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9. Spruce up the property, but don’t renovate
Let’s say you’ve inherited a home dressed in 1970s shag carpet and popcorn ceilings. You’ll want to focus on light, cosmetic upgrades rather than full-blown room renovations. Ask your real estate agent what upgrades they recommend to help increase the property’s value and marketability. An experienced agent can also tell what repairs you can skip.
“With a mere $2,000, we can turn the property around, get it cleaned up — steam cleaning, painting, taking the time to appreciate the asset, and making sure that the family benefits from the sale as much as possible,” says Harmel.
Here are some examples of easy, high-impact projects that can help you sell your inherited house faster:
10. Determine capital gains and see if any home sale tax exclusions apply
Typically, if you inherit a property, you won’t owe taxes on it until you sell it — these taxes are called capital gains taxes.
Capital gains taxes are calculated using the stepped-up basis. This can get complicated, but simply put, when you inherit a property, the value of the property resets on the day of the original owner’s death. When you sell, you are typically only taxed on the increase in value — the capital gains — from that point.
How is inherited property taxed when sold, you wonder? Let’s look at an example: You inherit a house that was purchased for $200,000 but valued at $250,000 when you inherit it. The cost basis of that house is now $250,000. If you sell immediately, you will pay no capital gains taxes on the sale of the house.
If instead you wait five years and the house has increased in value and is now valued at $275,000, you would pay capital gains taxes on $25,000. And if you lived in the house during that time, you may be eligible for other tax exemptions.
To be eligible for the home sale tax exclusion that allows you to exclude up to $250,000 of the gain if filing single and $500,000 if married filing jointly, you typically need to live in the home as your primary residence for a total of at least two of the previous five years.
Regardless of when you sell, you’ll need to discuss the sale and proceeds with a tax professional to ensure you’re paying any taxes that you do end up owing. And because the tax implications of selling an inherited property vary from state to state, you may also want to enlist the help of an attorney.
Simplify selling an inherited house
While selling an inherited house can be a daunting prospect, these 10 steps can help simplify the process and improve your results. Having a top agent on your side when you decide to sell can help make it even easier. HomeLight’s Agent Match can pair you with a top agent whose experience you can lean on as you navigate the process of selling an inherited house.
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