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Did you know that 100’s of houses are inherited every year in Colorado? Homes are inherited in Denver, Aurora, Lakewood, Thornton, Arvada, all over the front range and even on the Western Slope.
It’s no wonder then that plenty of heirs are reaching out to Google and asking so common questions like:
- Can I sell my inherited house even if the inheritance was given to me and my 2 siblings?
- What is probate?
- Does my inheritance have to go through probate?
- Do i have to pay capital gains tax when i sell it?
So you and many are pondering the disposal of a bequeathed estate in Colorado and need to sell an inherited house that’s bogging you down
Key Points:
Selling an inherited house can be complex, but it’s doable.
You need to consider the house’s value, debts, and taxes before selling.
There are different ways to sell, like using a real estate agent or selling for cash.
It’s important to clean and sort personal belongings in the house.
Be patient and prepared for challenges during the selling process.
Disposing of Bequeathed Estate Colorado: Selling Inherited Property
Inheriting a residence is both a boon and a burden, contingent on the circumstances. This is particularly pertinent if you are traversing through bereavement. Should the responsibility of inheriting a property feel burdensome, your optimal recourse is to divest it.
“I was recently called by Karl, one of 3 siblings, who said I want to sell my house fast that I inherited in Denver, CO because the property taxes are adding up, and there is a lot of deferred maintenance and it is draining my bank account.” said Shaun Martin, a Denver house buyer, with We Buy Houses In Denver. “We discussed all selling options including MLS listing, FSBO, or selling to a home buying company like us and after going back and forward over a afew calls we presented a cash offer that made sense for him and his siblings. We gave him a solution to a problem that was costing him money and keeping him up at night. It felt great!”
To divest a bequeathed property, you should initially contemplate variables such as its market valuation, outstanding mortgage and debts, the status of the home transfer, and tax ramifications (including capital gains taxes). Once all is settled, select a method to divest the house. It can be through a real estate agent, real estate investor, for sale by owner, or iBuyer.
The matters mentioned above are merely the tip of the iceberg. There’s a plethora to learn before you can successfully divest your inherited home, and truth be told, it can be quite intricate.
Fortuitously for you, we’ve simplified the process in this handy guide. So, if you require assistance in swiftly selling your Colorado inherited property, peruse and bookmark this page!
This Homeowner Sold Their Inheritancve in Denver, CO
“I inherited my grandma’s house in Denver, Colorado, and it was a lot to handle. I was stressed out because I had so many questions about selling it. I didn’t know where to start with all the repairs and taxes. But then I found a company that buys houses for cash in Denver, CO. They helped me sell the house quickly, and I didn’t have to worry about fixing it up. It was such a relief to get it all sorted out!”
Variables to Ponder Before Divesting (Selling) an Inherited House Colorado
Valuation of the Property Colorado. Divesting an inherited house is not as straightforward as divesting a vacant lot or an old home. The process can be quite perplexing, and you have to consider a few variables along the way.
To illustrate, here are some aspects you should delve into before deciding to divest an inherited house in Colorado.
Valuation of the Property
Before you seek an agent, you must first research the fair market valuation of your property. You can do this by comparing it to other properties in your location or through online tools designed for estimation.
However, temper your expectations because the estimated amount does not necessarily equate to the exact sum you’ll receive.
Several factors and conditions directly affect the market valuation of your inherited property, like the local housing market or the state of the house.
Outstanding Mortgage
There’s a possibility that the property you inherited still has an outstanding mortgage. Confirm this with the mortgage company that facilitates the loan.
Once you ascertain the outstanding amount, you can start calculating your potential earnings from divesting the house.
Outstanding Debts
Besides the outstanding mortgage, you should also check for debts. Are there any unsettled bills? Were all the property taxes paid? Is the property used as collateral, or does it have a clear title?
By addressing these queries, you’ll ascertain if the proceeds from the house sale would merely go towards settling debts. If this is the case, you may opt to delay divesting it and settle everything first.
Number of Individuals Inheriting the Property
Another significant aspect to consider is the number of family members inheriting the house. Naturally, all these individuals should consent to divest the property.
It should also be clarified who will oversee the sales process and other crucial tasks, such as discarding belongings inside the house.
Status of Home Transfer
You can only divest inherited property if it is already under your name. To clarify, there are three ways for you to legally own inherited property.
Probate
Probate can be a complex way to inherit a property, and often, inheritors only receive a fraction of the property afterward due to settling outstanding debts and taxes.
Probate differs from state to state but is typically initiated when a loved one passes away and has an inheritance that needs to transfer ownership. Probate requires numerous documents that vary depending on where the loved one owned property.
The probate process takes quite some time and can be costly (especially when there is no will). In probate, the court ensures that all the creditors of your deceased loved one are paid before transferring the property to the inheritors.
Living Trust
The optimal way to inherit property is through a living trust. This is a document that stipulates who will manage the property so the inheritors or family members can benefit afterward.
For instance, the parents (trustor) delegate someone (trustee) to divest inherited property so the children can divide the proceeds equally.
Transfer on Death Deed
Also known as a beneficiary deed, this means you inherited the property through a death deed or a document prepared by the owner of the house prior to passing. If you become a property owner through this document, you have the rights to divest it.
Capital Gains Taxes and Other Tax Ramifications
Inheriting a house can impact you financially. You and your family members may need to pay inheritance tax immediately after you are named as the owner, or you can be taxed once you receive the money from the sale (capital gains tax).
Laws regarding this differ from state to state, but generally, you will not qualify for home sale tax exclusion if you haven’t lived for two years (from the past five years) in the property.
Also, if you do not plan to divest the property immediately, you would have to pay taxes for any increase in property value.
To better understand your specific tax ramifications, you should seek the opinion of a lawyer or an accountant in Colorado. There are numerous nuances related to tax laws, especially capital gains tax, taxes on the sale, federal estate tax, property taxes, etc.
One thing is certain, though, you will not be able to avoid paying taxes on the sale.
Where to Report Sale of Inherited Property
Should you decide to divest your inheritance, the sale process should be reported as taxable income according to the IRS. The IRS provides instructions on reporting a sold property and determining the forms you need to use.
What to Do Before the Sale of an Inherited Property Colorado
The preparation in making the sale of your inherited property is as important as the sales process because you want the home sale to be efficient. To guide you, here is a detailed list of what you should do.
Clean and Sort Personal Belongings
If you have inherited a property in Colorado because a loved one died, it can be emotionally challenging to sort through their belongings and decide which to keep and discard. However, you really have to do this at some point.
It’s best to enlist someone to assist you because you’ll be dealing with years of accumulated stuff.
Hold a Yard Sale
Once the cherished possessions inside the house are divided among the heirs, it’s time to dispose of the remaining belongings through a yard sale. Remember, no matter how ironic it sounds, the property would be more appealing if it is empty.
If you find that selling the stuff on your own can be overwhelming, seek the help of an estate sale specialist. Once all the stuff is cleared, you can start repairing or upgrading the house to sell at a much higher price.
Wait for the Property to Go Through Probate Process
As established earlier, your inherited property would go through probate if your loved one did not leave a legal will. You would have to pack some patience because this process takes time.
To make everything smoother, consult with a probate attorney or estate planner.
Determine Who Can Handle the Real Estate Transaction
If your loved one left a legal will and designated someone to be responsible for distributing assets, choosing an executor is unnecessary. This is similar to when the property has a trustee.
However, in instances where siblings inherited a property and the parent did not state who should manage the sales and other transactions, the siblings should convene and appoint someone to have the ultimate authority of ownership.
Hire a Mediator
Disagreements on whether to divest the property or not often arise when many individuals inherit a single property. These disagreements could even lead to significant disputes.
To avoid this, hire a mediator or an attorney. They can help navigate through family disagreements so you can arrive at a decision on whether to divest the house.
Choose How to Divest the Inherited Property
Following all the recommendations above, you will now be ready to divest your property. Your next step would be to choose a way to divest it. You can either hire a real estate agent to divest an inherited home, divest it on your own, divest to a real estate investor, or an iBuyer.
We’ve covered all of this in the next section, so stay glued to this article.
4 Ways to Sell an Inherited House Colorado
Real Estate Agent
If you aim to get the best price out of your inherited home, divest it with the assistance of a real estate agent. They’ll serve as your personal representative and help you set the sale price, list and market your house, and negotiate offers.
Here are the pros of divesting through a realtor:
Realtors can set a price that can attract buyers but at the same time help you gain more income from the sale. They can help you refrain from overpricing and undervaluing your inherited property.
They can make your property stand out through strategic marketing.
They know how to address the financial and emotional issues of interested buyers.
Real Estate Investor
Real estate investors, also referred to as cash home buyers, or house buying companies, can be found through home buying companies that offer you a cash proposal for your home within days in Colorado.
Home buyers are renowned for their ability to buy inherited houses in “as-is” condition and make the process extremely quick and easy such as this home buyer that has a wealth of experience for people needing to get rid of inherited property.
Here are the pros of divesting to a real estate investor:
They buy houses as-is, so you don’t have to worry about repairs and the sale process.
You can divest while out-of-state because you don’t have to prepare or clean the house.
Once the investor has seen your house and it passed the assessment, they can provide you the cash payment at closing (as fast as 7 days).
There is minimal paperwork since you will work directly with the investor.
For Sale by Owner
If you have ample time, you can also divest your inherited home all by yourself. This means you won’t seek the help of realtors.
Here are the pros of personally handling the sale of your property:
It can help you net more money because you don’t have to pay the agent for commissions. (Note: This is possible if you are really an expert in the industry.)
You’ll get a better price compared to divesting to a property investor.
iBuyer
iBuyers are similar to real estate investors, but they typically charge a fee. iBuyers operate only in large real estate markets (major cities).
Here are the pros of divesting to an iBuyer:
You’ll get a cash offer in less than 48 hours.
You don’t have to visit any office because the real estate transaction is primarily conducted online.
You’ll have control over the sale’s timeline.
You don’t have to repair anything or make improvements to the property. They’ll deduct it from the money you’ll receive.
Tips on Pricing an Inherited Property and Negotiating Offers Colorado
Deciding to divest your inherited property without the help of a real estate agent means pricing it yourself. This seems enjoyable because you’ll have control over the price, but it’s actually not.
Pricing your Colorado inherited property would depend on numerous factors like outstanding mortgage and debts, existing bills, the housing market in your area, etc.
Here are some tips to help you set a price and negotiate offers for your inherited property:
Manage Expectations
Don’t expect your inherited property to be divested based on your listing price. Chances are, the offers would be thousands of dollars below your asking price due to market conditions.
Moreover, the negotiation process for your inherited home would dictate the final price. If you want someone to negotiate for you, hire a real estate agent.
Avoid a Very High Listing Price
Properties that are listed at a very high price scare buyers away. What you should do is choose a price that is “slightly” higher than what you want to settle with.
If the listing price of your inheritance is realistic, more buyers would be attracted, and they would probably start a bid. Bidding wars favor you as the seller because you’ll be able to get away with a higher sale price.
Don’t Divest the Property for a Very Cheap Price
When you inherit a property with a lot of precious memories, it is natural to want to divest it at the maximum price. However, it is natural for buyers to aim for the lowest possible price.
To make the sale, some inheritors adjust their listing price so the buyers can afford it, but often they settle for less than the house is worth. Avoid this at all costs.
The final price of the inherited house should be between the minimum and the maximum asking price. It should be based on a fair market value.
Think Before Making Concessions
Buyers who are experts in haggling would submit an offer for your inheritance that is way below your selling price and then demand you to assist them with the closing costs or repairs. Before you agree to these concessions, consult with a real estate professional.
Don’t Be Hasty
We understand that divesting your inherited property swiftly may be your main goal, but don’t jump on the first offer unless it is exactly your full asking price. Consider the long-term effects of divesting your inherited property for cheap.
The initial offer of most buyers is thousands below your listing price. Wait for a buyer that is willing to negotiate for a fair price.
Research on Negotiation Tactics
If you aren’t aware of the strategies of potential buyers, they’ll be able to convince you to agree with their offers and concessions. Learning about buyer strategies would help you recognize if you’re being low-balled.
You should also research negotiation strategies as the seller so you know when to make counter-offers, compromise, or walk away from the transaction.
What to Expect While Selling Inherited Property Colorado
The process of divesting an inherited property is multi-step. It can span from weeks to months, depending on several factors. But generally, you should expect a few things to happen within that span of time in Colorado.
Open Houses or Showings
Open houses and showings are essential when working with a real estate agent, so buyers take an interest in your home. This means that during the duration of time where you are marketing the house and opening it for tours, you should do your best to maintain it and ensure that it is in tip-top condition. If you want to avoid people in your inherited house, a cash buyer may be a better option.
Financial Obligations
Even though you have listed your inherited property for sale, you still have to pay for its utility bills like electric, water, cable, and trash removal. If the house has an outstanding mortgage, you still have to pay for it on time, too, since you are the new owner.
Efforts to keep the property in great condition also demand some expenses that can affect your income.
For all these fees, including the mortgage, enlist the help of your fellow inheritor to lighten the financial burden. After all, the ownership of the property is divided among you.
Home Inspection
When divesting with a realtor, before the inherited house is sold, a professional home inspector will visit your inherited home to look for potential problems like cracked foundations, leaking roofs, rotting structures, leaking or broken pipes, etc.
You may opt for a pre-listing inspection so you can make repairs before it becomes visible to the market.
This is highly recommended as opposed to letting the buyer hire an inspector and discover that the house needs a lot of repairs. This may deter them, or they’ll try to buy your inherited property for a much lower price.
Conflicts
If multiple people are named as owners of the property, expect some disagreements regarding ownership and financial responsibilities in tending to the inheritance.
Personal conflicts can lengthen the whole sale process, especially when there are other assets involved. Some heirs may want to divest the home and get rid of all the possessions of the deceased, while others would like to keep them.
There may also be issues regarding some legal nuances and tax ramifications that could further drag the sale.
Challenges You May Encounter in Divesting an Inherited Property Colorado
You should really pop a bottle of champagne after the closing day because the whole transaction of divesting an inherited property won’t be an easy ride. Your patience will be tested a couple of times before the house gets sold.
Here’s a list of challenges you may encounter while divesting Colorado inherited property:
Estate Being Kept in Probate
Even though you are eager to rid yourself of the property, this would not be possible if it is being kept in probate and there are issues regarding ownership. It can take years before the court can decide how to proceed with the property.
Nevertheless, this can be advantageous if the executor or a family member needs to use the house in the meantime because the legal transfer won’t take place while the house is under the probate process.
Equal Distribution of Estate Value and Assets
If the personal will does not stipulate how the value of the house would be divided among the heirs, disagreements may arise.
For instance, if five siblings inherited a home and one of them took care of the parents until their death, that sibling may request a higher percentage, and this could lead to conflicts.
Discarding Belongings
Inheriting a property from a family member who passed, especially if it is your parent, can be emotionally draining. When it’s time to sort through their personal belongings and decide which to keep and discard, you’ll find yourself riddled with grief.
This task can even be more challenging because of the guilt that you haven’t held on to their possessions and property.
Inherited Property is Underwater
Inheriting a property from a family member can turn into a nightmare if it is “underwater.” In real estate, this means that the worth of the property is less than the mortgage or loan taken for it.
It is also possible that the property is under lien; hence, legal issues when divesting it right away.
Too Many Repairs
As mentioned earlier, a professional house inspector would check the house to determine what needs to be repaired. If the previous owner failed to maintain the house for whatever reason, you would have to shoulder the cost of repairs, and this can easily amount to thousands of dollars.
If you want to avoid paying severe repair costs right away, request a cash offer from a reputable We Buy Houses company. Cash buyers purchase homes as-is, meaning the seller doesn’t need to touch a paintbrush.
Final Thoughts: Selling An Inherited House Colorado
Selling an inherited house can be overwhelming, with all the processes you must go through before the actual Colorado sale.
We hope that through reading this guide, you don’t feel that lost anymore and are now more enthusiastic to begin the journey of divesting your property.
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