Selling a probate house via an estate agent
As discussed above, you can start a probate house sale before probate is granted. You can list with an estate agent, take viewings and even agree an offer to sell the property. Your buyers can arrange a survey and even get a mortgage in principle. This means that you can go as far as exchanging contracts when selling a probate house, so that everything is in place to push the button as soon as probate is granted.
“The delays of probate house sales can put many buyers off”
It’s worth remembering that probate can be a lengthy process, and you need to make your estate agent, and your potential buyers, aware of this. Probate can put many buyers off, particularly if they’re involved in a property chain, or if they have a pressing need to move, such as a new job or a new baby. You may be lucky and find a buyer who’s prepared to wait, but even these sales can still fall through if there are long delays.
Never try to hide the fact that a property is in probate. The truth will always come out once the conveyancing process starts, and this will shatter any trust between you and your buyer, inevitably scuppering the sale. It’s better to be honest and upfront and hope to find a buyer who can wait.
Selling a probate house at auction
Auction sales are a popular choice for probate sale of property, especially where the property is old and tired and in need of repair. An auction will also condense the viewing process to just a few weeks, making it easier for bereaved relatives to manage. However, it is important to remember that auction sales are legally binding, and so you need to be able to complete the sale within a set timescale.
” You need to have probate already in place before going to auction”
For traditional auctions, the sale must be completed within 28 days (4 weeks) of the auction, and with the modern method of auction, you only have 56 days (8 weeks). If you have not been granted probate in time, and the sale cannot complete, you could face a financial penalty, so you need to have probate already in place before going to auction. Most auction houses will not accept probate property until probate has been granted.
Selling a probate house to a cash buyer
When it comes to the probate house selling process, you need maximum flexibility from your buyer. One of the best ways to get this is to sell to a cash home buyer. You’ll get a little less, around 80-85% of market value, but they will buy on your terms, to suit your timescale. By selling a probate house to a cash buyer, you could complete the sale, and have your cash in the bank, the same day that probate is granted.
“Selling a probate house to a cash buyer gives you complete flexibility and a swift, simple sale”
Many people are attracted to cash buyers for probate properties, as it means they can sell an inherited home quickly, get their inheritance sooner, and move on with their lives. However, before you choose a probate house sale to a cash buyer, executors need to have the written agreement of all beneficiaries.
Many people also choose this third option in order to get access to their inheritance sooner. Selling to a cash homebuyer may not net as much as a traditional sale, but 80-85% now is often preferable to 100% in 12 months’ time, especially with costs mounting up all the time while you wait to sell.
Preparing to sell probate property
As an executor, it’s your responsibility to get the maximum value for a probate property. If the home is in poor condition, or grandma’s house is stuck in the past with frankly dangerous fires and weird wood chip wallpaper, then you may consider modernising it and updating the interiors to present it at its best. You can do this while you’re waiting for probate, but you’ll need to pay for this yourself and then reclaim the money once probate is granted.
“As an executor, it’s your responsibility to get the maximum value for a probate property”
You’ll also want to clear the property, and this needs to be handled sensitively with the relatives. People can take small mementoes before probate is granted, but more valuable items will need to be put into safekeeping until the will is executed.
It’s also important to do your homework on the property, especially if you’re not familiar with it. Think about all the information and documents you’d produce if you were selling your own home, such as deeds, guarantees, planning permissions and building regs approval, and try to find these for the probate house sale. It’s not essential, but it will speed up a sale when probate finally comes through.
Selling an inherited house with a mortgage
If you have inherited a house with a mortgage, then you need to contact the lender as soon as possible. They will normally pause repayments while the estate is settled, and they will work with you to clear the debt from the estate before you sell, or to arrange repayment out of the proceeds of the sale.
Alternatively If you want to move in, or to take ownership of a mortgaged property, and rent it out, then you’ll need to take out a new mortgage in your own name (unless there is enough in the rest of the estate to clear the original mortgage). This will still involve conveyancing and Land Registry costs, even though you are not actually selling the property.
Selling inherited property multiple owners
Unless you’re an only child, or your sibling is the black sheep of the family who’s been cut out of the will, chances are you’ll inherit a property with one or more siblings. This can make things complicated, especially if you have different ideas about what to do with the place.
It is possible for one of you to move in and rent the remaining part of the property from the others. You could also decide to rent it out between you and split the income. Unfortunately, both of these options can get messy and often lead to disputes, either at the time or down the line.
It’s usually much easier to simply sell an inherited property and divide up the proceeds, so that each of you can do what you want with your windfall. Whatever you decide to do, you need to decide together. Family disputes can get ugly, and expensive, very quickly, especially where money is concerned. A clean break, by selling a jointly inherited property, is usually the safest option.
Do you pay tax on an inherited house?
In addition to all the costs above, you may also need to pay inheritance tax on more expensive properties. The current inheritance tax lower limit is £325,000, with anything above that taxed at 40%. However, that lower limit is raised if the property was a main residence and it is passed on to direct descendants, such as children or grandchildren. In this case, you can inherit an estate worth up to £500,000 without paying inheritance tax.
To complicate matters (but in a good way for once), this allowance can double if the first partner dies without using their inheritance tax allowance. In this case, it passes to their partner, effectively doubling what they can leave you tax free.
Remember, inheritance tax covers everything they leave, so even if the house is worth less than the allowance, insurance and pension pay outs could still take you over.
You need to start paying inheritance tax within six months, even if you haven’t sold the property or seen any actual cash from your inheritance yet. If you think you might owe inheritance tax, you need to get the property valued as soon as you can. This is also important for capital gains tax.
If you don’t sell straight away, and it rises in value before you do eventually sell, you could be liable for capital gains tax on inherited property. However, you can deduct the cost of selling, as well as any repairs or home improvements you make, so keep all your receipts.
Moving in or renting an inherited property
If the property you inherit is better than your current home, you might choose to move in, although this can be an expensive option. If you’re a tenant, you’ll still need to pay rent during your notice period, and if you’re already a homeowner, you’ll need to sell your existing property, with all the costs that go with it.
If you do decide to move in, you’ll need to instruct a solicitor to handle the relevant paperwork to have the house transferred to your name. You may also need a mortgage if you have to buy out your siblings or pay off any outstanding debt on the property.
If you choose to keep the property and rent it out, you’ll still need to have it transferred into your name. As a second home, you may pay higher council tax and you’ll also be liable for income tax on rent. Buy-to-let mortgages can be more expensive and you may also have to pay capital gains tax if you do eventually sell for more than the property was worth when you inherited it.
On balance, selling inherited property fast is usually the simplest option for all concerned. It avoids a long, painful process, it minimises your costs and it neatly side steps any family conflicts. The sooner you can sell, the sooner everyone can get what they’re due and get on with their lives.
Cash House Buyer Guru