Selling Inherited Property: A Step-by-Step Guide for Heirs

Inheriting a home is both a gift and a burden. You're grieving, and now you have to figure out what to do with a property — possibly in another state, possibly in rough shape, and possibly co-owned with siblings who all have different opinions.

This guide walks you through the entire process of selling inherited property, from establishing your legal right to sell through closing the deal and handling taxes.

Step 1: Establish Your Legal Right to Sell

You can't sell a property you don't legally own. Inheriting a home doesn't automatically transfer the title to your name. How the title transfers depends on how the deceased held the property and whether they had estate planning documents.

If There's a Will (Testate)

The will names beneficiaries. The property must typically go through probate — a court-supervised process that validates the will and authorizes the transfer of assets. During probate, the executor (named in the will) has the authority to manage and sell the property.

Probate timelines vary by state:

• Simple estates: 6 to 12 months
• Contested estates: 1 to 3+ years
• Summary probate (small estates under $50,000–$200,000 depending on the state): A few weeks to a few months

If There's No Will (Intestate)

State intestacy laws determine who inherits. Typically, the hierarchy is:

1. Surviving spouse
2. Children (split equally)
3. Parents
4. Siblings
5. Extended family

The court appoints an administrator (similar to an executor) to manage the estate. The process is similar to probate but may take longer because there's no will to guide distribution.

If the Property Was in a Trust

Properties held in a living trust avoid probate entirely. The successor trustee named in the trust can transfer or sell the property without court involvement. This is the fastest path to sale — sometimes as quick as a few weeks after death.

Transfer-on-Death Deeds

Some states allow transfer-on-death (TOD) or beneficiary deeds that transfer property automatically upon death, bypassing probate. If the deceased filed a TOD deed, the named beneficiary can claim ownership with a death certificate and an affidavit.

[Joint Tenancy with Right of Survivorship](/blog/joint-tenancy-vs-tenants-in-common)

If the deceased co-owned the property as joint tenants with right of survivorship, the surviving owner automatically inherits the deceased's share. No probate needed — just record the death certificate and an affidavit of survivorship.

Step 2: Understand the Stepped-Up Basis

This is the most important tax concept for inherited property. When you inherit a home, your tax basis is not what the original owner paid — it's the fair market value on the date of death.

This is called the stepped-up basis, and it can save you enormous amounts in capital gains tax.

Example

• Grandma bought the house in 1985 for $80,000
• Grandma died in 2025 when the house was worth $450,000
• Your stepped-up basis: $450,000

If you sell for $460,000, your capital gain is only $10,000 — not $380,000. At a 15% capital gains rate, you'd owe $1,500 instead of $57,000.

How to Establish Fair Market Value at Death

You'll need a professional appraisal dated as close to the date of death as possible. This typically costs $300 to $600. Some estates use the property tax assessment, but a professional appraisal is more defensible if the IRS questions your basis.

The executor can also elect an alternate valuation date — 6 months after death — if the estate is large enough to owe estate tax and the property's value declined during that period. This is uncommon for most estates.

Community Property States

In community property states (Arizona, [California](/blog/california-heloc-guide), Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin), both halves of community property get a stepped-up basis when one spouse dies — not just the deceased spouse's half. This can be a significant additional tax benefit.

Step 3: Assess the Property

Before listing, you need a clear picture of the home's condition and value.

Get a Professional Inspection

An inspection ($300 to $500) will identify:

• Structural issues
• Roof condition
• HVAC, plumbing, and electrical systems
• Water damage or mold
• Foundation problems
• Code violations

Inherited homes are often older and may have deferred maintenance. Knowing what you're dealing with helps you price correctly and decide how much (if anything) to fix.

Get a [Comparative Market Analysis](/blog/how-much-is-my-house-worth) (CMA)

A local real estate agent can provide a free CMA showing recent sales of comparable properties. This gives you a realistic price range.

Check for Liens and Title Issues

Inherited properties sometimes come with surprises:

• Unpaid property taxes
• Mortgage balance (the lender must be paid at closing)
• Home equity loans or lines of credit
• [Contractor](/blog/diy-vs-contractor) liens
• IRS tax liens
• HOA liens or dues

A title search ($200 to $400) will reveal all recorded liens. Address these before listing.

Step 4: Decide — Sell, Rent, or Move In

Sell

Best when:

• You need the cash
• The property is in another city or state
• Multiple heirs need to divide the proceeds
• The property needs significant repairs you can't or won't fund
• You don't want to be a landlord

Rent

Best when:

• The property is in a strong rental market
• You can manage it (or hire a property manager)
• You want ongoing income
• The real estate market is depressed and you'd prefer to wait
• Note: If you rent it out, you'll start depreciating from the stepped-up basis, and eventually face [depreciation recapture](/blog/depreciation-real-estate-guide) when you sell

Move In

Best when:

• You want or need a home
• The location works for your life
• The property is in good condition
• After living there for 2 years, you could sell and claim the [Section 121 exclusion](/blog/capital-gains-home-sale)

Step 5: Handle Multiple Heirs

If you inherited the property with siblings or other family members, you'll need everyone on the same page. This is where things often get difficult.

Everyone Agrees to Sell

Best case scenario. All heirs sign the listing agreement, proceeds are split per the will or intestacy law, and everyone moves on.

One Heir Wants to Keep It

The heir who wants to keep the property can buy out the others. Get an independent appraisal so the price is fair. The buying heir can use a mortgage, cash, or a combination.

Heirs Disagree

If one or more heirs refuse to sell and you can't reach an agreement, the nuclear option is a partition action — a lawsuit asking the court to force a sale. Partition actions are expensive (attorney fees often run $5,000 to $20,000+), slow (6 months to 2 years), and damage family relationships. Try mediation first.

Practical Tips for Multi-Heir Sales

• Designate one person as the point of contact for the agent
• Get an independent appraisal to remove emotion from pricing discussions
• Agree on a minimum acceptable price before listing
• Put everything in writing — even among family
• Use the estate account for expenses, not personal funds

Step 6: Prepare and List the Property

Cleaning and Clearing

Inherited homes often need a significant cleanout. Options:

• Do it yourself: Cheapest, but time-consuming and emotionally difficult
• Estate sale company: They'll sell valuables and handle the rest. Typical commission: 25% to 40% of sales
• Junk removal service: $300 to $800 for a full-house cleanout
• Donation: Charitable organizations will pick up furniture and household items, and you get a tax deduction

Repairs and Improvements

The question: fix it up or sell as-is?

Fix if:

• The repairs are cosmetic (paint, carpet, landscaping) and relatively cheap
• The improvement will return more than its cost in a higher sale price
• The local market expects updated homes

Sell as-is if:

• The property needs major work (foundation, roof, mold remediation)
• You're selling to investors or flippers
• You need to sell quickly
• The repair costs would exceed the added value

Pricing

Price based on the property's current condition, not its potential. Overpricing an inherited property that needs work is the #1 mistake heirs make. A home that sits on the market for months costs you carrying expenses (taxes, insurance, utilities, maintenance) and sells for less than if you'd priced it right initially.

Step 7: Understand the Tax Implications

Capital Gains Tax

Your gain is the sale price minus selling costs minus your stepped-up basis. If you sell relatively soon after inheriting, the gain (or loss) is typically small.

• Held 1 year or less after death: Short-term capital gains, taxed at ordinary income rates
• Held more than 1 year after death: Long-term capital gains, taxed at 0%, 15%, or 20%

Note: The holding period for inherited property is automatically considered long-term, regardless of how long you actually held it. This is a special rule for inherited assets.

Correction on holding period: Under current tax law, inherited property is deemed to have been held long-term regardless of the actual holding period. So even if you sell the day after inheriting, any gain is long-term.

Estate Tax

The federal estate tax exemption for 2026 is approximately $7 million per person (it dropped from $12.92 million in 2025 due to the sunset of the Tax Cuts and Jobs Act provisions). Estates below this threshold owe no federal estate tax.

Some states have their own estate or inheritance taxes with lower thresholds:

• Oregon: $1 million
• Massachusetts: $2 million
• Maryland: Has both estate tax ($5 million threshold) and inheritance tax
• Iowa, Kentucky, Nebraska, New Jersey, Pennsylvania: Have inheritance taxes (the heir pays, not the estate)

Property Tax Reassessment

In most states, a change of ownership triggers a property tax reassessment at current market value. If grandma bought the house decades ago, her property taxes may have been very low. After the transfer, expect property taxes to increase — sometimes significantly.

California's Proposition 19 (effective 2021) eliminated the parent-to-child property tax exclusion for most inherited properties unless the heir uses the home as a primary residence and the assessed value doesn't exceed the current value by more than $1 million.

Step 8: Close the Sale

Closing on an inherited property has a few extra requirements:

• Letters testamentary or letters of administration from probate court (proving the executor/administrator's authority)
• Death certificate
• Affidavit of heirship (in some states)
• Court approval of the sale (required in some states during probate)
• All heirs' signatures (or the executor's signature if they have sole authority under the will)

Work with a title company experienced in estate sales. They'll know the specific documents required in your state.

Selling an Inherited Property in Another State

If the property is in a different state than where you live:

• Hire a local agent. You need someone who knows that market.
• Get a local attorney if your state requires attorney involvement in real estate transactions (common in the Northeast).
• Understand ancillary probate. If the deceased lived in a different state than where the property is located, you may need to open a separate probate proceeding in the property's state.
• Be aware of state tax withholding. Some states withhold a percentage of the sale price from non-resident sellers (e.g., California withholds 3.33%).

Frequently Asked Questions

Do I have to pay capital gains tax on an inherited house?

Only on the gain above the stepped-up basis (fair market value at the date of death). If you sell soon after inheriting, the gain is usually minimal. Inherited property is always treated as long-term for capital gains purposes.

How long do I have to sell an inherited property?

There's no legal deadline. However, the longer you hold it, the more carrying costs you'll pay and the more the value may diverge from your stepped-up basis. Most heirs sell within 6 to 18 months of completing probate.

Can I sell an inherited house before probate is complete?

In most states, the executor can list and sell the property during probate with court approval. Some states require specific notice to heirs or a minimum waiting period. Check with a local probate attorney.

What if the inherited house has a mortgage?

The mortgage doesn't disappear when the owner dies. You have options: pay it off from estate funds, assume the mortgage (federal law protects heirs' right to assume), refinance in your name, or sell and pay it off at closing. Lenders cannot call the loan due solely because of an inheritance (per the Garn-St. Germain Act).

What if the house is worth less than what's owed?

If the mortgage exceeds the home's value, the estate is "underwater." Options: negotiate a short sale with the lender, let the lender foreclose, or deed the property to the lender (deed in lieu of foreclosure). Heirs are generally not personally liable for the mortgage unless they co-signed.

Do all siblings have to agree to sell an inherited house?

If all siblings inherited the property jointly, all must agree to sell — or one party must file a partition action to force a sale. If the executor has authority under the will to sell property without heir consent, they can proceed independently.

The Bottom Line

Selling inherited property involves legal, tax, and emotional complexity that a typical home sale doesn't. The stepped-up basis is your biggest financial advantage — understand it and use it. Move through probate as efficiently as possible, get professional appraisals, and don't let family disagreements derail the process.

Lean on professionals: a probate attorney, a CPA familiar with inherited property tax rules, and a real estate agent experienced in estate sales. Their guidance will more than pay for itself.

This article is for informational purposes only and does not constitute legal or tax advice. Consult qualified professionals for guidance on your specific situation.

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