential buyers.

Negotiate Offers
Be prepared to negotiate when offers come in. Review each offer carefully and consider the terms, including closing dates and contingencies.

Close the Sale
Once you accept an offer, work with a title company or real estate attorney to finalize the transaction. Ensure all necessary paperwork is completed and that any outstanding taxes or fees are settled.

Consider Future Steps
After the sale, think about how you’ll manage the proceeds. If there are multiple heirs, discuss how the profits will be divided.

By following these steps, you can effectively navigate the sale of an inherited property in Washington, turning a challenging situation into a profitable opportunity.

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. 

Check the Will
If the deceased left a will, it typically names an executor. Review the document to identify who has been appointed.

Understand Executor Responsibilities
The executor is responsible for managing the estate, including handling debts, distributing assets, and overseeing the sale of any property. Ensure the appointed person is willing and able to take on these duties.

Consult with Family Members
If there’s no will or the named executor cannot serve, discuss options with other family members. You may need to decide together who would be the best fit for the role.

Consider Professional Help
In some cases, appointing a neutral third party, such as a lawyer or estate professional, can help manage the estate and reduce potential family conflicts.

File for Probate (if necessary)
If the estate requires probate, the executor may need to file documents with the local probate court. This process legally establishes their authority to act on behalf of the estate.

Communicate Clearly
Ensure that everyone involved understands who the executor is and their role in the process. Clear communication can help minimize misunderstandings and conflicts.

By determining the executor early in the process, you can streamline the steps necessary for selling the inherited property.

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.

Engage a Probate Lawyer

• Legal Guidance: A probate lawyer can help you understand your responsibilities, navigate legal requirements, and ensure compliance with state laws.
• File Necessary Documents: They will assist in filing probate documents with the court, managing the probate process, and addressing any legal challenges that may arise.

Choose the Right Real Estate Agent

• Experience with Probate Sales: Look for an agent who has experience handling probate properties. They will be familiar with the unique challenges and processes involved.
• Market Expertise: An agent with local market knowledge can help you set a competitive price and effectively market the property.

Collaborate on Property Valuation

• Get an Appraisal: Work with your lawyer and agent to obtain a professional appraisal to determine the property’s value, which is essential for the probate process and sale.
• Discuss Repairs: Consult your agent on necessary repairs or updates to enhance the property’s appeal without overspending.

Communicate Clearly

• Regular Updates: Maintain open lines of communication with both your lawyer and real estate agent. Regular updates help ensure everyone is aligned on goals and timelines.
• Address Concerns Promptly: If issues arise, address them immediately with both parties to avoid delays in the sale process.

Understand the Timeline

• Probate Duration: Be aware that the probate process can take time, which may affect how quickly you can sell the property. Your lawyer can provide insights into expected timelines.
• Sales Process: Your real estate agent will outline the sales process, including marketing, showings, and negotiations, to set realistic expectations.

Follow Legal Requirements

• Disclosures: Ensure all necessary disclosures are made during the sale, as required by law.
• Court Approval: In some cases, especially if there are multiple heirs or significant assets, you may need court approval for the sale. Your lawyer will guide you through this.

Prepare for Closing

• Documentation: Your lawyer will help prepare the necessary legal documents for closing. Ensure you have all required paperwork ready to avoid delays.
• Final Review: Before closing, review all terms with both your lawyer and real estate agent to ensure clarity and compliance with the agreement.

By effectively collaborating with both a probate lawyer and a real estate agent, you can navigate the complexities of selling an inherited property with greater ease and confidence.

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.

When selling inherited property, understanding the tax implications is crucial. Here are the key points to consider:

Step-Up in Basis

• Fair Market Value: Inherited properties typically receive a “step-up” in basis, meaning the property’s value is adjusted to its fair market value at the time of the decedent’s death. This can significantly reduce capital gains tax liability when sold.
• Example: If the decedent purchased the property for $200,000, but its market value at death was $300,000, your basis for tax purposes would be $300,000.

Capital Gains Tax

• Taxable Gain: If you sell the property for more than its stepped-up basis, the profit is subject to capital gains tax. For example, if you sell the property for $350,000, and the stepped-up basis is $300,000, you would owe taxes on the $50,000 gain.
• Long-Term Capital Gains Rates: Gains from inherited properties are generally considered long-term, regardless of how long you hold the property, which usually means lower tax rates.

Deductions and Exemptions

• Selling Expenses: You can deduct certain selling expenses (like real estate agent fees and closing costs) from your capital gains, potentially lowering your tax liability.
• Exemptions: If the property was your primary residence for at least two of the last five years, you might qualify for the home sale exclusion, allowing you to exclude up to $250,000 ($500,000 for married couples) of gain.

State Taxes

• State Capital Gains Tax: In addition to federal taxes, check your state’s laws regarding capital gains, as state taxes may apply when selling inherited property.

Consult a Tax Professional

• Given the complexities of tax law and the potential for significant financial implications, it’s advisable to consult with a tax advisor or accountant who specializes in estate planning. They can provide tailored guidance based on your situation.

Understanding these tax implications can help you make informed decisions when selling inherited property and maximize your financial outcomes. 

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.

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.

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.

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.

Is there an easier way to sell?

Yes, there is! Wenatchee Home Buyers is a direct house buying company that has built our reputation on buying inherited houses for cash with less stress and less fees. Contact us today and get a competitive cash offer for an inherited house, condo, or property. We buy homes in any condition, and we can also help with the convoluted process of selling a house in probate! Let us make your home selling experience as straightforward and stress-free as possible so you can move on with your life.

Even if the house suffered major damage in the last storm or was neglected for years and needs a large amount of upgrades to make it “market ready”, once you accept our fair cash offer our team of experts will handle all of those expensive repairs so you don’t have to! We make selling an inherited house easy.