Selling a house in probate can be complicated and requires a specific set of steps.
There may be children or loved ones involved as well, which can complicate the situation further.
If you know the requirements and the process involved, dealing with a house in probate doesn’t have to be that scary.
Steps for Selling an Inherited Property
The first thing to address is to make sure the property is secure by locking all windows and doors. You should also contact the insurance company to tell them that the owner has died if this hasn’t already been done. This might cancel the policy, so you will have to be sure of this when you tell them that the owner passed.
Your next step is to secure important documents, titles, and policies.
Also, removing all valuables from the house will stop any concern of theft.
Next, get in touch with the local council to tell them that the owner has died and that the house is empty. You can also provide a mailing address for future correspondence or bills that may be outstanding. Also, turn off all the utilities.
Find a professional probate specialist to evaluate the house. It’s best to get several different estate valuations so that you can have a good idea of what it is worth.
To determine the estate’s worth, add all of the policies, shares, and bonds of the estate to its value, and then subtract any outstanding debt.
You’ll also need to familiarise yourself regarding inheritance tax and make sure it is paid in full.
Apply for a Grant of Probate.
Step 8 (optional)
Once this is all accomplished, you can perform any necessary repairs or touch-ups to the house before it’s ready to be shown.
Get an estate agent to help you put it on the market, or you could decide to sell to a local cash buyer.
You may be asking yourself whether or not you can sell the house before probate is granted.
No, you cannot. You must wait for the Probate to be granted, so apply early. Probate can sometimes take three to six months; however, you can show the house during this time.
Hire a Conveyancer to manage the legal sale of the property.
The last step is to clean and clear the home of its contents.
What Expenses Do I Have When Selling an Inherited House?
Inheritance tax is one expense you’ll incur when selling an inherited property.
The amount varies based on a number of factors. One such factor is whether the deceased person was married before their death occurred.
If the property and assets are over £325,000, an inheritance tax must be paid. You’ll want to get the Grant of Representation so you can have rights over the estate.
Another expense will be getting an evaluation of the property’s value. You will need to hire a surveyor to have this done.
Any outstanding bills against the property must also be taken care of such as utilities, other taxes, debts and insurance.
You’ll want to get a Conveyancer to help you when you sell the property, so things go smoothly.
There may be a few other unforeseen expenses, but the above is the bulk of your expenses.
What Is Probate?
Before an inherited house can be sold, the relationship with the property needs to be established. Applying for probate is the legal process that happens following someone’s death.
During the process, a list of all financial assets including money and the estate is compiled. This gives someone the legal authority to go ahead and deal with the estate. These people are also known as a personal representative.
If might not need probate if the person that died had jointly owned land, shared money, shared property, or if they only had savings or premium bonds because then these assets would go automatically to the surviving owners.
The Cost of the Probate Process
The cost of probate varies significantly depending on who does it. For example, a probate specialist may charge a fixed rate per hour. So, before hiring anyone, you want to shop around and do some research and find someone experienced with helping someone who has inherited a home.
The Length of the Probate Process
Probate can typically take anywhere between six and twelve months with the average length of time being around nine months. If there is a will established, then it could take even less time.
Understanding Inheritance Tax
When you sell a primary home, you don’t have to pay capital gain tax (CGT); however, this isn’t the case when you make a profit by selling an inherited home. If you own a home in addition to the home you have inherited, you need to establish one as your primary residence.
If you fail to establish which is the primary residence, then the HMRC will decide for you. This needs to be done within two years of inheriting the home. If the HMRC does it, it could prove to be quite costly for you in the end.
If the estate is worth more than £325,000, then you must pay inheritance tax on the estate. However, if the property is left to the children or grandchildren of the deceased person, then this threshold is increased to £475,000.
The standard inheritance tax threshold is currently 40% but can be reduced to 36% on some assets.
Other Tax Situations to Consider
There are actually three different types of taxes you will need to consider when inheriting a property:
- The Inheritance Tax: as already mentioned, the threshold for this tax is £325,000 and will need to be paid within six months of the death of the owner, or you will be charged interest.
- Income Tax: if you decide to rent out the inherited property, you will then have to pay an income tax on the property. This is not something you have to consider, however, if you choose to occupy the property yourself or sell it.
- Capital Gain Tax: this is a tax applied when selling an inherited property. It is a tax paid on the value of the house that is gained. So, if the inherited property, for example, is valued at £200,000 but sells for £250,000, then you will only have to pay fees on the £50,000 that was gained from the sale.
Living in the Inherited Property
When inheriting a property, this is definitely something that is considered. However, suppose it is considered secondary to your primary residence. In that case, you may want to consider selling it unless you have plans on holding onto it for a more long-term investment opportunity.
In this case, you will have to let the property out to tenants which means you also have to familiarize yourself with all government regulations regarding rental property. It is ultimately more responsibility you will have.
Renting an Inherited Home
If you choose to keep the inherited home and rent it out, you may have access to some extra income. However, being a landlord is definitely a full-time job and can be both time consuming and complex. There are also legalities and financial obligations you will want to consider. So, sometimes, it really is in your best interest to sell the property.
Inheriting a House with a Mortgage
If you inherit a house with a mortgage in the UK, you become responsible for the mortgage payments on the home. Sometimes the deceased person will have this costs factored into their insurance policy. In this case, the payments may then be covered.
However, if there is no policy or it is not enough to cover the mortgage payments, you have two options:
- Sell the Property: you can sell the property and then use the money to pay off the remainder of the mortgage
- Take Out a New Mortgage: take out a mortgage for the property in your name. Remember, the new mortgage won’t start until after the probate process is complete and the property has been officially released to you. If you plan on letting out the property, you will also need to have a buy-to-let mortgage in place.
Frequently Asked Questions When Selling an Inherited House
Looking for more information pertaining to selling a probate property or inherited house? Check out our FAQ below for answers to some of the more commonly asked questions when it comes to selling an inherited house.
How long does it take to sell a house through probate?
Selling a house through the probate process can take anywhere from three to six months based on the waiting time of the Grant of Probate to come through. Show your house during this time. It still must sell on the market, so that time period will vary based on your home’s value and location.
Can you sell a house before probate is granted?
No. You must wait until you are granted probate.
How long does probate take?
Three to six months to come in.
Can I prepare the house for showings while probate is pending?
Yes, you can. It is advised to do so.
What do I do with the contents of the home?
Make sure you have all essential documents secured then keep, donate or sell the remaining items in the home.
What documents are required for inheriting property?
To inherit the property, you will need to have the death certificate, an original copy of the will, the National Insurance number of the deceased person, the property deed, mortgage information, and building society or bank statements.
My loved one just died, where do I start?
In short: Secure the house. Then file for probate. Gather all of the essential documents from the house. Remove valuables to secure the home further. Call an estate instructor to get the value of the home. Make sure you turn off the utilities.
Tell the council that your loved one passed away and the house is empty. Prepare the estate value by adding all the assets together and subtracting any debts owed. Get your home ready for showing and wait for the probate to come in and then sell your home on the market for fair market value.