What To Know About Selling a House When One Owner Is Deceased

It doesn’t matter if you’re downsizing out of your five bedroom home in Detroit or putting your house in Portland on the market, selling a house can be challenging. That said, the process can get even more complicated when one owner dies.

Many people don’t prioritize estate planning, but it ensures your home, assets and loved ones are cared for following your death. When there’s no will or living trust, the state will divide assets between heirs, like children, parents or other family members.

If you’re selling a house when one owner is deceased, speak with an attorney to better understand the process and work with a top-rated local real estate agent when you go to sell the home.

What happens to a house when the owner dies?

If there’s more than one owner, the other owner or spouse holds all rights to the property if their name is on the deed to the property. If there’s only one owner and they die, then selling a house becomes a little more complicated.

When a homeowner dies, the owners will typically name the beneficiary or the person who will inherit their property. If the owner doesn’t have a will or a living trust, the property goes through the probate process, a court-supervised process where the debts of the deceased are paid off and their assets are distributed. All debts and assets are known as the deceased’s estate, and the executor is the person who collects the assets in probate to pay debt and locate beneficiaries and/or heirs for asset distribution.

Can you sell the property of a deceased person?

Whether you can sell the property of a deceased person depends on the legal transfer of ownership and the laws in your state. To sell the property of a deceased loved one, you must be the rightful heir to the inherited property. But if the house is titled solely in the deceased’s name or a tenancy in common, then you cannot sell it or claim ownership of the property before beginning the probate process.

The process of selling a house when one owner is deceased

To sell a house when one owner is deceased, certain steps must be followed to ensure a legally compliant transaction.

1. Understand the property’s ownership

The ownership structure dictates how the property can be sold. Here are ownership arrangements someone may encounter when selling the estate of a deceased person:

• Joint tenancy: A joint tenancy is a property ownership arrangement with multiple owners or co-tenants. Each owner has equal rights and responsibilities to the property. An advantage that comes with this type of arrangement is the right of survivorship, which means that if a joint tenant dies, then their shares transfer to the surviving co-tenant. To transfer jointly owned real estate, the surviving co-tenant must take a certified copy of the death certificate along with an affidavit of survivorship to the county land records office. When the title is transferred to the surviving owner, then that owner is free to sell the property.
• Tenancy in common: A tenancy in common (TIC) is a type of joint ownership arrangement that allows multiple people to hold fractional shares of one property. Unlike a joint tenancy, where property rights transfer to the co-owner, there is no right to survivorship. Each tenant’s share passes to their estate when they die. A single tenant cannot sell the property without permission from all co-owners. If an agreement to sell is struck, each owner gets a percent of the proceeds equal to their amount of ownership. If they don’t agree to sell, then a co-owner can force the sale of the TIC through the court system or call for a partition of the property.
• Community property with right of survivorship: This arrangement allows two spouses to equally share property through marriage and transfer assets to the other spouse upon death. This gives the surviving spouse the right to sell the property without going through probate.
• Living trust: A living trust is a legal document that states who will receive or manage your property after your death. Each trust should have a grantor, who establishes the trust. The grantor designates a trustee to control the assets for the beneficiaries and handle distribution. You can transfer your home to the trust with a deed, allowing beneficiaries to bypass probate.
• Sole ownership: A property with one owner is typically titled under sole ownership. This type of ownership doesn’t automatically transfer to anyone upon death. If there’s no will or living trust stating who receives the property, it must go through probate to transfer to the rightful beneficiaries and/or heirs.

2. Undergo the probate process

After the property owner dies, the executor of the estate is responsible for filing the will with the probate court, initiating the probate process. When the court accepts the will to be valid, then the court appoints the executor named in the will, giving them the ability to act on behalf of the deceased.

The executor must pay off any debts and taxes owed by the deceased from the estate. After debts are paid, an inventory of the estate is taken and the executor will request authorization from the court to distribute the remaining assets to the beneficiaries listed in the will.

Assets are disbursed according to state laws if there’s no will. The probate court will appoint an administrator who takes on the role of the executor. The administrator will pay any outstanding debts from the estate and then locate the legal heirs of the deceased. This includes surviving spouses, children, parents or other family members.

Probate laws vary by state, so the exact process may differ in the state where the property is located.

3. Submit a transfer on death deed (TOD)

A transfer on death deed (TOD) is a legal document that allows a person to transfer ownership rights upon death to a beneficiary or beneficiaries without going through probate. The TOD must be recorded with the county recorder’s office prior to death where the property is located. Be thorough in your planning because a TOD is not allowed in all 50 states.

4. Consult an attorney

You aren’t required to hire an estate and tax attorney or real estate attorney to go through a probate or sale process, but it may be in your best interest. An estate attorney can help you determine your rights and responsibilities as the new property owner and ensure a smooth transfer. If the deceased owed any debts or taxes and there’s a lien on the property, a tax attorney can help navigate these complex tax issues. When you go to sell, a real estate attorney can prepare and review documents and contracts related to the sale.

5. File for a transfer of property ownership

After death, ownership must be transferred according to the deceased’s will or the state’s succession law. After initiating probate and when the legal beneficiary is determined, they must file for a new property deed for the home through the county recorder’s office. This usually requires providing a copy of the death certificate and a statement from the probate court.

A quitclaim deed may be used to avoid probate court, but it must be filed before the property owner’s death. This transfers ownership from the grantor to the grantee by deed before death. However, a quitclaim deed does not provide certainty regarding what property rights are conveyed and there’s no liability for the grantor if a claim against the title should arise before death.

6. List and sell the house

After you transfer property ownership, you have the legal right to list and sell the house. It can be a challenge to price a house, but a local real estate agent who knows the neighborhood can help by performing a comparative market analysis (CMA). A CMA is a tool to estimate a home’s value by evaluating similar ones that have recently sold in the same area.

Once you set a price, the real estate agent can list your new home on the MLS and market the property. Once prospective buyers have seen the home, wait for offers to start coming in. When you get an offer, you can accept it as-is, make a counteroffer or reject the offer.

When you decide on an offer, you and the buyer will move forward with the transaction. Be prepared to pay closing costs, and there could be tax implications.

7. Use proceeds to settle outstanding debts

When you inherit a home, the mortgage doesn’t disappear. The estate will cover these expenses until you transfer the title into your name. You can use the home sale proceeds to settle any outstanding debts like the remaining mortgage balance or any other unsettled bills. Any remaining money is yours to spend as you please.

8. Pay taxes

Be prepared to pay taxes when selling a house when one owner is deceased. This includes:

• Estate tax: This is a tax on the net value of the estate before distribution to the heirs. This applies to cash, real estate, stock and other assets. Federal estate tax only applies if the estate is worth more than $12.92 million for someone who dies in 2023.
• Inheritance tax: The inheritance tax is a state tax that you pay when you inherit money or property from the estate of a deceased person. This tax is applied to part of the inheritance that exceeds a certain threshold, which varies by state. The rate you’re charged also depends on the state, but it can be as high as 18%.
• Capital gains tax: When you inherit a home, the property’s tax basis is stepped up. This means the value is readjusted to its current market value. However, when you sell the property, you could be hit with capital gains tax. The IRS allows you to exclude up to $250,000 of gain, or $500,000 if married filing jointly, from the sale of your home. Capital gains tax applies to the property’s sale price after the market value on the date of the previous owner’s death is subtracted.
• Income tax: In addition to capital gains tax, you may have to pay state income tax on the capital gains from the sale of the home. Not every state taxes income on capital gains.

The bottom line: Follow the necessary steps before selling a deceased’s estate or property

Dealing with death is never easy, especially when you inherit property. Probate and selling a house when one owner is deceased is complicated, but a real estate attorney and local real estate agent can help you navigate this challenging process.

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