How to Sell Your Inherited Property in Illinois? | MJ Property Solutions, LLC.

How to Sell Your Inherited Property in Illinois?

How to Sell Your Inherited Property in Illinois?

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how to sell an inherited property in IllinoisWhen a loved one passes and leaves you a gift, it is a sign of love, and an indication to improve your life. Inheriting real estate can have a significant impact on your financial life. If used wisely, the money can be turned into a huge advantage. Inheriting real estate can be a headache too. Maintenance, repairs, insurance, mortgage, and taxes create problems. Not every homeowner has the time and money to manage another house.

Sometimes, it is not ideal to keep two homes, and you must decide to sell the house. Even in that case, your decision is shadowed by various other factors such as the condition of the house, payment of the home loan and the number of shareholders.

Inheriting a house that is ‘clear & free’ imposes fewer issues. You do not have to worry about the mortgage, refinancing systems, foreclosure or short sales. Hire a property appraiser to give you an estimate of the home value, and you can distribute the equity as stated in the will or equivalent ratio.

There are also fewer problems on the way if you are the sole owner of the house. You are free to make decisions yourself. The situation becomes complicated when you inherit the house with siblings. People at different stages of life, often have different concerns and goals. You all might not agree with one decision.

Understand the Probate Process in Illinois

Probate can be a lengthy and time-consuming process. Unless a ‘small estate procedure’ is applicable, you must go to the court and get the will approved. Then the court-appointed executor will guide you about the estate distribution. You cannot sell your inherited property before the probate process is complete.

Read More: What is the Probate Process in Illinois? 

Inheriting a House with Siblings

In an ideal situation, when you inherit a house with siblings, you have a ‘will’ that clearly states what happens to the estate. There is a distribution method/ratio outlined for you.

Let’s suppose, you are three siblings, and you all have a 33.34% share in the property. Your brother is living in the house, and you & your sister are away. In an ideal world, you get your 33.34% share. Either you sell the house, or your siblings pay you the money. However, the reality is often far away from idealized situations. It happens that siblings do not agree on a mutual decision.

In that case, you have three options available to you.

  1. Refinance the Property

If someone wants to live in the inherited home but does not have money to finance the house, you can help him/her. Consider refinancing the property. In that case, your sibling’s share will act as the down payment, and the rest can be financed.

Since there is already a 30% down payment, it will be easier to get approved for a housing loan.

  1. Buy Out the Share

It works similar to refinancing. If you have the money, you can pay other siblings the funds equivalent to their share and the house will be yours.

  1. Private Financing Structures

Let’s suppose you want to keep the house, but your credit score and financial matters do not allow you to get approved. You cannot get a mortgage. In that case, it might be better to arrange a private deal. Owner financing is one such option.

Your siblings can lend you the home equity, and you can pay it back in the form of installments. Each month you pay the loan installment along with the interest rate. Your siblings will have the right to foreclose the house in case of nonpayment of the loan. Please contact a real estate attorney and make sure to write the terms of the contract.

Another option is to turn the home into a rental. Depending on your location, renting the house might give you extra cash to pay the home loan.

Sell Your House Fast for Cash

You can also sell your home as-is to a redevelopment firm in Illinois. Pros of this option are that you can sell your home within days, often in just 14 days. You do not have to spend money on repairs. There is no need to maintain the house or show it to potential home buyers.

Take Advantage of the Stepped Up in Basis Law

You pay the ‘Capital Gains Tax’ if the value of your home exceeds $250,000 or $500,000 if you are married. That threshold is the ‘basis.’ When you inherit a house, the current market value of the home becomes the tax basis.

Let’s say; your parents bought the house for $65,000. Now after years, the house is currently worth $385,000. Now this $385,000 will be used as the ‘tax basis,’ and you will not pay the Capital Gains Tax on this amount. However, if you keep waiting, you will pay Capital Gains Tax on the price increase of your house. That’s why we recommend selling your inherited house fast. You can wait for the home prices to go up but the imposed taxes will kill any profits you might earn from price appreciation.

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