Do all heirs need to agree to sell an inherited property?

Selling a house that you bought for yourself is a fairly straightforward process. After all, it’s your house, and you have final say in most of the decisions, whether you opt for a traditional market sale or sell to a cash-homebuying company.

However, if you’re looking to sell a house that you inherited from someone who has passed away, you may need to be prepared to deal with a maze of complexities. And if you’re not the only heir to the property — for example, if it was left to you and your siblings together — you might be trying to figure out a tough question: Do all the heirs have to agree to sell the property?

The answer isn’t simple. Much depends on what state the home is located in and what plans were made prior to the owner’s passing. And of course, it also depends on your relationship with the other heirs. Unfortunately, things can become very complicated, and even acrimonious, if the owner’s desires were not clearly discussed with all involved before their death.

Alex Grange, a Chicago-based attorney and real estate broker, is no stranger to the complicated family dynamics that come with inherited property. He recently worked on a transaction that involved three siblings spread across the country who disagreed over dividing the proceeds of the sale based on one who spent time caring for their aging mother and another who spent money rehabbing the property. “Each situation is unique depending on the family makeup, the legal structure of the property in question and the applicable state laws,” Grange says.

If the house is in probate

A lot of inherited property winds up in probate, which is a complex legal process that evaluates assets and outstanding debt. Probate can be an issue if the deceased doesn’t have a will, but it can also come into play even if there is an outline of what to do with the property. This process can be both very lengthy and very expensive.

“Probate can be a real hassle,” says Grange, who is the founder of Grange Real Estate & Law. “It can create some major delays. The probate court takes stock of the estate and any outstanding debts. If there is a will, the court will determine if the will is valid and execute the will via a legal proceeding.”

In probate, divvying up assets, including real estate, is a duty that falls to an executor. That may be someone named in the will, such as a family member or an attorney, or it could be someone appointed by the court. In some cases, the executor can sell the house without getting the sign-off from all the heirs. For example, in California, if the executor can sell the property for at least 90 percent of its appraised value, they may have the authority to move forward with the sale. So know your state’s laws.

Additionally, one beneficiary can file a request for a partition action, which will divide the shares among the heirs. For example, if a house is worth $600,000 and there are three equal beneficiaries, a partition action could give each of them a $200,000 interest in the property. Then, if one sibling wanted to hold on to the home, he or she would need to buy out the others’ shares. Setting this up can also be very expensive, though, and the heirs would all need to agree on an appraiser, a value and a timeline for the sale.

If the house isn’t in probate

Probate can take a very long time. However, Grange says that one easy way to avoid this hold-up by setting up a trust beforehand. “A trust can clearly lay out plans and make the process go much more smoothly,” he says. “Consulting a real estate attorney early to make appropriate plans for what to do with the property when the owner passes is very advantageous.” Another option is to create a life estate that names the owner’s beneficiaries.

When a house isn’t in probate, all heirs may not have to agree to the sale. For example, Grange says that if one sibling is a majority trustee and the others are simply named as beneficiaries, there may be a mechanism for that majority owner to make the final decision about a sale. While that can certainly lead to plenty of family disagreements, it is a possibility. For this option to work, though, the other heirs may have to file quitclaim deeds to relinquish their interest in the property to the buyer.

Taxes on inherited property

While there may be questions surrounding how real estate can be sold after the owner dies, there is one certainty that every heir should understand: the tax implications. Until you and the other heirs come to an agreement about a sale, it’s important to keep current with property tax bills (as well as mortgage payments). Then, when it’s time to move forward, you’ll need a good grasp of exactly how much the house is worth so that you can understand two types of taxes:

• Estate tax: The federal estate tax only applies to estates valued at $12.92 million or higher (for 2023 deaths) or $13.61 million (for 2024 deaths). In addition, six states have a separate inheritance tax: Iowa, Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania. New York also has its own set of estate tax laws.

• Capital gains tax: Capital gains taxes apply to real estate as well, but they work a bit differently with inherited properties versus a property you bought yourself. Instead of using the initial purchase price of the property (plus capital improvements) to determine capital gains taxes, most inherited property uses the market value at the time of the owner’s death. So, if you sell the home fairly quickly, you’ll be unlikely to pay the tax. If you and other heirs hold on to it for a long time while the price appreciates, however, you may eventually be taxed on the sale. If you plan on holding on to it, get an appraisal as of the date of death — when and if the house is sold in the future, you’ll need to be able to establish the value of the deceased’s interest on their date of death.

Hire an experienced real estate agent and attorney

Selling an inherited property is not a do-it-yourself kind of job. When you’re already dealing with grief on top of the stress of tying up loose ends for the deceased, trying to get a group of family members on the same page to list the home can feel overwhelming. Each heir may have different opinions about a range of issues — whether to sell the property at all, how much it’s worth and how much they should be entitled to (not to mention what to do with the home’s contents). Those diverging opinions can create big challenges. An expert real estate attorney and a real estate agent with experience in selling inherited or probate properties should be essential members of your team.

“There’s always emotion involved,” Grange says. “When someone passes away, that can bring up some unresolved issues. Mediation can help when determining what to do with the property. All the heirs can get in front of a third party to facilitate the exchange.”

Make sure everyone is in agreement before moving forward with a sale. “If you get to the closing table with an ongoing disagreement, the title company won’t distribute unevenly without going through the right process,” Grange says.

FAQs

• Can an executor sell a property to themselves?

  Technically, yes. However, many criteria must be met, and an executor cannot purchase the property for less than its market value, according to the Werner Law Firm in California.
  

• Can an executor sell a property for less than market value?

  Potentially, but there are limitations on how much less an executor can accept. For example, in California, the law states that an executor must sell a home for at least 90 percent of its appraised value.
  

• Does an inherited property have to go through probate?

  Not necessarily. If the owner set up a trust prior to passing, the trustee can determine a plan for selling or holding on to the property and avoid dealing with probate, which can be a lengthy and potentially expensive process.