Selling an inherited property during a time of bereavement can compound stress during an already difficult time. So, it is natural to want to make the process as straightforward as possible.
What happens when you inherit a property?
Before you can make any decisions about what to do with an inherited property, it must go through probate. Probate is the name used for the process of dealing with the estate of something who has died. This will include any money, possessions and property, the deceased person’s credits and liabilities (including any loans, mortgages and debts) and their final wishes.
What is the process for probate?
If the deceased person left a Will, they should have specified an executor who is expected to “execute” the Will and complete the probate process. If no executor is named, responsibility will generally fall to the beneficiaries or a blood relative. To execute a Will, a ‘grant of probate’ or ‘letter of administration’ is normally required. These can be obtained by contacting your local probate registry. The grant will make it possible for the executor to access all of the deceased’s assets, such as their bank accounts.
What happens to a house in probate?
During probate you will need to get a probate house valuation. This establishes an open market value for the property. Once the deceased’s estate (including the property) has been valued, the Will’s executor will need to contact HMRC to pay any inheritance tax that is owed. This must be done before the property can be transferred into your name. On average, probate takes between six and nine months to complete. However, complications (such as a Will being contested) can cause the process to take considerably longer.
What happens to a house after probate has been granted?
Once probate is completed you can proceed with selling the inherited property or transferring ownership if you decide to keep it. Until the property is sold or transferred, someone will need to take responsibility for the ongoing maintenance of the property. This may include organising and paying for garden clearance, house cleaning, redecoration and general maintenance. Security of the property is also your responsibility. Vacant properties are more likely to be broken into so it’s important that you take this responsibility seriously. You will also need to ensure that the house insurance covers the property when vacant – many won’t!
Once the property has been officially transferred to you, you will be responsible for any costs associated with the running or maintenance of the property until you sell it. The best way to avoid these associated costs is to utilise the services of Gaffsy; they are the cheapest way to sell your property, avoiding costs such as agents’ fees, estate agents’ charges, solicitors’ fees, clearance costs, utility charges, mortgage payments and cosmetic repair costs.
Is inherited property taxable?
Yes, the whole of the deceased person’s estate (their money, possessions and property) will be subjected to inheritance tax if it is worth more than £325,000. Any inheritance tax due will be paid by the executor of the Will before the property is transferred to you. The current rate of inheritance tax above the £325,000 threshold is 40%.
Are there any exemptions for inheritance tax?
In 2017, changes were made to the inheritance tax exemption that exists for members of the Armed Forces who die in the line of duty. The exemption now applies to all members of the armed forces, emergency services and humanitarian aid workers.
Do you pay capital gains tax when selling an inherited house?
If you sell an inherited property and the property has increased in value between the time of you inheriting it and the date that you sell it, you will also be liable for capital gains tax (unless it is your main residence). Tax will be payable on the ‘profit’ you make from the sale (the price you achieve from the sale minus its value when you inherited it). The property’s probate value will be used to calculate how much is owed.
If a property is gifted to you while the owner is still alive, but they die within 7 years of transferring ownership, capital gains tax may still be payable when you come to sell. Capital gains tax will be applied on the sold price minus the value of the property at the time of it being gifted to you, rather than the value at the time of the previous owner’s death.
Everyone has a personal capital gains tax-free allowance of £11,000, so you will only be required to pay tax on any capital gains above that amount.
If you have questions about Capital gains tax? Use the government’s tax enquiries form here.
Shared inheritance – inheriting a house with siblings
Inheriting a house from your parents that you jointly own with your siblings can have added complications if not everyone is in agreement about what to do with the property. If all siblings collectively want to sell the house as quickly as possible to avoid further angst and negotiations, Gaffsy can aid this process; we can have the house sold as quickly as you need, much quicker than if selling through traditional estate agents. If, however, you cannot agree on the best way forward, and all parties are equal beneficiaries, no one party can force the sale of the inherited property. The executor is included in that.
If you reach an impasse, and those who want to keep the property are not in a position to buy the other party/parties out, you can approach the courts and ask them to order a sale. To do this, you will need to demonstrate that you have already approached the other parties (either directly or via a solicitor) in writing, outlining the reason for wanting a sale and giving them an opportunity to refute the reasons. It is wise to keep in mind that a court order has the potential to cause a significant family rift, so it is advisable to explore all other mediatory options before resorting to this measure.
Deciding what to do with your inherited property
An inherited property can be an amazing gift from a loved one. It can, however, also bring all sorts of practical, financial and emotional challenges. The simplest way would be to reach out to Gaffsy, who can get your house valuation quickly, and complete on your house sale fast with no fees, lessening the stress hugely. Once the property has been through probate, you will have several options:
Move into the property: If the property you’ve inherited meets your personal needs, you may decide to live in it yourself.
Rent it out: Keeping an inherited property and renting it out could provide an additional income, however, becoming a landlord does also bring certain responsibilities. It is also important to remember that you will need to pay tax on any profit you make from renting out your inherited property.
Sell it: For most people, selling inherited property is the easiest route for them and their family. The costs of maintaining a second property can be a significant financial burden, leading most inherited property owners to seek a quick sale.
If you decide to sell your inherited property, you will need to consider the options available to you and select the method of sale that best suits your personal circumstances. Some options for how to sell an inherited house are:
Selling an inherited property on the open market
Listing your inherited property on the open market is the most common way to sell a house and the best way to achieve the highest price from a sale. Estate agents can provide you with a property valuation, organise viewings, help with negotiations and provide support in any situations that arise once you have a buyer in place. That said, selling your house on the open market comes with no guarantees. A house on the open market can take a very long time to sell, and in some cases it doesn’t sell at all.
Selling inherited property at auction
Selling a property at auction has the potential to offer a quicker sale than one on the open market and can be a good option if you’re successful in finding a buyer. It is worth keeping in mind, however, that there is no guarantee that your property will attract a buyer on auction day. If your inherited property doesn’t sell at auction, it can be very difficult to sell the property on the open market, as potential buyers may already have seen it advertised at a low ‘guide price’ prior to the auction.
Selling inherited property to a cash home buyer
If you want to sell a probate property quickly, cash house buyers can be an attractive option. Once you have been through probate, a genuine cash buyer can buy your inherited property incredibly fast. You will need to be willing to accept slightly less than market value for the property, but in return you can expect a quick and guaranteed sale, with none of the hassle or time uncertainty of selling on the open market.