This article breaks down the details of selling an inherited property before probate.
You’ll learn when you can sell a house before probate is completed or even granted, how to manage a sale, and the easiest option for a quick sale.
Let’s explore this topic together.
Can You Sell an Inherited Property Before Probate?
Generally, probate must be completed before you can sell an inherited house, as ownership typically transfers through the probate process.
That is most often the case when the title is solely in the deceased person’s name. Or, there is shared ownership of the house with no survivorship provision.
However, there are specific scenarios where selling before probate is possible. Here are five cases where you don’t have to wait for probate before selling a house.
#1 Joint Ownership with Survivorship
In joint tenancy, each person holds an equal share with the right of survivorship.
That means the decedent’s interest is automatically transferred to the surviving owners. The house can bypass probate, enabling its sale before estate settlement.
The most common situation is a wife selling a home with her deceased husband on deed.
#2 Living Trust
A living trust is a legal arrangement allowing an individual to transfer ownership of assets to a trust account.
As such, those assets are not considered part of the estate when the person dies, so the executor can sell a house without probate.
So, the successor trustee has the legal authority to sell the property following the grantor’s conditions without going through probate court.
#3 Beneficiary of Transfer-On-Death Deed
Many states allow property owners to designate one or more beneficiaries to receive their house directly upon their death.
With property rights established in advance, the beneficiary can sell the house without probate.
#4 Small Estate Affidavit
Some states allow property ownership without full probate by using a legal affidavit, provided the value of the full estate is below a certain threshold, depending on the state.
Given that’s the case, you can claim the house outside of the formal probate process and sell it.
#5 Community Property with Survivorship
In a state that recognizes community property ownership with the right of survivorship, a house is transferred directly to the surviving spouse when their spouse passes away. They can skip probate and sell a house when one owner is deceased.
In these cases, the executor can sell property before probate. Otherwise, there is no quick way. Learn how long it takes to sell a house in probate.
What’s the Quickest Way to Sell an Inherited House Before Probate?
Working with one of the local real estate investors, popularly known as “we buy houses” companies, is often the fastest and most convenient way you can sell heir property.
What happens when you sell a house you inherited to cash buyers is that they streamline the process, close quickly, and buy houses in their current condition.
So even if you inherited a hoarder house, this process eliminates potential obstacles that can delay or derail traditional sales.
Who Are Cash House Buyers?
Cash house buyers are individuals or companies that purchase properties for investment.
They use their own money to cover the entire purchase price of the house or alternative forms of financing that are much quicker than traditional bank loans.
These investors typically look for properties that meet specific criteria based on their goals. However, generally speaking, they often seek:
- Discounted houses: Properties priced below market value, such as if an owner inherited a house that needs work or experiences some form of distress (financial or personal circumstances).
- Quick closing potential: Opportunities to close the deal rapidly.
- Properties with potential: Houses likely to increase in value due to favorable market conditions, improvements the investor makes, or both.
- Low risk and good ROI: Low-risk properties, such as those in established neighborhoods or with steady rental demand, for more predictable returns.
Cash house buyers make money through several different avenues, including the following:
- Resale profits: Cash buyers realize a profit by buying low, holding property while it appreciates, and then selling.
- Flipping houses: Some cash buyers focus on purchasing houses below market value for the express purpose of repairing them and selling them for a profit.
- Rental income: Purchasing houses in high-demand rental areas allows cash buyers to generate regular rental income.
Pros of Selling to a Cash Home Buyer
You Don’t Have to Fix Anything
One of the biggest benefits of selling to a cash buyer is that these professionals purchase homes exactly as they are.
So, you need not worry about making repairs, resolving any other condition-related problems, or sorting out financial or other issues.
Selling an inherited house as is frees you from extensive responsibilities and saves time and effort.
You Don’t Deal with a Lender’s Requirements
Cash transactions are particularly advantageous in real estate as they generally don’t involve lenders used by buyers. Lenders have requirements such as official appraisals and inspection reports.
Consequently, you can get cash quickly and have a reduced risk of the deal falling apart because of a lender who won’t lend on a house with problems attached.
Speedy Sale
Investors’ strong side is doing everything fast. They’re ready to close quicker than mortgage-financed buyers, often within just a week or two.
The speed of the sale makes this route an ideal choice, particularly when you inherited a house unexpectedly or when you can’t afford a long wait to sell.
No Realtor Involved
Many cash home buyers advertise that you won’t have to pay agent commissions, which are usually 5-6% of the home’s selling price.
Simple Process
There is typically less paperwork and fewer steps than you’d have in a traditional real estate transaction.
That simplifies the process and makes it less stressful, especially if you want to sell your deceased parents’ home fast and hassle-free.
Cons of Selling to a Cash Home Buyer
Offers Below Market Value
While selling to a cash house buyer has clear advantages, it’s essential to consider the potential trade-off related to the price.
Investors aim to make a profit, meaning their offer will be below market value (although, partially offset by the absence of realtor commissions).
You must determine if this approach is best for your circumstances and priorities.
Unscrupulous Players
Many investors and companies are ethical, but fraudsters exist. Be wary of suspiciously attractive offers or unrealistic promises.
Before proceeding or sharing sensitive information, thoroughly research buyers. Check their longevity in the market, reputation, and results.
A word to the wise: If in your situation the cons outweigh the pros, there are other approaches to selling. Read up on how to sell an inherited house to gain more insights.
How Can a House Be Sold During a Probate?
When selling a house while in probate, the court must first appoint someone to manage the estate. That person is an executor if there is a will and an administrator if not.
If you are named executor or administrator, you will take several actions, which vary depending on state probate laws. But as a general rule, here is how you can sell a house in probate.
- Obtain a property valuation: It’s prudent and usually necessary to have the house professionally appraised to ensure the property is not undersold.
- Get permission to sell: In many jurisdictions, you need court approval before selling. If so, you must file a petition with details (terms and price) about the proposed sale.
- Market the property: The house can go on the market once the court says so. Property sold during probate is listed with a real estate agent experienced in this type of sale.
- Review offers: While you may consult with beneficiaries, as the executor or administrator, you’re tasked with formally reviewing offers and negotiating terms.
- Confirm the sale: Once you have an acceptable offer, you typically must present it to the probate court for approval. A hearing may be required.
- Close the sale: After approval, the closing can proceed the same as any other real estate transaction.
- Distribute the proceeds: Once any outstanding debts are settled, you will distribute the remaining funds according to the will or state laws. You will also generally need to file an accounting of this with the court.
Once the house is sold during probate, know that you have tax obligations that need to be settled. We tackle this topic in our article on capital gains tax on an inherited house.
Then refer to our guide on how to avoid paying capital gains tax on inherited property to know the various strategies you can do to forgo paying these taxes when reporting the sale of your inherited house.
