Guide to Selling an Inherited House in Texas
When a loved one passes, they often leave behind a lifetime of treasured memories—or even a home in which many of those memories were made. If that’s the case, you may be left wondering about the future of that property now that it’s been left in your hands. If you’re considering selling an inherited house in Texas, you’ve come to the right place.
We’ll walk you through each step of the process, equipping you with the legal know-how needed to move forward with a sale. Plus, we’ll keep you informed about the state-specific tax implication, home buy-back program options, as well as other essential checklist items to include so that you can prepare your home for sale like a pro.
Step 1: Ensure There Are No Strings Attached
This might seem obvious but it’s so critical that it bears emphasizing: Before selling an inherited house in Texas, make sure that the house is actually—legally—yours. In legal terms, this means you’re the sole or primary heir and the executor of the estate that includes the house. Beyond that, you’ll want to ensure that no one involved has any opposition to your decision to sell the inheritance. So, be sure to check options on how to refinance an inherited property to buy out heirs if that is the case.
Imagine how many shows and movies wouldn’t get past the first scene if inheritance drama were promptly resolved through due diligence. In this case, that due diligence is called “probate,” the American legal process that settles the estate of those deceased. If you need to tackle probate claims, you can find a Texas County Clerk to facilitate the process.
Step 2: Estimate How Much the Property Is Worth
Once you’re sure that you’re legally in the clear for a sale, you’ll want to understand how much the house or real property might potentially fetch. You can attain a ballpark estimate by looking at similar houses that recently sold in the same area—and for how much. You’ll inevitably arrive at a broad figure, but you can use that as a solid starting estimate.
Next, to drill down to a more precise figure, you’ll need to account for ongoing—or future— financial setbacks that may impact the overall fair market value of the home. A few common ones include:
- Condition of the property – Unless you’re selling the property “as-is” to interested parties, you may need to perform renovations in order for the house to be considered market-ready.
- Carrying costs – If you’re lucky, you might have inherited a house with no mortgage. However, what happens if you inherit a house with a mortgage? Any expenses you need to cover while waiting for the house to be sold are called carrying costs. This might include existing mortgage payments, outstanding utility payments, liens, or property tax.
- General market conditions – If it’s a buyer’s market, expect a lot of negotiating power to gravitate towards potential buyers. Alternatively, in a seller’s market, you’ll likely have significant command over the final home selling price and should be prepared for a swift sale.
There are limitations to how accurate you can estimate the price tag of your inherited house. If you’re truly ready to proceed, you can hire local experts to help with the pricing and the process.
Step 3: Figure Out What You’re on the Hook For
Once you’ve arrived at a more accurate estimate for the market value of your property, you’ll need to get ahead of any potential hangups by staying informed about any tax implications, both at the state and federal levels:
- Handling property taxes – While there are no inheritance taxes in the state of Texas, you still may be on the hook for federal taxes. Also, be sure to note that unless you actually lived in the house or land for two years, inherited properties are not qualified for home sale tax exclusion. However, any capital tax gains imposed will only be applicable for the period during which you’re the legal owner.
- Reporting to the Internal Revenue Service (IRS) – An inherited home sale is taxable income. Furthermore, the standard rule of thumb is to always check with and report to the IRS, regardless of whether or not you owe any taxes.
Step 4: Prepare the Inherited House for Sale
Now that you’ve got a better grasp on your fiscal and tax responsibilities, you can move on to preparing the inherited house for sale. As you do so, we recommend setting up a checklist to account for essential to-dos such as:
- Handling any personal belongings left behind in the house
- Performing general cleaning and maintenance
- Value-adding expenses like depersonalization or renovations, staging, and photography
Finally, even though you’re not legally required, you may want to double-check with any relatives or friends of the deceased that may want a say in how to manage anything else left behind inside the house.
Together you may decide how you’d prefer all of the other inherited assets to be handled:
- Throwing them away or donating them to charity
- Hosting an estate sale
- Including them along with the house for sale
Selling an Inherited House in Texas With a Sale-Leaseback
If you’re ready to part with your inherited property in Texas but don’t want to get caught up in the intricacies of the selling process, there’s a simpler option.
With a sale-leaseback program, for example, you can sell your inherited house, but stay in it as a renter—giving you some breathing space while you prepare for more long-term plans regarding the inherited house or real property. This way, you don’t have to hop through as many home-selling hoops, and you can convert its equity to cash for other purposes.
If you’re selling an inherited house in Texas, it’s important to know what steps to expect. Talk to a real estate expert to go over all your options in detail before moving forward.
- Investopedia. Probate. https://www.investopedia.com/terms/p/probate.asp
- Texas Secretary of State. County Clerks. https://www.sos.state.tx.us/elections/voter/cclerks.shtml
- Fit Small Business. Carrying Costs on Real Estate Investments. https://fitsmallbusiness.com/carrying-costs-real-estate-investments/