So you recently lost a parent or loved one, and now own their home. My condolences. I can’t imagine how difficult this must be.
On top of grieving, you now need to figure out what rights you have when it comes to making decisions about the property. Specifically, a common question many successors in interest face is: Can I legally sell this inherited house?
It’s a great question, and one that doesn’t have a simple yes or no answer. The ability to sell largely depends on how ownership of the home was transferred to you.
Let me walk you through the key things to know.
What is a Successor in Interest?
First, let’s cover the legal definition of a successor in interest. This term refers to someone who inherits or receives property ownership from a deceased person without going through probate court.
You become the successor in interest either via:
- A transfer on death deed – a legal document your loved one files that automatically passes the property to you when they pass.
- Joint tenancy ownership – where you were already a co-owner on the property title/deed before they died.
- Tenancy by the entirety – if you’re the surviving spouse on a jointly owned home.
- Getting placed on the property title via your loved one’s will or trust after their passing.
Roughly 27% of homes nationally are owned in some type of joint tenancy arrangement between spouses or family. So it’s quite common.
The key difference between a successor in interest and an heir who inherits a home is that the latter must go through court-supervised probate before taking ownership. We’ll dig into why that matters shortly!
What Rights Do You Have as a Successor in Interest?
So now you know you’re legally considered a successor in interest since you inherited or retained ownership of your loved one’s home outside of probate. What powers does that give you exactly?
In a nutshell, successors in interest have full rights to:
- Take possession and live in the property as the new legal owner.
- Rent out the home and collect rents if you choose.
- Make repairs and maintain the property.
- Communicate with the mortgage lender regarding payment, modifications, etc. This is now your responsibility!
Some key things to note:
- You have no personal liability for the existing mortgage by default. But you need to continue making payments to avoid foreclosure.
- Your rights don’t necessarily include selling the home you inherited. More on that next!
Selling Power Depends on How You’re Titled
This brings us to the $100k question…can a successor in interest legally sell the inherited home without going through probate?
Drumroll please…
The answer depends on whether you have been properly recorded as the new legal owner on the property deed or title documents. Specifically:
- If your name is on the deed as the rightful owner, you can sell the home as you wish.
- If the deed still lists your deceased loved one as the legal owner, you cannot convey clear title to buyers until probate transfers it to you.
You see, it’s all about legal ownership status. Being named successor in interest merely grants you possession rights. The probate court must award you official title ownership for you to transfer sale rights to someone else.
Approximately 40% of successors in interest nationally run into roadblocks trying to sell a home still legally owned by the decedent. Remedying unclear title requires opening probate and being appointed executor.
But if you confirmed you’re on the deed, selling is 100% in your power! Let’s look at what that entails…
Step-By-Step Process to Sell As Successor
If you have verified your name is on the property title as successor owner, congratulations! You can move forward with listing and selling the home if you desire.
The process looks like:
1. Hire a real estate agent to assess the home value. Comparable sales and market demand factor hugely into realistic pricing. Statistics show over 20% of inherited home sales start out overpriced!
2. Review the sales contract carefully. Pay particular attention to title warranty clauses about conveying clear ownership. Don’t let yourself get sued down the road!
3. Disclose debts tied to the property upfront. This includes disclosing any existing loans, tax debts, contractor liens, etc. that buyers will inherit. Transparency is key.
4. Work with title company to record mortgage release. If you inherited the home subject to a mortgage, work closely with the lender to get this fully released prior to closing.
5. Finalize the settlement process. This includes exchanging keys, closing docs, and sale proceeds with the buyers! Then it’s time to celebrate your new chapter!
It may sound straightforward, but selling property held in ambiguous joint ownership gets complicated fast. On average, 65% of successors who sell inherited homes report major frustrations navigating title issues. So brace yourself for some obstacles along the way!
Weighing Pros and Cons of Selling As Successor
Given the complexities that often arise, you may be wondering if trying to sell the inherited property as successor in interest is worth it. Should you just open probate instead to transfer clear title?
Let’s compare the pros and cons of each route:
Selling As Successor in Interest
Pros
- Faster process since probate court not required
- Typically lower legal fees and costs
- Avoid public nature of probate records
Cons
- Title complications very common
- Risk of liability if ownership contested later
- Mortgage release issues if lender uncooperative
Selling as Heir Through Probate
Pros
- Court supervises ownership transfer to heir
- Clear title conveyed to buyers
- Personal representative has power to handle mortgage
Cons
- Probate proceedings move slowly
- Higher legal and admin fees
- Public record of estate assets
As you can see, there are good reasons for both approaches depending on your priorities. Many successors choose to open streamlined probate just to access the executor’s contractual powers to sell with court backing.
Talk over your goals with the estate attorney to determine the ideal route. Now let’s tackle the mortgage piece…
Impacts to Existing Mortgage and Successor’s Options
Another common predicament successors in interest face is what to do with the existing home loan left behind by the deceased.
As mentioned, you take ownership of an inherited home subject to any outstanding mortgage. Several things can happen:
1. You continue making payments. This maintains status quo to avoid default or foreclosure. You need to call the lender immediately to establish communication privileges per federal law. Generally they cannot require a credit check or attempt to recalculate affordability standards.
2. Assume full legal liability for the loan. Some successors formally agree to take over the mortgage debt in the deceased homeowner’s stead. This may require a loan modification agreement. Depending on lender policy, it could also involve undergoing income verification or even refinancing.
3. Refinance the mortgage into your name. Many successors find the cleanest option is to pay off the old home loan entirely through refinancing. This removes liability uncertainty and gets things squared away quickly. The catch is coming up with cash to qualify for a new loan.
If successors in interest fail to addressinherited mortgage obligations proactively, statistics show roughly 15% fall into foreclosure. Don’t let financial specifics slip through the cracks during an already stressful period!
Can a successor in interest use a placement deed to legally sell a house?
Yes, a successor in interest can use a placement deed to legally sell a house. A placement deed explanation is important for the successor to understand the legality of the transaction and to ensure that all parties involved are aware of the terms and conditions of the sale.
Special Ownership Situations Impacting Successor Rights
Before wrapping up, let me briefly touch on how certain unique co-ownership arrangements impact successors in interest and their right to sell inherited property.
Joint Tenancies
If you shared joint tenancy ownership of the property with rights of survivorship, you automatically receive the deceased owner’s share. The home passes outside probate by operation of law. Selling power depends whether you’re formally on title/deed records.
Tenants in Common
Unlike joint tenancies, tenants in common don’t have right of survivorship. So the deceased owner’s share gets inherited by successors named in their will. Until probate transfers legal title, selling power is iffy.
Trust Ownership
If the deceased homeowner held title through a living trust, the trust document dictates successor treatment. Named beneficiaries or trust trustees may take ownership and selling authority outside court proceedings.
As you can see, lots of factors determine successor abilities for inherited property. But now hopefully you feel much more educated on what it takes to legally sell a house as successor!
Key Takeaways
Let’s recap the top lessons for successors in interest looking to sell:
- Verify you’re properly recorded as owner on deed/title before listing property. This confirms selling rights.
- Weigh using streamlined probate to transfer unambiguous title to buyers if necessary.
- Proactively communicate with deceased homeowner’s mortgage lender regarding outstanding loan.
- Consider options like assuming/modifying mortgage vs. refinancing into your name.
- Understand impacts to selling decisions if home titled in joint tenancy, as tenants in common, or in trust.
While being a successor in interest has its complexities, I hope breaking down the core legal concepts around selling inherited property helps provide clarity and direction during this challenging transition.
Wishing you the very best as you navigate next steps and honor your loved one’s memory. This too shall pass!