Bernie Stephan, Eco Realty - A GUIDE TO SELLING AN INHERITED HOME

A GUIDE TO SELLING AN INHERITED HOME

A GUIDE TO SELLING AN O SELLING AN INHERITED HOME

Bernie Stephan, Eco Realty

Table Of Contents

Dealing with Inherited Homes: Best Practices for Families 1

Concepts to Know When Selling an Inherited Home

Distribution Among Family Members

Downsides to Inheriting

How Selling a House in an Estate Differs from Regular Home Sales

Determining the Value of an Inherited Home 27

Four Ways to Sell Your Inherited House

Inherited Home Sales & Taxes

Prepping an Older Home for Sale

10. Small Improvements Can Gain You Thousands 61

11. Marketing an Inherited Home

12. Using Curb Appeal to Sell Your Inherited Home for More

13. The Importance of Good Pictures

14. The Process of Selling Inherited Homes

Foreword

Let Me Help You

Being an executor or personal representative is never stress-free. Important decisions must be made, and navigating the responsibilities can feel overwhelming. As an experienced real estate professional, I am here to guide you through the process, especially when it involves real estate. If you haven’t yet secured a skilled probate attorney, I can recommend trusted professionals whose work I know and respect. My role is to help you at every step, steer you away from potential pitfalls, and provide support so you’re never facing these challenges alone.

Need to sell the property quickly?

I’ll help you identify the estate’s most critical objectives. For urgent cases, I can connect you with qualified local cash buyers from my network. These buyers often make offers within 48 hours and can close quickly—sometimes even advancing funds before closing. This can be essential for covering medical bills, relocating a surviving spouse, or getting funds to heirs as soon as possible.

Want to maximize the sale price?

When the focus is on maximizing net revenue, I’ll ensure the property is strategically listed and aggressively marketed for maximum exposure. I’ll provide an accurate valuation and help you assess which repairs, if any, will add value to the sale. My goal is to guide you toward smart decisions that deliver the best return iii

without unnecessary spending.

In probate, holding costs and delays can be higher than in a standard sale. That’s where my experience and knowledge of probate come into play to minimize these challenges and keep the process moving efficiently.

Let me help you make this process as smooth and successful as possible.

CHAPTER 1 Dealing with Inherited Homes: ed Homes: Best Practices f actices for Families

Dealing with an inherited home is a complex subject, and there are several complicated issues to resolve. A web search for “selling inherited property” returns more than 10 million results. A glance down the first page or two shows some of the issues: • Do You Pay Capital Gains Taxes on Property You Inherit? • What Taxes Are on an Inherited House? • If You Inherit a Home Do You Qualify for the $250,000 Home Sale Tax Exclusion? • What to Do When You Inherit Your Parent’s House, Home Inheritance Issues, and on and on.

Additionally, it is not uncommon for a person selling an

inherited home to have a sentimental attachment to the property, with the sale being the result of a recent death in the immediate family. This adds an emotionally overwhelming component to the transaction. Because of continuing property ownership obligations such as property taxes, insurance, utility bills, household and grounds maintenance—in addition to any issues with the settlement of the estate—a rapid sale is often necessary. Getting a loved one’s house ready for the market can be anxiety-provoking, emotional, and stressful. It likely includes clearing out once-treasured belongings and depersonalizing the rooms. Then there is the financial cost of making necessary updates to attract buyers. Sometimes heirs must deal with liens or hidden problems in the house structure or systems (i.e., electric, plumbing, and gutters), and there may be disagreements among beneficiaries about the sale price, or whether to sell at all. Family members drag their feet, distracted by images of growing up in the home, preventing them from taking appropriate action. They can’t let go. Everyone takes the time they need to deal with the passing of a loved one. Sellers in this situation need to take the appropriate steps to learn the market, educate themselves, and have a reliable real estate agent and tax attorney or Certified Public Accountant (CPA), an empathetic party who is there to help. This little book is meant to offer some proven tips that can help owners of inherited property approach the issue in a structured manner, with fewer problems and more satisfactory results for all stakeholders concerned. Here, we will discuss the different aspects of splitting the property with family members and the best practices involved.

BENEFITS OF SELLING

No matter if you are a single heir or one of multiple heirs to the property, selling it as quickly as possible will save money, time, stress, and the tiring effort involved in the settlement process. There are several benefits to selling the inherited property. For example, in some cases, along with inheriting property, the heirs end up inheriting unexpected commitments and difficulties with legal and financial implications. Every situation when someone inherits and then sells a home is typically different from each other. For example, if it is discovered there are environmental concerns or the mortgage is “underwater” (meaning the mortgage balance is more than the home is worth), heirs may even choose not to accept the home at all, allowing it to go into foreclosure. Those who do not want inherited property should consult a lawyer promptly, as disclaimer paperwork will likely have to be filed. Traditional home sales methods are a perfectly good option if you find that there are no outstanding mortgages and the property is in good shape and does not require major repairs or cleaning to sell. If you can easily afford any necessary repairs and cleaning while handling the selling process, then you can safely choose to sell an inherited property just as you would any other house. This is not to say that selling the property will always be complication-free, but even when issues arise, it may still be worth it to persist with the sale. When there are siblings or family members who share the property with you as legal heirs, there might be disagreement about how the settlement should proceed. Therefore, selling the property could save you the aggravation of dividing a singular property between many hands. Once the property is converted to money, the money can be more easily

distributed among the heirs. One concern that you do need to address is the amount of time required to sell the property, since it is uncertain when it may sell. A short sale of the home can come to your aid if there are mortgage payments due which you are unwilling or unable to pay. If one or more heirs inheriting the property have an urgent need for cash, then a quick home sale is also a good option. Sometimes, you might receive some added tax benefits from selling the home. At times, you might also feel that you just want to get rid of the burdens an inherited home imposes by selling it quickly so you can get on with your life as smoothly as possible. If the property is in a different city or state, assuming the responsibility of maintaining a vacant house can be a burden that you may not be prepared to endure. If the house goes to probate, even if there are no residents, the property must be maintained. The property taxes, insurance premiums, utilities, homeowners association fees, and other ongoing costs must be paid by someone. Depending on how long the probate period lasts, families may need to pay for many months of maintenance, along with the legal fees and other expenses connected to owning and selling the property. At the end of the probate, you will also have to go through the effort and expenditure of repairing and selling the home. Under such conditions, if your benefits are lower than your commitments, it may be wisest to simply sell the home to investors.

DEALING WITH F G WITH FAMILY MEMBERS

Disputes among siblings or legal heirs over the settlement of inherited property are common. Often, disputes over a property are dominated by past issues of sibling rivalry and are a fight for

dominance. In the absence of parental guidance, adult siblings are left to face the scenario of ambiguity or disagreements over their rightful role. It is essential that you work to ensure that disputes and disagreements do not lead to litigation. Litigation will only worsen the situation by causing issues with family members, creating uncertainty, and wasting time waiting for legal issues to be settled, as well as the usual expense and aggravation associated with legal hearings. The tremendous cost involved in litigation is certainly a wasteful expenditure. Litigation is not the peacemaker’s choice—prevent it whenever you possibly can. This situation can be avoided. By keeping the emotional heat down and a compromising frame of mind in the forefront, there is generally a solution that can be made for a peaceful settlement. Where creative solutions to these problems can be facilitated, there is mutual gain for all concerned. A good solution is for one of the heirs to buy the property from the others. Ordinarily, if you inherit the home with your siblings without any remaining mortgage, the rule is that ownership is to be evenly split unless otherwise stated in the will. If one of the siblings is interested in keeping it while the others want to sell it, the interested sibling can buy out the others using conventional financing. The cost involved in this process can be minimal and includes the appraiser’s fees and the closing costs. If this will work, you pay your siblings in cash for their shares and get the title of the property transferred into your sole name through a deed. Alternatively, a private agreement can prove useful under some circumstances. For instance, if you or your sibling cannot qualify for a mortgage, the one who does not wish to keep the house can finance the transaction. This will mean you will not need a home

loan or incur out-of-pocket expenses.

For a private agreement, you make a promissory note to your sibling for his or her share of the value as assessed by the appraisal. The amount due to him or her can be paid in monthly installments along with interest. With this arrangement, you can buy out the property over time. If necessary, you may also make a deed of trust that grants the power to foreclose if you default on payments. Renting the property could be the solution if none of the siblings are interested in keeping the property personally, but as a group, the heirs see benefit in the house as rental or investment property. If you have a friendly relationship and can get along for a long period as co-owners of the property, you can rent out the property and take your share out of the proceeds monthly. If one of the siblings manages the collection of rental payments and arranges maintenance for the property, the effort can be rewarded by the others with an increased share. Whatever the terms are, though, it is advisable to record them in a written agreement to forestall future disagreements and conflict. Sometimes, though, the best arrangement under these circumstances is still to sell the property, subtract the expenses and costs involved, and the commissions paid, and then divide the resulting amount among you. Selling the property as soon as you inherit also helps save on the capital gains tax. Capital gains tax for the sale of the inherited property is calculated on the property value after the death of the decedent. Since the difference may not be much if the time between death and sale is short, you may be left with nothing to pay in capital gains tax. A lawsuit for partition should be the last resort for you to settle the inherited property if you cannot come to an amicable agreement with your sibling over the settlement. If it comes down to it, you can file a lawsuit asking the judge to order the sale of

the home and terminate your co-ownership. This is a complicated process and the judge usually appoints a mediator first, to get the property ready for sale. If you are at odds with each other, you and your siblings might not be able to do this. Therefore, you will need to have an agent sell the home and mediate between you.

HOLDOVERS LIVING IN ESTATE

When inheriting a property, you might have to address the issue of holdovers living in the estate. If one of your siblings or yourself is living in the property, you need to come to an agreement with all the heirs regarding whether the concerned individual will continue to live there or will need to vacate. In the case of continuing to live there, the terms must be clearly drafted. If the right to remain there is mentioned in the will, then it cannot be challenged. If it has to be challenged for some reason, the necessary legal proceedings must be adhered to. If the decision is made to sell the property, then the property must be vacated in a definite timeline facilitating the sale. If the occupant wishes to continue residing in the property despite the sale, then it must be dealt with accordingly. If you are inheriting a property with tenants living in it, you must fulfill some responsibilities from the position of a landlord. If the property is sold, the legal rights of the tenants must be given due consideration. For complicated situations like this, consult an attorney.

SPLITTING UP ITEMS INS G UP ITEMS INSIDE

Decisions pertaining to the settlement of the property or the division of its contents among the legal heirs must follow the guidance given in the will. Where there is no will enacted by the owner of the property, then the state’s laws regarding intestate

succession will come into play. If either the will or the law requires the estate to be divided equally, the heirs must act accordingly. Sentimental objects are invaluable to those they are valuable to and settling them should happen out of the legal conventions in agreement between the siblings. Since the value of sentimental objects is often subjective and cannot be decided by an appraiser, the real challenge comes when more than one sibling wants the possession. Negotiation and compromise are called for. A real estate agent can be appointed to decide the value of the property. The challenge here may revolve around how to divide the real estate among the heirs in a way that is acceptable to all parties. The two main approaches that the siblings could take include either selling the property to divide the proceeds or keeping the property and sharing its use. If the estate also features assets that cannot be distributed on a pro-rata basis, an equal division of value is the solution. If a sibling wants to hold the property, then the others can get cash equal to their share of the property or other assets as it may be decided. Ultimately, everyone involved in the deal walks away with his or her share of the property in the right proportion. Dealing with the leftover items in the estate could be a laborious task and a bothersome job while attempting to settle a property. In this situation, you might need to categorize the items as those to keep, those to sell, those to donate, and those to throw away. Remember that during an estate sale, people may be ready to buy even the oddest things. Therefore, make an effort to see that as many things as possible are sold or auctioned away to be converted into cash and distributed among the heirs.

CHAPTER 2 Concepts to Know When Selling an Inherited Home ed Home

Selling an inherited home involves understanding several legal concepts and practical issues that can influence the process. Familiarizing yourself with these elements will allow you to make informed decisions and avoid complications as you navigate this potentially overwhelming experience.

Most inherited homes are passed to heirs through a legal document known as a will. A will represents the final opportunity for a person to dictate how their property will be distributed after their death. It is legally binding and generally difficult to contest,

even if its terms might seem unreasonable or unexpected. For example, someone of sound mind, or testamentary capacity, has the legal right to leave their entire estate to a charity or a pet, bypassing children or other relatives. When the maker of the will is the sole owner of a home, they hold full authority to decide who inherits the property. The individual responsible for carrying out these instructions is known as the executor. This person, named in the will or appointed by the court, ensures that the deceased’s wishes are honored and oversees the necessary steps to transfer property titles. A properly executed will simplifies the inheritance process and makes it far less susceptible to disputes. Without a will in place, intestate succession laws determine how the property is distributed, often requiring court involvement to resolve issues or appoint an administrator. The word “probate” often carries negative connotations, but the process in California doesn’t have to be excessively difficult or time-consuming, especially for smaller estates. Estates valued at less than $184,500 may qualify for a streamlined probate option, allowing heirs to bypass formal probate proceedings through simplified affidavits or summary procedures. For larger estates, probate typically involves filing the will with the court, notifying heirs, and validating the will through formal court proceedings. California law provides two main types of probate proceedings: formal probate and simplified probate for smaller estates. In formal probate, the court oversees the executor’s activities, including the appraisal of assets, payment of debts, and distribution of the remaining property to heirs. This process can take several months to over a year, depending on the complexity of the estate and whether disputes arise. However, if the estate qualifies for simplified procedures, heirs may only need to complete affidavits or petitions to transfer property without

extensive court involvement.

If the named executor cannot serve, a replacement may be appointed through a court process. Beneficiaries may nominate a new executor, but the court will appoint a guardian to represent the interests of minor or incapacitated heirs. In some cases, probate may not be required at all, particularly if no property needs to be divided or transferred under the will’s terms. However, real estate often necessitates probate to formally transfer the title to heirs, even when co-ownership is involved. Inherited property carries tax implications that are important to understand. Estate taxes at the federal level apply to estates exceeding $13.61 million in 2024, but California does not currently impose an additional state estate tax. However, property taxes are subject to reassessment upon inheritance, potentially increasing tax obligations for heirs. Proposition 19, enacted in 2021, limits property tax exemptions to transfers between parents and children or grandparents and grandchildren, provided certain conditions are met. This means many heirs may face significant increases in property taxes if they do not meet these requirements. Ownership of inherited real estate requires more than a simple declaration. A formal transfer of title is necessary to establish legal ownership. This process typically involves obtaining the deceased’s death certificate, a copy of the probated will, and the original deed to the property. If the property was jointly owned, it may automatically pass to the surviving co-owner. However, if the property is solely owned and you are named as the heir, a new deed naming you as the owner must be issued, often by the executor or court-appointed administrator. In some cases, inheritance involves a life estate rather than outright ownership. A life estate grants an individual the right to use or occupy the property for their lifetime, with ownership

transferring to another person, known as the remainder beneficiary, after the life tenant’s death. This arrangement can help avoid probate and may offer certain tax advantages, but it requires careful planning and legal expertise. Life estates are less common in California due to the popularity of living trusts, which offer similar benefits while providing greater flexibility and privacy. However, a life estate can still be an effective tool for certain inheritance plans. The process of selling an inherited home can seem daunting, but with the right understanding of the legal and financial aspects involved, you can approach it with confidence. This book aims to provide the knowledge and practical guidance needed to navigate this often-complicated journey, helping you make informed decisions and avoid unnecessary challenges along the way.

CHAPTER 3 Distribution Among Family Members

While drafting a will, its maker usually makes provisions for the major parts of his or her estate—cash, stocks, expensive jewelry, and heirlooms. However, it is common that people do not make provision for most of the more mundane personal property items in their will—furniture, automobiles, household effects, and the large number of other items acquired and stored over a lifetime. The usual provision is that the remainder of the estate be divided equally or equitably among the heirs. Dividing the personal property of a deceased family member is emotionally difficult and engenders hard feelings and disputes among heirs.

To assist with this, an equitable process is outlined below:

SORT OUT ITEMS F T ITEMS FAMILY MEMBERS INTEND T ERS INTEND TO KEEP

This first step requires the time, energy, and fortitude to go through every item in the house that you or your family members intend to keep. So closely following a loss, it can be painful to endure inventorying and disposing of the possessions they have left behind. Before moving on to selling or auctioning the items, it is crucial to establish a boundary or limit to who among the family members possesses the right to keep sentimental items or properties, especially among siblings. If the will or law requires the property to be divided equally, then you must follow it. For better organization, you are encouraged to separate the items you wish to keep in a separate container or location to avoid confusion with other items you intend to sell, donate, or throw away. Mutual agreement between siblings or other family members can decide who will keep which sentimental objects without further dispute. A mathematical algorithm was developed to fairly distribute an inheritance among the siblings within a family. The algorithm developed is to divide the inheritance between them equally. For example, a deceased parent left an antique firearms collection to be divided equally between his four children. There was an uneven number of items of varying values. Each sibling wanted some of the same items. The solution was to have the collection assessed, item by item, by a professional dealer. This established a total worth for the collection, such that each sibling knew the dollar worth of his

or her part. The collection was laid out in a room, each piece tagged by value. A coin flip decided which sibling would choose an item first, second, and so on. The siblings went around the room choosing until their value was reached. In the end, the siblings did not have the same number of items, but had each received an equal share of the collection’s value. In the event of serious disputes over the equal distribution of items between heirs, the family can resort to working with a mediator to resolve a fair distribution of items or properties. This is an equitable system for when the family does not wish to liquidate the assets or rejects joint ownership between heirs. Each member submits his or her own prioritized list of items to the mediator. The mediator then prepares a list for each member of the family of the items allocated for each of them. Each member will then show their list of preferred items to the other members for negotiation and adjustment. If you come across any papers, be sure to thoroughly review each before proceeding to throw them out. Important key financial documents such as wills, trusts, addenda, real estate deeds, and titles should be kept. Beyond that, it is up to the heirs to decide which sentimental photos or other memorabilia they want to preserve. SELL VALUABLE ITEMS O LE ITEMS OR PROPERTY AND DISTRIBUTE THE NET PROFIT EQUALLY In a scenario where you and your siblings have inherited real estate from your deceased parents, it is important to seek mutual terms as to whether the property should be sold and the profit divided immediately, or if you wish to keep the property as rental or investment income, or simply share the use of the house. In some circumstances, one sibling may want to keep the home while others have no interest in it or want it sold for financial

gain. An equal division of value can still be obtained if there are other assets in the estate. Through this agreement, the one who wants the house gets to keep it while the others get cash or other assets, but ultimately everyone receives an equal value of assets. Another option would be that the sibling who wants the house would have to buy out the other siblings’ interests in it. In all of this, it is wise to seek professional advice from real estate investors, agents, and attorneys. They can give personal perspectives from experience on how to sell your house at the highest possible value in the market, and can help you make sales decisions. Nowadays, it is a more convenient and customary practice to sell any unwanted items online for extra cash rather than simply discarding them. You can hire an estate appraiser to estimate a value of furniture, jewelry, and antiques. Such professionals can provide you with an estimate for any valuable items, usually charging an hourly or per-project fee, depending on the location of the house and the type of appraisal you want. Another traditional method is to hold an estate sale. Here is a tip on maximizing profit from an estate sale in your neighborhood: price every single item you want removed from the house. You never know what people might collect or buy on impulse! Seek extra hands to help you conduct the business aspects, such as running the cash box or promoting and selling items. Often, an estate sale is not one day, but perhaps three or four. Make sure to do “telephone pole” and online advertising in your community to get the word out about your sale. This will help to attract customers from areas close by to come to your sale. Some cities require some sort of permit for holding a sale; ensure that you comply with the local authorities. It is helpful for the customers if you post signs or directions in

the neighborhood to assist people in directing them toward your sale—be thorough! Good signage is always appreciated and helps make sure people actually make it to your house instead of going on an impromptu tour of the neighborhood and returning home with empty hands. If you are unable to sell all your remaining items by the last day of your sale, it is recommended that you set a 50% discount price, or simply give items away to ease your disposal burden. An alternative to a DIY estate sale is to hire an estate sale or auction company to handle the sale for you. They generally get paid based on a percentage of the sales after they have quoted it with you upfront. Expect to pay 30% to 50% of the entire profit of the sale. Another option is to hire an estate liquidation company to handle a sale. A liquidator is someone you can hire to clear off any items you don’t intend to keep and have decided to sell, discard, or donate. Like searching for a real estate agent, it is important that you do a background check on the company, search for contact information, and call previous clients regarding their opinions and experiences working with them. Typical estate liquidators keep about 35% to 40% of the sales profit, but this percentage can vary depending on the services offered. Have a discussion with the company regarding the research, appraisal, and pricing of your items, the duration of the sale, and how much negotiating with buyers the company will do.

DONATE ITEMS TO THOSE IN NEED

At a certain point, you may find yourself wanting to donate items. Donation is a generous, charitable act that helps those in need instead of simply throwing items into a dumpster. You have a variety of options when donating, including orphanages, veterans’ organizations, homeless shelters, disaster victims, and

a depressingly wide range of other choices. Items that you no longer need can include almost anything, such as furniture, household effects, clothes, books, cutlery, or toys. Sometimes you can request a transport service truck if you wish to donate many items, particularly large ones. It is a wonderful way to give back to the community and to be rewarded for a kind act. Furthermore, you can get tax deductions for your contribution. The available tax deduction to the donor depends in part on the donor’s items’ value, which is the value of the items for taxation purposes at the time that it is inherited. If a charitable donation is not specifically authorized in a will or trust, the estate may not properly take a deduction for the donation. The estate is not eligible for deductions for the transfers to charity by the beneficiaries; however, the individuals may donate items that were passed to them from an estate and can claim a charitable deduction on their personal tax returns. THROW AWAY ANY REMAININ Y ANY REMAINING ITEMS TH G ITEMS THAT HAVE NO SIGNIFICANT OR SENTIMENT ENTIMENTAL VALUE After you have gone through the process of separating items for yourself, for your family members, for sale, and for donation, the last step to clear the remaining items would be to simply throw them away. Depending upon the size and amount of material to be discarded, this may mean taking it out to the garbage or engaging a commercial clean-out and hauling service.

CHAPTER 4 Downsides to Inheriting o Inheriting

Bequeathing a house to one’s children, while an understandable decision, can create challenges for the heirs when it comes time to sell the inherited property. In many cases, a house is not inherited by just one child but shared among siblings, each receiving a stake in the property. Selling such a home can become complicated when multiple owners have differing opinions on how to proceed.

Challenges of Co-Ownership

When a property is co-owned by multiple heirs, patience and negotiation are key. Disagreements may arise over whether to sell the property or keep it within the family. These disputes can lead to family discord, making an already emotional time

more difficult. Even when all parties agree to sell, conflicts may occur regarding pricing, marketing strategies, or repairs needed to make the home market-ready. The process is further complicated by the emotional weight of mourning a loved one while trying to make objective decisions about the estate. Maintenance costs, taxes, and vacant property insurance can quickly add up, creating financial pressure on the heirs. Swift action, including deciding on a sale, can help reduce carrying costs and avoid prolonged financial strain.

LEGAL AND PRACTICAL CONSIDERATIONS

The executor named in the will—or appointed by the court if no executor is specified—is responsible for managing the property’s sale and ensuring the estate’s wishes are carried out. In California, probate is often required to transfer title, especially for real estate, unless the property was held in a trust or co-ownership arrangement that bypasses probate. Retaining an attorney experienced in both real estate and estate law can prevent costly mistakes during this process. Inherited homes often require significant repairs or updates to meet market expectations. Homes that have not been updated in decades may need work on heating, plumbing, septic systems, or other essentials. Inspections can uncover additional issues, such as underground oil tanks, that may need to be addressed before the sale. These expenses can accumulate quickly, and heirs must carefully balance repair costs with potential market value.

FINANCIAL IMPLICATIONS AND TAXES

In California, the tax basis of an inherited property is typically stepped up to its fair market value on the date of the original owner’s death. If the property is sold for more than this value, the difference is subject to capital gains tax. When multiple heirs

inherit the property, gains (or losses) are divided equally among them, and each heir must report their share on their taxes. If the property sells for less than its stepped-up basis, no taxable gain is incurred. Heirs must also consider property tax reassessments under California’s Proposition 19. Unless specific parent-to-child or grandparent-to-grandchild transfer exemptions apply, the property will likely be reassessed, potentially resulting in a higher tax burden.

PREPARING THE PROPERTY FOR SALE

Preparing an inherited home for sale often involves clearing out personal belongings, making necessary repairs, and staging the home for buyers. Heirs should prioritize removing heirlooms, important documents, and valuable items. Items of no significance can be sold, donated, or hauled away by professional services. For heirs who live far from the property, managing these tasks can be particularly challenging. Real estate agents, estate sale companies, and professional organizers can help oversee the process, but their services come at a cost. It’s crucial to account for these expenses when determining the sale price of the home.

FAMILY DYNAMICS AND DECISION-MAKING

When siblings inherit a property together, differing financial and emotional priorities can lead to tension. It’s the executor’s responsibility to make final decisions, but when the executor is also a sibling, this can further complicate family dynamics. Open communication and, if necessary, mediation can help resolve conflicts and ensure a smoother sale process.

CONCLUSION

Selling an inherited home involves unique challenges, from legal requirements to family dynamics and financial considerations. While the process can be emotionally and logistically complex, careful planning, professional guidance, and clear communication among heirs can help ensure a successful outcome. By addressing potential issues early and working together, families can navigate this difficult time with greater ease.

CHAPTER 5 How Selling a House in an Estate Differs from Regular Home Sales egular Home Sales When someone dies intestate (without a will) or without bequeathing their property, their estate, including any real property, may be sold through probate court. In California, probate laws regulate this process to ensure the property is marketed and sold at the best possible price for the benefit of the estate’s heirs or beneficiaries. Probate sales involve specific steps, deadlines, and legal oversight, making the process unique compared to standard real estate transactions.

Understanding Probate Sales

A probate sale occurs when the executor or administrator of an estate, under court supervision, sells property to distribute its 23

value among the beneficiaries. If no executor is named in the will, or if there is no will, the court appoints an administrator to manage the estate. While probate can be avoided with proper estate planning, such as establishing a living trust, properties not held in trust must generally go through probate to transfer ownership.

KEY ELEMENTS OF THE PROBATE PROCESS

APPOINTMENT OF EXECUTOR OR ADMINISTRATOR

The court appoints an executor (if named in the will) or an administrator (if no executor is named or there is no will). This person oversees the sale of real property and distribution of assets.

VALUATION AND LIS N AND LISTIN\G

A Probate Referee appraises the property, and the executor works with a real estate agent experienced in probate sales to determine a competitive listing price. The agent markets the property using traditional methods such as signage, online listings, and open houses. Offers and Negotiations Buyers often look for bargains in probate sales, but offers must align with the estate’s best interests. Once an offer is accepted, a Notice of Proposed Action is sent to all heirs, providing them 15 days to object. If no objections arise, the sale moves forward without a court hearing.

COURT CONFIRMATION HEARING

If objections are raised or court confirmation is required, a hearing is scheduled. During this hearing, additional buyers may overbid on the property. The minimum overbid is calculated

using a formula:

• 10% of the first $10,000 of the accepted offer • Plus 5% of the remaining amount • For example, if the accepted offer is $175,000, the minimum overbid would be $184,250.

FINAL SALE AND ESCROW

The highest bidder at the court hearing completes the purchase by submitting a cashier’s check for 10% of the bid amount. The property then enters escrow, with the sale closing in approximately 30 to 45 days.

Unique Aspects of Probate Sales

LIMITED DISCLOSURES Unlike standard real estate transactions, probate sales may not require full disclosure forms. However, the executor must provide material facts about the property’s condition. ONGOING MARKE G MARKETING Even after an offer is accepted, the property remains on the market to attract potential overbidders until the court confirmation hearing. SPECIALIZED DOCUMANTATION Probate sales involve contracts and disclosure forms unique to these transactions. Working with an agent experienced in probate sales is critical to navigating these complexities.

Avoiding Probate

While probate ensures a court-regulated process, it can be costly and time-consuming. Establishing a living trust allows real

property to bypass probate entirely, saving significant legal fees and reducing delays. Without probate, the executor can list and sell the property like any standard real estate transaction.

Financial and Legal Considerations

COSTS Probate fees in California can total up to 6% of the estate’s value, including attorney and court costs. Additional expenses may include maintenance, taxes, and vacant home insurance during the probate process.

TAX IMPLICATIONS

The tax basis for inherited property is "stepped up" to its market value at the time of the decedent’s death. Capital gains tax applies only to the difference between the sale price and this stepped-up basis.

Why Hire an Experienced Probate Agent?

Navigating probate sales requires specialized knowledge of legal procedures, unique vocabulary, and specialized documentation. An experienced probate agent can guide you through the process, ensuring compliance with court requirements while maximizing the property’s value.

CHAPTER 6 Determining the Value of an Inherited Home ed Home

SELLING A HOME IN PROBATE

When someone dies intestate (without a will) or without bequeathing their property, their estate, including any real property, may be sold through probate court. In California, probate laws regulate this process to ensure the property is marketed and sold at the best possible price for the benefit of the estate’s heirs or beneficiaries. Probate sales involve specific steps, deadlines, and legal oversight, making the process unique compared to standard real estate transactions. 27

UNDERSTANDING PROBATE SALES

A probate sale occurs when the executor or administrator of an estate, under court supervision, sells property to distribute its value among the beneficiaries. If no executor is named in the will, or if there is no will, the court appoints an administrator to manage the estate. While probate can be avoided with proper estate planning, such as establishing a living trust, properties not held in trust must generally go through probate to transfer ownership.

KEY ELEMENTS OF THE PROBATE PROCESS

Appointment of Executor or Administrator The court appoints an executor (if named in the will) or an administrator (if no executor is named or there is no will). This person oversees the sale of real property and distribution of assets. Valuation and Listing A Probate Referee appraises the property, and the executor works with a real estate agent experienced in probate sales to determine a competitive listing price. The agent markets the property using traditional methods such as signage, online listings, and open houses. Offers and Negotiations Buyers often look for bargains in probate sales, but offers must align with the estate’s best interests. Once an offer is accepted, a Notice of Proposed Action is sent to all heirs, providing them 15 days to object. If no objections arise, the sale moves forward without a court hearing.

Court Confirmation Hearing

If objections are raised or court confirmation is required, a hearing is scheduled. During this hearing, additional buyers may overbid on the property. The minimum overbid is calculated using a formula:10% of the first $10,000 of the accepted offer plus 5% of the remaining amount, for example, if the accepted offer is $1,750,000, the minimum overbid would be $1,840,250. Final Sale and Escrow The highest bidder at the court hearing completes the purchase by submitting a cashier’s check for 10% of the bid amount. The property then enters escrow, with the sale closing in approximately 30 to 45 days.

UNIQUE ASPECTS OF PROBATE

Limited Disclosures Unlike standard real estate transactions, probate sales may not require full disclosure forms. However, the executor must provide material facts about the property’s condition. Ongoing Marketing Even after an offer is accepted, the property remains on the market to attract potential overbidders until the court confirmation hearing. Specialized Documentation Probate sales involve contracts and disclosure forms unique to these transactions. Working with an agent experienced in probate sales is critical to navigating these complexities.

AVOIDING PROBATE

While probate ensures a court-regulated process, it can be costly and time-consuming. Establishing a living trust allows real property to bypass probate entirely, saving significant legal fees

and reducing delays. Without probate, the executor can list and sell the property like any standard real estate transaction.

FINANCIAL AND LEGAL CONSIDEFRATIONS

Costs

Probate fees in California can total up to 6% of the estate’s value, including attorney and court costs. Additional expenses may include maintenance, taxes, and vacant home insurance during the probate process. Tax Implications The tax basis for inherited property is "stepped up" to its market value at the time of the decedent’s death. Capital gains tax applies only to the difference between the sale price and this stepped-up basis.

WHY HIRE AN EXPERIENCED PROBATE AGENT?

CHAPTER 7 Four Ways to Sell o Sell Your Inherited House ed House

With many inherited house situations, the objective is a swift and efficient sale; speed may take precedence over maximizing the sale price. Additionally, a home vacated by a recently deceased elderly person may not have been updated or even properly maintained in 10 or 20 years. Further, the inheritors may not possess, or want to spend, the funds involved in getting the home prepped for an absolute top-dollar sale.

Strategize carefully to pursue your objective (are you out for top dollar, a quick sale, a substantial or minimal investment), then decide the manner of sale you think will suit your goal best. The

methods that are selected in this short list are the best and most reliable, but every technique has its pros and cons.

AUCTION

If you are looking for a quick sale, selling a house at auction may be the natural choice. Selling a house at auction can be the quickest method, and can also be very profitable. An auction is a great tool for quick sell with the least amount of hassle. There are many reasons why homeowners choose to sell their properties at auction over other house sale methods: • Homeowners looking to secure a quick sale are likely to try selling their house at auction to eliminate house sale fall-throughs at the eleventh hour, which are common on the traditional open market. • Individuals who have inherited an unusual or rundown property who would struggle to sell on the open market may sell through auction. Auction houses attract many buyers looking for their next project, so chances of achieving a successful sale increase. • Multiple buyers in one room can create a “bidding war” and rapidly drive up the sale price.

STEPS INVOLVED IN AUCTIONING A HOUSE

• Select an auction firm. There may be several in your area. Research each carefully to decide who you’d like to have auction your property. Study their brochures, online presence and reputation (i.e., look for online references or reviews), and websites. Ask how their auctions are advertised to buyers to assess who you feel would do the

best job attracting potential buyers for your property. • Obtain property appraisals. Request appraisals from a few different auctioneers. Do this while you are researching auction houses. Each auction house should provide what they deem to be a good reserve price and details of what fees are payable. • Instruct your chosen auction firm. Once you have chosen your preferred auctioneer, you will need to officially instruct the company to sell your property and sign any relevant contracts (this is similar to instructing an estate agent to sell a house). At this point, you will be expected to pay admin and marketing fees. • Consult your real estate attorney. You will need to engage a lawyer to assemble the legal documents for the property you are selling. This should generally include copies of the property’s title deeds, any special conditions of sale, title search, lease (if applicable), and other relevant documents. The documents are then available to potential buyers to inspect up to the day of the property auction. • Set your reserve price. You need to set a reserve price in advance of the auction. This price can be discussed with your real estate agent and the auctioneer. The reserve price you set is the minimum amount you will accept for the sale of your property. Not setting a reserve price is a major mistake that can result in a catastrophic sale price. • Auction firm markets the property. Once the auction firm has been instructed, it will begin marketing your property. You should be clear about the different types of advertising and any associated costs well prior to this point. • Day of the property auction. You may be present when

the auction takes place, but this is not required and the auction firm will provide you with an update of the sale’s outcome once it is complete. According to Quick Move Now, one of the largest cash house buyers, a tactic auctioneers commonly employ is to commence with a bid lower than the reserve price, allowing potential buyers to start a bidding war. As well as bidders who are physically present, the auctioneer can also take commission bids from buyers unable to attend. In these instances, the auctioneer will bid on behalf of the absentee up to their maximum bid. If your property receives a bid above the reserve price, the sale will then become legally binding. If the reserve price has been met and the hammer goes down, the house’s sale is now legally binding. In addition to marketing and listing fees the seller has already paid, the auctioneer will typically take a commission of 2.5% of the sale price. Winning bidders must provide proof that they have cash funds available, or a mortgage in place at the point of auction. If the sale is successful, the purchaser will have to pay a 10% deposit on the day with the remaining 90% payable within 28 days of the auction. Timing varies, but generally, the time taken from auction to completion is approximately 28 days. You’ll also need to factor in marketing time in the lead up to the auction. You’ll need enough time to generate interest in the property to maximize your chances of achieving a fair price. All in all, you are probably looking at 2-3 months from the point of deciding to sell at auction to completion.

PROS

If buyers let emotions take over, the bidding war can be fueled

by their emotional investment and drive the price higher than it should realistically go. Competition and ego often encourage emotions. Nobody wants to lose so everyone keeps bidding. People get caught up in the auction and end up paying more than the actual value of the property. The house is sold ‘as-is’ so no fixes and repairs are expected to be done by the seller. You can also leave anything that you don’t need, anything that you can’t be bothered with, and it will be sold with the house. Other than repairs, you also won’t have to worry about city inspections; that’s the buyer’s problem. There are hardly any contingencies and the deposit is often high. The buyer will not have a way out of the contract and he will have to deposit at least 10% of the contract price or $2,500 immediately after the auction. If the property isn’t closed on in 30 days or less, the buyer forfeits the deposit, which will ensure that only serious buyers apply for the auction.

CONS

The biggest downside of an auction is that it is unpredictable. The outcome is uncertain, and you can be left with much less than you were hoping for. This can be mitigated by setting a reserve price, but remains a problem. You must hire a skilled professional, and skills come with a price tag. There is no guarantee that you will successfully sell a property at auction. In fact, only 75% of property auction listings achieve a successful sale.

Regardless of whether your property sells or not, you must cover

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