What is an Estate Sale?
Are you dealing with selling your parent’s home after death?
The death of a relative is always brutal for a family.
Not only do you have to weather the emotional turmoil that accompanies someone you love passing away, but you also have to deal with the real-world details – like selling your relative’s home.
Selling a home after a parent or other relative dies is what’s known as an “estate sale.”
The term “estate sale” can often be interpreted in different ways.
For instance, if you are not a Realtor, you might think that an estate sale is an auction where furniture and other possessions are liquidated.
On the other hand, most real estate agents think of an estate sale as selling a property for one of the heirs.
Both can be considered proper usage of the term. In some parts of the country, estate sales are called “tag sales” as well.
Selling the home of someone who passed away recently is similar in many ways to selling any other home, but there are some extra considerations.
Selling a House in an Estate
Knowing how to address all the potential hurdles of the estate sale will make the process easier.
Getting ready for an estate sale is no easy task. Your life is suddenly filled with tons of emotions. Now you have to sell a home which adds additional stress.
The most common situation is a son or daughter having to sell a parent’s home. Typically, there will be many great memories surrounding a parent’s house, primarily when children have grown up in the home.
Lasting memories such as these can make selling more difficult. Many wonder what to do when inheriting a parent’s home.
Below you’ll find the best tips for selling a home after a parent or other relative dies. You will want to follow these steps for selling a deceased parent’s house.
Understanding how to sell an estate property differs slightly from a traditional sale.
Selling a Home After the Passing of a Parent
There are some critical considerations when figuring out how to sell an estate. Below you’ll find some things you should be immediately thinking about when selling a house after the death of a parent.
1. Transference of Real estate After Death.
If a person dies without a will or testate (with a will), then the real estate passes directly to the heirs at law or to the beneficiaries under the will.
For example, A single parent passes away, leaving behind her two children. The house has been left equally to both siblings. The two children receive equal ownership of the house upon death.
The children don’t need the court or executor to transfer the property to them – the property passes directly. If there was no will, the same thing would occur. So what happens when the home is going to be sold?
The first thing that needs to be done is to ensure the executor has been given the authority to liquidate the real estate. There should be specific instructions in the will about selling the property.
First, look to see if the executor under the will was given power or authority over the real estate. If the executor was not given control over the real estate, then the beneficiaries hold the authority and can sell the real estate without the executor’s consent.
Every state varies on how a home is sold as an estate with and without a will. Following the precise procedures of your state is the first step in selling a house after a parent dies.
I would highly recommend speaking with a qualified real estate attorney.
Understanding How Probate Law Works
You will likely need to go through the probate process when there is no will. The probate process is a court-supervised procedure that observes the distribution of your parents’ entire estate.
Probate procedures include the sale of their residence to eventual payment for any outstanding debts.
Probate law ensures those designated as beneficiaries are duly honored with their responsibilities and obligations towards it.
Laws of probate vary from state to state. It is a complex process that can take several months to over a year. Having a probate or real estate attorney is a must.
How Long After Probate Can a House Be Sold?
Once a home has gone through probate, it can be sold. Typically a court will set aside a date for the end of probate, and the property should be sold before such expiration.
How Does a Living Trust Work?
If your parents set up a living trust, selling their house after death will be more straightforward.
A living trust is a document intended to expedite the management and inheritance of your parents’ assets – particularly their house. The instrument designates your parents as trustees and you as their designated beneficiary.
If you inherit real estate where a living trust has been established, you can bypass probate and avoid some estate taxes, ultimately enabling the faster sale of the property.
Living trusts are excellent to have when multiple heirs to the property exist. When a parent’s home is in a living trust, the trust will indicate which heir is in charge of liquidating the house.
Selling a House in An Estate That is Insolvent
If you are going to be selling an estate where there are more debts than assets, this is what’s called being insolvent. In this situation, it is crucial NOT to pay any debts you don’t have to—state law will set a priority list for you to follow.
If you pay some low-priority creditors, you could find you are personally liable for the amount you shouldn’t have paid out.
For example, don’t pay the landscaper or the telephone bill. These should be paid by the executor of the state once approved.
Handling Inheritance Procedures and Disagreements
When selling a house after the death of a parent, it is crucial to address any potential disputes immediately. Doing so will save time, money, and significant aggravation.
A meeting of the minds should take place on all significant aspects of the sale.
Consider things like who is taking care of the home selling expenses, who will prepare the home for sale, how much the property is worth, how the proceeds will be split, and who will be responsible for accepting an offer.
Many siblings will end up assigning responsibilities in the sale. There should be an equitable distribution of the assets.
2. Pay The Bills For Your Parent’s Home.
It is in your best interest to stay current with the bills related to the home – like the mortgage, utilities, and maintenance – until you finalize the home sale.
While the passing of your loved one is essential to you, the mortgage company and other service providers still expect to be paid.
If you are dealing with the death of an older parent, it’s possible they had a reverse mortgage. If so, ensure you follow the necessary steps when selling a house with a reverse mortgage.
You can avoid complications by ensuring that all of these bills are paid until you are sure they don’t need to be – like if you let the landscaper know that their services are no longer required.
Paying the bills, however, should be done through the estate and NOT personally, as mentioned above!
3. Collect All The Necessary Documents Related to Your Parent’s Home.
One of the least enjoyable but most necessary things that those left behind need to do is collect all required financial documents.
Financial documents are essential for the distribution of the estate, including the home.
Without all the necessary documents, things become much more complicated.
You may have to search for a while to find everything you need. Often all documents won’t be in the same place. Sometimes people will stash them in hidden places.
It is worth searching everywhere, including crawl spaces, the attic, and the garage. Go through all the boxes and files, and even look under the mattress and drawers.
The documents you will want to gather may include the following:
- Will – If there is a will, it will significantly simplify the distribution of the estate.
- Receipts from bills – You will need to freeze your relative’s credit and contact all creditors, including the three major credit reporting agencies.
- Investment documents – Your relative may have had stocks and bonds.
- Insurance documents – There may be a policy from an employer or one purchased privately.
- Homeowner’s policy – Keep homeowner’s insurance up to date and increase coverage if necessary.
- Bank account documentation – You want accurate information on your parent’s bank accounts.
- Personal documents – If your parents or relative had any confidential documents, like journals, poetry, etc., you might like to have them later for sentimental reasons.
Once you have gathered all the documents you know you’ll need, shred everything else with personal information, like social security numbers.
It is common for identity thieves to use the social security numbers of the deceased. Eliminating all documents with the number on them makes identity theft more difficult.
4. Change The Locks and Mail Delivery of Your Parent’s Property
You must completely control the property when selling a home as an estate sale. This includes forwarding the mail so you receive it timely and enhancing the home’s security.
Keep in mind there will be folks who know about the death that took place and the fact the home may be vacant.
You will be surprised how many keys have been given out on a property over the years, whether it is friends, relatives, babysitters, or contractors who have done work.
It is better to be safe than sorry.
5. Go Through Everything in Your Parent’s Home
Buyers will not be interested in most of your relative’s possessions, so ideally, you will clear out the home altogether – and have it staged for sale – or at least take out all the personal belongings and only leave behind enough furniture to aid in the sale.
You can read some additional tips on selling vacant vs. occupied to see which situation best fits your circumstances.
Clearing out an entire home of someone’s possessions, particularly if you have emotional ties to them, can be tiring and stressful. That is why it is helpful to have a process that simplifies things.
The basics of the organization require the creation of categories – what you will do with each item as you process it.
You want to keep some items, throw away other things, donate others, and maybe sell some. See how to pack a house for moving. You’ll love the advice to make getting your home ready a breeze.
If there are things that family members will want, especially items that may be disputed over, go ahead and set them aside to deal with later.
The sooner you get everything out of the home, the sooner you can put it on the market.
If your parents were in the fortunate position of owning a lot of valuable possessions, it might be prudent to hold an estate sale of these things.
Having an estate sale will allow you to maximize the value of your parent’s belongings.
6. Get Your Parent’s Home Ready to Market
Once you have processed your relative’s possessions, you will be ready for the sale.
At this point, you will go through the same steps as any other home seller – although some minor differences may apply.
When selling a home owned by an older relative or a house occupied for decades, extra work is often involved in prepping for sale.
This can be one of the most challenging parts of selling a deceased parent’s home.
The house may be dated, including old wallpaper, decorations, carpet, paint, etc.
It may also have damage that has gone unaddressed for a long time.
You will want to bring in a reputable real estate agent to advise you on what needs to be changed or repaired before you put the home on the market.
If you want the best possible price, you will probably need to make some changes. They may include:
- Getting rid of old furniture
- Changing old window coverings
- Removing wallpaper
- Changing carpeting or other dated floorings
- Refinishing hardwood floors
- Applying a fresh coat of paint
- Eliminating all signs of pet ownership, like stains and other damage
- Installing new fixtures
- Updating lighting
In addition to any changes you make to the home, you will want to clean it thoroughly. Nothing is more critical to a home’s sale than a proper cleaning.
If you do not want to do the work yourself, ask your Real Estate agent for a reference for someone who will do a good job.
Once you have prepared the home for buyers, you can list it through your Realtor. As long as you have made the home desirable based on the current market, you should be able to sell it for a fair price.
7. Hire a Top Producing Real Estate Agent
Speaking of real estate agents – make sure you hire an exceptional one! The first thing you need to know about real estate agents is they are a dime a dozen. I should know, having been in the business for over thirty-seven years.
In my time in the business, I’ve worked with some outstanding agents. On the other hand, plenty of agents make me feel bad for their clients.
Picking the right real estate agent is critical to your success. From pricing the home correctly, having an exceptional marketing plan, and staying in constant communication, your real estate agent needs to be on top of their game.
There are many things a seller’s agent does to ensure a smooth sale. Not taking the agent selection process seriously is a typical home-selling mistake.
When selecting a real estate agent for an estate sale, you might want to look for an agent with some experience with this transaction. As you have gathered from reading, there are many things to consider when selling a home after the death of a parent.
One of the most critical factors in selling a home is picking the right real estate agent!Click To Tweet8. Did Your Parent or Parents Die in The Home?
Whenever you are selling an estate sale, be prepared for the buyer to ask if the death took place in the house. For many buyers, death occurring on the property can be a problem. It gives them the creeps.
In some states, you may have to disclose whether a death occurred in a home.
In other states, disclosure of death is not required.
For example, in Massachusetts, where I’m located, you do not need to disclose a death in a home, even if it is murder. Doing the right thing is essential, so ask your real estate agent if the disclosure is required.
In most states, it is not a required disclosure.
Buyers can now find out if a death has occurred in a house on a new website called Died in House. The site will check the following:
- A death in a home and any relevant details.
- Names of those who died.
- The vitality status of associated people.
- Cause of death, if available.
- Additional deceased information.
So if you are a buyer who has some concerns about a death in a specific property, the site could be a helpful tool. They do charge you 12 dollars to get the report. Here is a short video explaining what Died in House can do for a buyer.
Whenever selling property, it is crucial to understand the disclosure laws for your state. Rules can vary dramatically.
9. After Estate Sale, Tax Consequences
When selling an estate, one of the most important financial considerations will be dealing with taxes. See the IRS guidelines on estate sales for vital tax considerations and how they relate to your circumstances.
Having a massive unexpected tax bill is never fun. It is the last thing you’ll want to deal with after the death of a parent.
Estate and inheritance taxes are similar but differ in how they get paid. Estate taxes are levied against the value of your parent’s estate, which must be paid before any proceed are distributed to the heirs.
On the other hand, an inheritance tax is the taxes a beneficiary pays to the state based on inherited proceeds. Sometimes these tax terms can be used interchangeably.
Only half of all states have either an estate or inheritance tax.
10. Understand Capital Gains Tax Laws
Real Estate capital gains taxes refers to what you are taxed based on the purchase price vs. the sale price. With estate sales, there is a tax break known as the step-up in basis that reduces the amount of your capital gains tax.
The property valuation “steps up in basis” to when they passed away rather than their purchase date.
So you only have to pay capital gains taxes on proceeds about the death date value.
Here is a simple example. Many years ago, your parents purchased their home for $100,000. It is now worth $700,000. If your parents had sold before they passed, they would have $600,000 in capital gains.
Due to the capital gains exclusion, they would only have to pay taxes on $100,000. For married couples, the capital gains exclusion is $500,000.
So if your parent’s home was valued at $650,000 at the time of their death, there would only be a gain of $50,000 if the house was sold at $700,000. There would be no taxes owed.
If a home is sold at a loss, you could be eligible to apply for a capital loss as long as it was sold for fair market value and not to a relative at a below-market price.
Deducting capital gains is one of the significant tax benefits of owning a home.
Final Thoughts on Selling a Parent’s House After Death
Selling a home in an estate sale after the death of a loved one can be a trying experience. Homes often conjure up happy memories that can invoke our inner emotions. It is always hard to let go of a house that has become a home.
Hopefully, the tips for selling a parent’s home after death have been helpful.
Please reach out if you have a home in the Metrowest, Massachusetts area that needs to be sold. I’ve been involved with selling a property in an estate numerous times.
Additional Helpful Home Selling Advice
- Preparing to sell your home the right way – Luke Skar provides tips on selling your house quickly and efficiently.
- Advice when selling an inherited property – Paul Sian has helpful tips on how to sell a home that was inherited.
- Maximize your curb appeal when selling – Lynn Pineda offers tips to make your home’s exterior look its best.
Use the additional excellent home-selling resources to make the best decisions possible.
About the Author: The above Real Estate information on how to sell a house after a parent dies was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-625-0191. Bill has helped people move in and out of many Metrowest towns for the last 37+ Years.
Are you thinking of selling your home? I am passionate about real estate and love sharing my marketing expertise!
I service Real Estate sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, and Uxbridge MA.
