What to do with inherited Sacramento CA property?

What is the status of the estate?

Inheriting valuable property such as a home, securities, bank accounts and retirement accounts from a deceased relative can be a major financial windfall. Some assets are easier to transfer ownership from the decedent to the estate then to the heirs.

When inheriting properties from the original owner’s death the process of transferring ownership begins. Most property inherited can be transferred through one of three ways: probate, death deed or life trusts.

Transfer ownership of a home with a Death Deed

A simpler way of gaining ownership in homes is via transferring a property via the death certificate or a beneficiary’s deed. When your parents die, this type of deed gives you immediate ownership of your parent’s estate and avoids probate hassles. In 2016 the California legislature created a Revocable Transfer on Death Deed (“TOD Deed”) as a way for California residents to transfer residential property to named beneficiaries, effective upon death.

The stated purpose of the TOD Deed, according to the author of the bill, is to allow seniors and individuals whose estates consist primarily of a home to avoid costly and/or complicated probates or trust administrations. In short, a TOD Deed, when properly executed, notarized and recorded is supposed to be a simple and inexpensive way to transfer residential property. The California Revocable Transfer on Death Deed has many issues and should be studied to see if it is a good fit for any family or property owner.

Transfer ownership of a home with a Living Trust

The best option in inheriting a parent’s estate is to set up living trusts. These are legal documents that list your parents as trustees for their residence and their property, and name you as beneficiaries. Living Trust can be the easiest choice, especially if several people are involved. I wrote about the Living Trust, check it out here — What are 6 top reasons to set up a Living Trust?

Transfer ownership of a home in California Probate

It is not simple to inherit property by way of a will. Most inherited property is subject to probate process. The same goes for the absence of will in the world. The probate process is a procedure in which ownerships are transferred from the decedent to the new owner or heirs. Many people enlist the help of a probate attorney to help the process go quickly and smoothly. The court can assign executors to help with the probating process based on a will. I wrote a more detailed article about how to sell a property in probate here – How to Sell a House in Probate in Sacramento, California

How to sell a probate property in Sacramento, California is a 4 step process.

First, get the legal authority to sell the house.
The probate court will give the personal representative (executor) in California two types of power to sell a probate property, limited or full authority.
The third step is to find a real estate buyer that will work within the probate guidelines. The fastest way to sell is to find a local cash buyer who can purchase the property as is.
The fourth step is to legally transfer the property ownership to the new owner and have the funds dispersed to all the proper entities.

The property that a person leaves behind when they die is called the “decedent’s estate.” The “decedent” is the person who died. Their “estate” is the property they owned when they died.

3 things you can do with an inherited house

It is not easy to decide what will happen to an inherited house. The home could have been in your family for years. But the next step is to figure out what happens to the home. There are several different options for inheriting your home. You may buy it, sell it, or rent it. Buying the house is keeping the home to live in. Keeping the property as a primary residence and living in an inherited home is generally the simplest option.

Selling inherited property is another option. The home sale process is a real estate transaction to change ownership of the house. You can do a quick “as is” cash sale to an investor or make the house ready for the retail market by talking to your local realtor and getting the house show ready. Working with cash buyers to sell the property to get a fair market value will avoid the real estate agent’s commission. Selling shares of inherited property will need the cooperation of other family members and a purchase agreement to agree on a final sale price to close the estate sale.

Renting out inherited property and getting rental income will require deciding if you or all the inheritors want to be a landlord. Being a landlord requires a lot of work, risk, and responsibility. If you decide to rent, you may have to get landlord insurance for the property, mortgage payments, a property manager, reserve funds, pay property taxes, understand the tax implications, where the monthly payments are made and much more.

Identify the person who has the authority to transfer the property ownership

The first thing is to figure out who will be the representative of the estate. If the estate is in a will, the representative is the executor named in the will. If there is no will the estate may go through probate and there may be a court-appointed administrator. If the estate is small, often the person who will inherit most of what is left behind can be the informal estate representative.

In either case, this is the person legally responsible to make all the final decisions surrounding the estate. This includes the sale of the house.

There may be some situations where there is no single executor or administrator. In the case with more than one heir, the other heirs could have equal decision-making power surrounding the sale of the property. Situations when other family members don’t agree on what to do can lead to long legal disputes, expensive lawyer fees and broken relationships.

If you are the sole inheritor

A sole heir inherits all property of a deceased person because there is no other person entitled to a share of the estate. The executor appointed may be the sole beneficiary to the will or a third person can be appointed. The executor should know that he/she shall be liable for any errors or mistakes even if the same has been executed in good faith. Inheritance tax, capital gain’s taxes, federal estate tax and plans to avoid capital gain’s tax are much simpler with a sole inheritor.

If You Share the Inheritance

Can the majority rule idea work to force selling an inherited property? In California, “majority rule” is not the law of the land when it comes to selling an inherited property. When multiple people own real estate, any owner, including a minority owner, can bring a partition action if they wish to divest themselves of a property.

When there is a shared inherited property, the other heirs help make the decision to sell the property. When you share ownership of the real estate property with siblings, other family members and heirs and are lucky to have everyone else agrees to sell the inherited property, there isn’t much more to do besides finding the value of the home and locating the right buyer. After everyone agrees to sell the house and divide the income, the next step is to clean out the property, make the house show ready and begin working with a real estate agent or finding a local real estate investor and sell in “as is” condition.

Get offers from local cash buyers and a FREE home valuation from a local expert so you know what the home is really worth before you sell. Capital gain’s taxes on an inherited home could be some good news, but check with a tax professional to understand all the tax issues.

Other issues to check before the home sale are if the property has a reverse mortgage, any tax liability, any home equity line debt, outstanding debts, or estate taxes issues.

Dealing with Sibling Disagreements

In conflict, the family should try to minimize these differences as soon as possible. Depending upon how many family members and how scattered across the city, state or country, it may be difficult communicate effectively. The entire process can be very draining with multiple people
looking to the inheritance for valuable property and estate items. Even it is obvious that selling an inherited property is best for the estate, it can be difficult for others to see it.

Check everyone’s needs and concerns

Talk to the rest of the heirs and ask them about their problems and concerns. When someone has inherited with a sibling and other heirs who have money problems they consider their needs in order to get what they need to fix their problem. If all people understand their potential benefits in selling the inherited property they can then follow their plan. It’s much more difficult when family and friends understand the intention and to not appear like bandits and leave everyone behind. The heirs, meanwhile, need the permission of the executor to sell inherited property.

Start with the small issue of the possessions of the estate first

Before you decide how to handle an inherited house, deal with smaller estate issues. This will help establish how the heirs will work with each other. If the decedent did not leave clear instructions behind, this process will help set some ground rules of the estate. No one wants any legal process to lower the value of the inheritance.

Have the discussion about selling inherited property if you share inheritance

The process of selling an inherited house is made even more complex by the fact that oftentimes, ownership is divided among siblings or other relatives. The discussion about selling inherited property when not everyone wants to sell the house is very common. Trying to get others to see the point of view to sell the home is best done with a diplomatic approach to the conversation. Allow everyone involved to be heard, and say as much as they need to say without cutting them off. The selling process is hard enough without the heirs fighting over the inheritance.

Here are some financial aspects to selling inherited property. Let the heirs know they are on the hook for the monthly mortgage payments, property taxes, insurance, and utility bills until they sell the house. If the inherited home has a reverse mortgage or other ongoing payments, the estate is liable for them.

Since selling is your proposal, you need to make sure you consider the sentimental reasons for keeping the property and not just the financial aspects of selling inherited property. Empathy is very important at a time like this. Be open and real because now is the time to show it.

If everyone can see that they will benefit from the sale of the home, they will be more likely to follow the plan. Showing they can have more money that makes their lives easier is always a plus.

Show everyone that selling an inherited house and proving the value of the home on paper should make dealing with the family and heirs in the future much easier. You would only pay taxes if the property sells above the “stepped-up” property value. You will either get a capital gain or a capital loss depending on the sale price of the property. You will be required to pay capital gains taxes on the difference between the fair market value of the home when you inherited it and the sale price. When the inherited home is sold you will need to make good on all of your promises. After all the closing costs, everyone needs to walk away feeling like they got their fair share.

The 4 ways to sell your inherited property

There are many ways to sell a house. The traditional way is to hire a real estate agent or realtor. You could also try selling it yourself or For Sale by Owner FSBO, or sell it to a local investment cash buyer and lastly some type of creative deal.

1. The traditional real estate sale

I would suggest looking for a real agent certified specialists (CPRES). They have completed training through the California Association of Realtors (CAR). The Trust & Probate Realtor that is certified can work with the estate in a trust or in probate. Learn more at – How to find a realtor to sell your property in probate?

2. For Sale by Owner way of selling an inherited house

Another option for selling your inherited home is to sell it yourself. Here is more information about FSBO – 7 insights on how to sell your home in Sacramento

Here are some of the responsibilities and activities when doing a For Sale by Owner inherited property sale.

Properly price the home matching to what the current market will bear.
Take great pictures- this is the most important thing you can do to sell your house.
Make a marketing plan for your home to give it maximum exposure.
Do an open house to show the home to interested buyers.
Do the Follow-up with buyers’ agents who have shown the home to gauge the interest of their buyers and get their feedback.
Put a for sale sign on the property.
Keep the house clean and free of clutter; check out these staging ideas.
Be ready to negotiate.
Have the offer to purchase forms ready to go.

For Sale by Owner Fixer-Upper house is a challenge, but certainly not impossible. What helps when you’re selling a house that’s perhaps less-than-perfect is to research and understand who will buy an as-is property. Learn more here about selling a fixer upper property.

3. Sell inherited property fast to a cash buyer

A local real estate investor who wants to make a no fee, no commissions, “as is” condition, fast sale offer makes cash offers. In fact cash offers are the only way to guarantee this type of offer can close. Learn more at Why sell your home for cash?

4. Creative deals to sell an inherited property

There are many ways to creatively sell a house. I would not recommend them to most real estate owners. The risk to the current property is very high. But with an inherited property there could be a creative deal made to an heir or family member.

Rent to own creative deals have a high failure rate. But doing a family member a rent to own deal could work out for the estate. Keeping the home in the family is a very strong motivator. The estate could do a seller finance deal. Working with a family member to keep the property in the family can be worked out with a creative deal.

Inherited property with a reverse mortgage

The key point when you inherit a property with a reverse mortgage taken out against the property is you must pay back the reverse mortgage to the lender. The important issues when inheriting a house with a reverse mortgage is understanding the timeline. Read more about the Inherited property with a reverse mortgage

Have the discussion about selling inherited property if you share inheritance part 2

How to keep the inherited property for yourself? You can buy out the other heirs. If everyone agrees this is a simple transaction. Make sure to pay a fair market value for the property.

But in California a co-owner can force the sale of inherited property through a lawsuit called a “partition action.” The partition action is a legal proceeding which allows the heirs that do not want to keep their share of the home to have the court order it to be sold and the shares of the proceeds divided among all heirs. California Code of Civil Procedure 872.210 is the California partition statute that specifies who is authorized to commence a partition action.

Mortgage issues with inherited homes

If you want to keep the home but the property also inherits a mortgage, the first thing to do is contact the loan servicer. They will need to see a death certificate and verify that you are the heir of the house before they can give you more information on the loan balance.

If the property has a due-on-sale clause, this enables lenders to demand that the remaining balance of a mortgage be repaid in full in the event that a property is sold or transferred. The property is transferred to the heir who becomes the new owner.

If on the other hand the mortgage is an assumable mortgage, this makes the whole transfer much easier. The assumable mortgage allows a buyer or heir to take over the decedent’s mortgage. Mortgage assumption is not an automatic process. The lender has to approve the new owner before they will sign off on the loan assumption.

A final thought

First, my condolences on your loss. Sympathy should be part of any inheritance, but many times the process of a real estate sale and transfer of ownership are cold contracts and negotiations procedures. Don’t feel embarrassed about the emotions that pop up during the course of the sale. This can only more difficult when the house is a hoarding property.

I work hard to be professional and caring at the same time in all the inherited property deals I do. The buyer’s want a good deal and that is why I like win-win deals. If the property has issues, they have to be worked out by negotiations. Don’t take it personally. To everyone else in the transaction it is just a house. The work of due diligence, correct paperwork, financial issues, and legal matters are cold daily activities for the other people involved in the transaction.

Sensitivity to other people is not required to sell an inherited property. And sad to say, it is not always part of every deal I work on. I will work hard to make the process as considerate as possible for you.