Receiving a home through inheritance is a complex process. In addition to dealing with the emotional stress that comes with the loss of a loved one, you will need to make a series of crucial decisions regarding the legal, financial, and logistical aspects of managing the property. This can be particularly challenging if you have to share these responsibilities with your co-beneficiaries. Follow these five tips to navigate this process as smoothly as possible.
Confirm who actually has the legal right to sell
First things first, you have to figure out if the property must pass through probate or if it was held in a living trust. That one fact decides everything about who can sign the deed and when.
Probate in the metro is administered by the counties. Each one – Jackson, Clay, and Platte – has its own court and distinct timeline. If the estate goes to probate court, the court names an executor or an administrator who is the only person legally empowered to sell. If the home was funded in a living trust before the owner’s death, the trustee can begin right away with no court interference.
Don’t guess the right answer. Dig up the deed, search for a trust document, and verify the appropriate legal process with an estate attorney. Starting the sale before you have a clear line of authority to sign could result in title issues that stall or kill the transaction.
Get all the co-heirs aligned early
If several individuals are left a property, they must all be on board prior to selling the house. This requires a written commitment detailing the acceptable minimum sale price, the process for considering offers, and what each person is responsible for.
Without that, you’re likely to end up in legal gridlock for months on end. If even one co-heir is unhappy and refuses to relent, the sale can be prevented and the legal fees to address that situation start adding up quickly.
To minimize such risks, organize a family meeting as soon as possible. If tensions are running high, hire a mediator to ensure things don’t get out of hand. The ultimate aim is to get everyone to agree prior to showing the house a single time.
Decide between listing on the MLS and an as-is cash sale
This tends to be the decision most heirs spend the most time mulling over, but for many, it really just comes down to how much time, money, and energy their family has left right now.
A traditional MLS listing will likely get good offers in Kansas City (most homes are right now), if the property is in good condition, the price is right, and you’re working with the market not against it. To get there, however, means repairs, updates, professional cleaning, likely staging, and probably more than a few tire-kickers wanting to come take a look. If it’s been vacant, you know there’s going to be some deferred maintenance. That all takes time and money the estate probably doesn’t have right now, and the carrying costs the family also may not have right now.
An as-is sale to a cash buyer will get you none of that. No repairs, no cleaning, no waiting for buyer financing to go through. For families who want to close the book on the estate, working with a company like Rex Buys KC is the cleanest way between points A and B. Family decides they’re ready, does the paperwork, and it’s over.
Neither is wrong. We just encourage you to get some hard estimates about what the first option is actually going to cost before you convince yourself the second isn’t in your long-term best interest.
It doesn’t have to be a life-altering decision with endless repercussions, as long as you get the legal authority worked out (heirs or probate), make sure everyone is more or less in the same boat on the home’s status, monitor how fast things are spiraling with the ongoing operating costs, and at least have a ballpark of where that tax bill might land. The families that really push through this in the quickest fashion possible are the ones treating it like a project with a solution, not a problem with a reaction.
Stop the financial bleed of holding costs
Every month that the house remains in probate, it is losing money. Considering that there are already likely maintenance and other costs of the home, the faster a house is sold in probate, the less money an estate stands to lose. A home that is valued at $225,000 and that loses a conservative $1,000/month while in probate can cost $7,000 more the longer you wait.
Understand the step-up in basis before you sell
Most inheritors don’t realize their tax basis in the property is the fair market value at the time the decedent passed away rather than what the decedent paid for it 30 years ago. This makes a gigantic difference for capital gains taxes if it’s an appreciated property. The step-up in basis basically wipes out capital gains tax for anyone who isn’t super wealthy so long as they sell quickly after inheriting.
If your parents bought their house for $80,000 and it’s now worth $280,000, you will not pay any capital gains on that spread so long as you can defend the fact that the property appraised or was formally valued at $280,000 when your parents died (assuming that the sale price is around $280,000).
The step-up in basis is often only circumvented by people with enough money not to care about capital gains, but it requires documentation and often proof in a tax audit, so get the house appraised or at least a real estate evaluation as soon as possible after your parents’ death and keep documentation.
