The Comprehensive Guide to Selling Your Inherited House in Southern California
If you’ve just inherited property in Southern California, you probably have a lot of questions.
- Do I have to pay capital gains tax?
- What is the fair market value of my property?
- Do I owe any federal estate taxes or property taxes?
- Will selling inherited property affect my income taxes?
- Is there an inheritance tax I have to pay?
- How does the probate process work?
- Do I need to pay outstanding debts?
- Should I sell through a realtor or a cash buyer?
That’s because selling an inherited property in California can be a challenging and complex process, especially if you’re not familiar with property tax, liabilities, the local area, and the real estate market. You may not know:-
- How to navigate the probate process
- The capital gains taxes you owe
- How to sell an inherited property California residents will want to buy
- How to deal with jointly inherited property
- The realities of building an estate plan as a new owner
Fortunately, this post is here to help. By the end of it, you’ll understand how the probate process works, how to sell an inherited property that needs repairs, how to sell a house in California without a will, and whether you should use a real estate agent or accept a cash offer. You’ll also discover how to deal with inheriting real property you share with others and some of the common misconceptions about the sales process.
Understanding the Probate Process
Probate is a legal word that refers to settling the estate of a deceased owner. Executors (people who carry out the will) identify and gather the deceased’s assets, pay debts and tax liabilities, and then distribute any remaining property to the beneficiaries (usually the heirs).
Probate Process Steps: Selling Inherited House California
Selling an inherited house and working through the probate process can seem complicated at first. However, it is highly process-driven, like many other administrative tasks. Once you know the basic steps, it gets much easier.
Step 1: Filing A Petition For Probate
The first step is for the executor named in the deceased person’s will to file probate with the court. They must provide information about the person who has died, their heirs, beneficiaries, assets, and debts. The court will then legally appoint an executor or administrator to oversee the process, giving them the authority to act on the deceased’s behalf.
Step 2: Notifying All Stakeholders
The next step is for the executor to notify all parties who might have a claim on the estate. This includes beneficiaries, heirs, and creditors, such as the deceased’s mortgage company.
Usually, you will need to make notices public if you are a California resident, either by mail, in a local newspaper, or through services that assist with the probate process. Any information you provide should tell them about their rights regarding the estate, such as their ability to contest the will or claim payment. (For example, you might inform the government about their ability to claim federal estate tax after consulting with your accountant).
Step 3: Appraising The Deceased’s Assets And Building An Inventory
After that, the executor must prepare a list of the deceased assets and belongings to show what they own and what it is worth. You should price capital items according to “fair market value” at the date of death. Include pensions, stocks and bonds, property, and any private businesses they own.
Step 4: Paying Debts And Taxes
The next step is to pay various debts and taxes. The executor must file income taxes for the deceased person, and pay the outstanding mortgage, bills, loans, and other items to creditors.
The average California resident does not need to pay the federal inheritance tax or taxes. There is no inheritance tax in the state. Also, beneficiaries do not need to pay income taxes (sometimes called death taxes) on the money they receive from inheritance.
Step 5: Distributing The Assets
The last step is to distribute the remaining assets to the beneficiaries mentioned in the will (or intestacy laws if there is no will). In the U.S., there are no federal estate taxes on income when inheriting property, cash, or investments unless the inherited property is worth more than $11.7 million. California also eschews estate taxes, meaning beneficiaries won’t have to pay these either, unlike in states like New York, Maryland, and Illinois.
However, beneficiaries will need to pay capital gains tax if they sell any of the deceased assets for a higher price than their value upon the deceased’s date of death.
The Costs Associated With Probate And How To Manage Them
The costs you face at probate will depend on the fees charged by attorneys, the complexity of the estate, and the professionals you need to hire when you sell inherited property.
You will need to consider a range of tax considerations of expenses, including:-
- Bond fees
- Accounting fees
- Appraisal feels
- Publication fees
- Legal fees
- Executor fees
You can use several methods to manage these fees. These include:-
- Using various small estate procedures that let you transfer estate items below a certain value without going to court
- Holding property with the right of survivorship if you are a partner or spouse
- Ensuring you allocate some money from the estate to pay for the various administration fees listed above
- Push closing costs into the future by selling assets later
- Taking advantage of the lower rate of long-term capital gains tax by waiting more than a year between acquiring assets and selling them
Selling an Inherited House that Needs Repairs
Inherited properties rarely arrive in your lap in move-in-ready condition. Usually, they require some repairs. This section lists common repair issues you are likely to encounter, how much they cost, and various options for selling inherited homes or property when the house needs work.
Common repair issues in inherited houses
Common repairs you are likely to encounter in an inherited house in California include:-
- Leaky roofs and problems with the fascia
- Noisy or leaky plumbing
- Old or outdated electrical wiring
- Mold and water damage in the bathroom or basement
- Outdated fittings and appliances
- Pest infestations
Professionals can assist you in dealing with these issues rapidly. However, they can get expensive, particularly if the damage is widespread.
Estimating repair costs
The best way to investigate repair costs is to hire a home inspector to evaluate the damage and problems. You can start selling inherited houses California residents will love without any repairs, but you may have to discount significantly. Inspectors can tell you about the real condition of your property and how much it will cost to fix, helping you set a reasonable price with your real estate agent. They can tell you whether it’s worth selling as an investment property or whether you are better off fixing it and selling a single property as new.
Options for selling a house that needs repairs
When it comes to selling a house that needs repairs, you have several options:-
- Sell to a cash buyer. Sometimes, companies or individuals have enough cash on hand to purchase the property outright. This approach is hassle-free and usually doesn’t require making any repairs. Cash buyers offer a fair price based on their appraisal of the home’s value.
- Sell as-is. The next option is to sell as-is. Here, you don’t do any work on the property, reducing your selling costs. Real estate agents will evaluate the house and then pitch a sale price to the market, based on its value as a rental property or primary residence.
- Make small repairs. Another approach is to make small repairs. Many real estate investors look for properties where the previous owners have fixed minor issues by cleaning, landscaping, or painting, and are willing to offer a higher price.
- Make significant repairs. Lastly, you can make major repairs, such as improving the structure of the house or replacing the roof, wiring, and plumbing. This option makes the house sell for a higher price, but you might not make back all the money you invest when you come to sell.
Ultimately, selling to a cash buyer is probably the most profitable option, unless you think you can make a return by carrying out effective repairs.
Selling an Inherited House Without a Will
Selling inherited property in California without a will is complicated, but not impossible. Selling the house to a local and experienced cash buyer can make the process of selling without a will seem easy and trouble-free.
Legalities of selling an inherited house without a will
If the deceased failed to leave a will, you must distribute property according to the laws of intestacy. These determine who the beneficiaries are based on their relationship to the deceased.
As before, you must go through the probate process. Unfortunately, this process can last six months to two years, meaning you may not receive inherited property fast.
During the process, you may need to pay taxes (if the value of the estate is high), attorney fees, and appraisal fees. You will also need to resolve disputes with creditors and beneficiaries.
Steps to follow when there’s no will
If there is no will, you should do the following:
- Find all relevant heirs and beneficiaries with a legal right to inherit property
- Hire an attorney with expertise in probate matters and selling an inherited property
- File a probate petition with the court
- Tell all the parties involved about the probate and publish a notice in a local publication, such as a newspaper
- Create an inventory of all the deceased’s property
- Sell the house or other assets if required by the will or requested by the beneficiaries
- Distribute each beneficiary their share according to the instructions in the will or intestacy laws if there is no will
Benefits of selling an inherited home to a cash home buyer when there is no will
The benefits of selling inherited homes to cash buyers are significant:-
- You don’t need to pay commissions or fees as part of the sale of the property
- You don’t need to wait for other people in the chain to buy their new homes
- You can close the deal in as little as 7 days
- You don’t have to go through the hassle or stress of dealing with a real estate agent
- You don’t need to repair or renovate the property
Selling an Inherited House: Realtor vs. Cash Home Buyer
Weighing up whether you should sell to a realtor or a cash home buyer can be challenging. Therefore, this section details the pros and cons of each, helping you decide.
Pros and cons of selling through a realtor
Realtors will list your house on the open market and handle negotiations and viewings for you. This approach can sometimes help you get a higher price for the house if it is located in a good area and is in reasonable condition. Realtors can help with paperwork, managing interesting parties, and ensuring you get the best offer.
With that said, there are some downsides to using real estate professionals. For instance, they charge significant commissions which can be as high as 6%. Also, you still need to prepare your property for sale, including cleaning, staging, and making repairs.
Pros and cons of selling to a cash home buyer
The situation when selling to a cash home buyer is entirely different. Here, you get a cash offer upfront, without the need to prepare your home for viewings. Service is fast and hassle-free, and you avoid the massive commissions some real estate professionals charge. It makes property inheritance much easier to manage.
The downsides are minimal. For instance, a cash offer buyer will usually offer a lower price than the market value. However, you will always get less than the list price because of the commissions and fees you need to pay if you sell via a realtor.
There’s also a risk that you’ll choose the wrong cash buyer who won’t offer a fair price. That’s why it’s critical to go to trusted home buying professionals.
Factors to consider when choosing your selling method
When choosing your selling method, you should consider the following:-
- Whether you need the money now or later. If you need it now, choosing a cash home buyer might be the better option.
- Whether you have an emotional attachment to the home. If you do, then holding onto it for a little longer might be the better option.
- Whether your home is in a high or low-demand area. You may have better luck selling to a cash buyer who can sell the property to a real estate investor
Dealing with Jointly Inherited Properties
Jointly inherited properties can throw a spanner in the works. Multiple heirs may complicate matters, both in terms of probate logistics and the federal government. Tax implications may also be different.
Here are some of the common issues you might face when selling a jointly inherited property:-
- Disagreements over the value of assets, including the market value of the home
- Disagreements on the deceased ordinary income or taxable income and how much income tax they need to pay
- Disagreements on the state of the property and repair work required
- Disagreements on whether to sell the property or keep it in the family
Tips for resolving family disputes and selling the property fairly
Fortunately, you can resolve many of these issues by following these simple tips:-
- Communicate empathetically and respectfully, keeping the conversation constructive
- Consider various alternative options if you can’t decide how to sell the house or divide the proceeds
- Involve professionals from the start to properly determine the property’s value and how much it will cost to sell
- Be mindful of each other’s legal rights and wishes, being careful not to tread on anyone’s toes
Debunking Myths About Selling Inherited Houses
Myths about selling inherited houses are common. Fear often gets in the way of rationality.
Therefore, this section lists some common myths about selling an inherited property and how to expedite the selling process.
The Most Common Myths About Selling An Inherited Property
Myth 1: Estate tax is enormous
People worry about having to pay federal estate taxes, inheritance taxes, and more when they inherit property. However, the tax burden from selling inherited property in California is minimal.
For instance, most people don’t need to pay inheritance tax on property they receive in a will in California. Estate taxes only apply to the largest estates by value.
Myth 2: You Have To Pay Capital gains tax
The belief that you have to pay capital gains taxes when you inherit property in California is another myth. You only need to pay these when selling an inherited property later on for more than its fair market value on the date of death for the deceased.
Myth 3: The Property Needs To Be In Good Condition
Thanks to cash buyers, you can sell properties in virtually any condition. You don’t need to fix them first.
Myth 4: You Have To Sell Your Property Through A Realtor
These days, you can sell properties rapidly through property-buying companies. These don’t charge a commission and can complete deals in just a few days, even with multiple owners.
Realities of selling inherited properties quickly
Selling your property quickly isn’t as straightforward as you might think if you go down the conventional route. However, it gets much easier when you and other family members choose a cash buyer.
For instance, probate can be a time-consuming process, particularly if local courts are slow or you want to avoid capital gains tax. And you may need to deal with other beneficiaries who have their own ideas on when to sell.
You might also need to deal with the emotional aspect of selling a house that’s been in the family for many years. Letting go of inherited property can be challenging.
How cash home buyers can expedite the selling process
Fortunately, there are several methods you can use to speed up the process and get the money you need when you choose a cash buyer. For instance:-
- You can sell your house according to your preferred timeline – which could be a matter of days
- You can get a stress-free service, which might be what you need when you have an emotional connection to the inherited property or you are still dealing with grief
- You can sell the property as-is, without needing to carry out repairs or modifications
Having navigated through this comprehensive guide, you’re now well-versed in the California-specific nuances of the probate process, strategies for selling an inherited property that needs repairs, the capital gains tax implications, and how to go about selling an inherited house without a will. You’re also armed with valuable insights into the distinct advantages of choosing a cash buyer over a traditional realtor.
So why wait? The clock is ticking, and every moment counts in the fast-paced California real estate market. Opting for a cash offer not only accelerates the selling process but also bypasses the headache of costly repairs and realtor commissions. Plus, let’s not forget—California residents often escape the burden of inheritance tax due to generous federal thresholds, as well as lenient state estate and property tax regulations.
To capitalize on this win-win scenario, don’t hesitate to reach out for a no-obligation cash offer for your inherited California property. Act now to unlock the full financial potential of your inheritance. Contact us today, and take the first decisive step toward a hassle-free and profitable sale.
Call (949) 356-6763 for a no-obligation quote!