July 25, 2024
According to research from UK think tank Demos, the value of UK inheritances passed on every year has approximately doubled every two decades since 1979 (when adjusted for inflation).
If you’re one of those set to inherit a property in the UK, you probably have a million questions. How soon can I access an inherited property? Can I sell an inherited property? How much tax do I have to pay on an inherited property?
Hopefully, this guide will clear up any questions and help you on your way to selling an inherited property.
Understanding inherited property
First, it’s important to get an understanding of where you stand in regards to the inherited property. As well as practical considerations such as legal aspects, tax implications, ownership issues, you may also need to consider the emotional implications of selling an inherited property.
Legal aspects
There are a number of legal aspects that come into play when you intend to sell an inherited property.
- Probate process: Probate is the legal process of dealing with a person’s estate (property, money and possessions) on their death. In England and Wales, the executors (if there is a will) or the closest living relative must apply to the court for probate, in order to put inherited property on the market.
- Estate tax implications: Inheritance tax is calculated based on the value of the deceased person’s estate, assets on the day they died, gifts of cash or valuables made in the 7 years before they died, and any trusts where the person had a beneficial interest.
Usually, no inheritance tax is applied to estates valued below £325,000 or left to the deceased’s spouse, civil partner, a charity or a community amateur sports club. The threshold may also be higher if the person who died was widowed or the estate is left to the deceased’s children.
You can check the government’s inheritance tax calculator here.
Additionally, if and when you sell an inherited property, you may be liable for capital gains tax, though you will not be liable for Stamp Duty, as you would when purchasing a house.
- Title and ownership issues: Ownership and beneficiaries should be established by the executor of the estate during the probate and administration period. Once the beneficiary has been established, property records need to be updated to reflect either the beneficiary or, if the property will be sold immediately, the new owners.
Emotional considerations
Of course, if you have inherited property from a parent, a spouse or another loved one, there will likely be emotional aspects to consider, alongside the logistical process.
- Family dynamics: If you have inherited a property jointly with your siblings, or other family members, you all need to agree on the best way to move forward. Dealing with the death of a parent can be a difficult time, no matter how old you are, so try to proceed with compassion.
If you all jointly agree to sell the property, you can proceed with the sale and split the profits.
Alternatively, you may agree to take another course of action (such as renting the property out, or one beneficiary buying all the others out of their shares).
If you find it hard to come to an agreement, or discussions become heated, you may wish to consult a family law mediator.
- Emotional attachment: Of course, even being the sole beneficiary of a property inheritance can take its emotional toll, especially if the property is also the home where you grew up.
Take your time where you can, and rely on any existing support networks, such as friends and family.
If you are struggling with grief, a therapist or grief counsellor may be able to help work through your feelings in a healthy way.
Preparing inherited property for sale
Once you have made the decision to sell your inherited property, it is time to move forward and prepare the property for sale. Particularly if it has been lived in as the family home for a long time.
Assessing the property’s condition
First, tackle the condition of the property itself, with structural repairs and upgrades.
- Hire an inspector: A property inspector will assess the property structure, including gas, electrics, and plumbing, as well as the condition of walls, floors, windows and other fixtures and fittings, to determine the condition of the property and identify any areas for improvement.
- Make necessary repairs: Once you understand the property condition, you may decide to make repairs and upgrades that will increase the property value, such as replacing roof tiles, upgrading the boiler, or rewiring.
Deep cleaning textiles (such as curtains and carpets), re-grouting tiles, and a coat of neutral paint can all be quick, cost-effective ways to add to the property value.
Decluttering and staging
Then it’s time to make the property presentable and appealing to prospective buyers
- Removing Personal Items: Depending on the level of repairs and upgrades, you may need to clear out belongings before undertaking work, and you will certainly need to remove them before putting the house on the market.
If you have inherited the property from a close family member or a loved one, there may be a lot of sentimental value in the personal belongings, and clearing them out yourself may be a daunting and emotionally draining task, as you decide what to keep, what to donate, and what to sell.
You might instead identify just a few areas to sort through yourself (such as paperwork, jewellery, or clothing) and enlist the help of family, friends or professionals to tackle the rest.
If you want to handle all the belongings yourself, but also need a quick sale, you could move them to storage temporarily, to be dealt with at a later date.
Alternatively, you could engage a professional house clearance service to remove and dispose of all items.
- Professional staging: Staging a house for sale can make it more appealing to prospective buyers. Particularly if all the old belongings have been cleared out, it can be a good idea to engage the services of a professional stager, who can make the house a home with temporary furniture and accessories.
Valuing the property
Once all the previous owner’s belongings have been cleared out, any minor repairs and upgrades have been made, and the property has been staged to appeal to prospective buyers, it is time to value the property for sale.
Appraisal
In a property appraisal, a professional will inspect your property and land to estimate how much it is worth. You can then use this as a starting point for putting your property on the market.
- Hiring an appraiser: Your local estate agent will be able to appraise your property value for you. They will have a good understanding, not only of national economic trends but also of hyperlocal trends and will be able to value the property in the context of comparable local property prices.
- Using the appraisal: Once you have an understanding of your inherited property value, you can leverage the appraisal in your pricing strategy as your put the house up for sale.
The price you list the property at is called the asking price, and acts as a starting point for negotiations with prospective buyers. You migh use the price estimated by the appraiser, use a slightly higher price with the assumption that the final price will be negotiated down, or use a slightly lower price with the hope of attracting lots of interested buyers who out-bid one another to raise the price.
Marketing the property
While repairs, staging and setting an asking price are the first steps towards selling your property, marketing is the way to get it in front of prospective buyers.
Your local estate agent is perfectly placed to handle all aspects of marketing your property on your behalf. Things like professional photography and well-written descriptions, as well as placement on social media, property brochures, property listing sites can all help to find and appeal to prospective buyers.
Negotiating and closing the sale
Once you have begun showing your property, you will begin to receive offers through your estate agent, which you can then use to open price negotiations.
Receiving offers
- Evaluating offers: Offer price will likely be a big consideration when evaluating offers from a number of sellers, but it shouldn’t be the only one.
Look at the buyers’ readiness to move (whether they have a mortgage in principle agreed, whether they are part of a chain).
For people selling a family home, there may also be some sentimental considerations. You may, for example, prefer the property be sold to a young family, rather than a developer.
- Counteroffers: The offers you receive don’t have to be the final price, either. Respond quickly to make counter-offers to raise the price from potential buyers.
Closing Process
- Legal documentation: You will need to engage a solicitor or conveyancer to draw up the legal paperwork for selling your inherited property, including the Land Registry and Title documentation.
- Finalising the sale: Make sure to stay in close contact with your estate agent and solicitor, and to deliver any details or paperwork promptly in order to ensure a smooth sale.
Financial and tax considerations
Over and above the inheritance tax you may have paid upon inheriting the property, if you then decide to sell it after a period of time there are some further tax considerations to be aware of.
Capital gains tax
Capital Gains Tax is applied to the profit when you sell an asset (in the case, a property) that has increased in value.
You only pay the tax on the ‘gain’ (ie. on the difference between the valuation when you received the property and the final sale price).
Capital gains tax rates depend on your income tax bracket.
Using the proceeds
There are a number of ways you might use the proceeds from an inherited property sale. We recommend taking independent financial advice if you are unsure on the best course of action.
- Paying off debts: If there are mortgages or debts to settle as part of the inheritance estate, it may be wise to settle those first.
If you have personal mortgages or debts, you may also wish to additionally settle these.
- Investing: Alternatively, you may wish to reinvest the sale proceeds as a way to generate income. You could reinvest in a buy-to-let property, invest in upgrades to increase the resale value of your own property, or invest in stocks and shares.
Conclusion
For some, inheriting a property may seem like a financial dream come true. For others, it could be an emotional upheaval.
Either way, there are lots of logistical aspects to consider when deciding on selling your inherited property. From family disagreements, to tax implications, as well as all the usual admin involved in selling a property.
If you recently inherited a property, contact our property experts to discover how you can make the most of the property sale.