The Guide to Selling Inherited Property in Massachusetts

Selling an inherited home is a process that is wrought with financial, legal, and emotional ramifications. If you’ve never been through it, the experience can be quite overwhelming. Knowing what to expect and being able to plan ahead can make for a much smoother transaction.

This article is designed to cover all the ins and outs of selling inherited property in Massachusetts, so you’ll be better able to navigate the choppy waters ahead.

What is Inherited Property?

Inherited property is anything that is passed down from a deceased person to their heirs or named beneficiaries. This can include items of value, such as bank accounts, vehicles, and real estate, as well as things that don’t necessarily have monetary value, but are sentimental in nature.

In the state of Massachusetts, the inheritance process involves a legal proceeding known as probate. This is when a court oversees the process of making sure all outstanding debts are settled, and any assets that remain in the estate are distributed accordingly.

To make selling inherited property in Massachusetts as simple and straightforward as possible, it’s important to understand the legal and financial implications of doing so. Let’s dive into this in greater detail below.

What to Do When You Inherit a Home in Massachusetts

Initiate the Probate Process

To initiate the probate process, you will need to submit the following to the county in which the decedent lived prior to their death:

• The original will (if applicable)
• Certified copy of the death certificate
• Petition for Informal Probate of Will and/or Appointment of Personal Representative (MPC 150)
• Surviving Spouse, Children, Heirs at Law (MPC 162)
• Notice of Informal Probate and Return of Service (MPC 550)
• Order for Informal Probate of Will and/or Appointment of Personal Representative (MPC 750)
• Informal Probate Publication Notice (MPC 551)

If there is an existing will, you’ll also need to submit Devisees (MPC 163). If there is no will, you will need to file Bond (MPC 801). If the estate is particularly complex, or there are disputes or other discrepancies, formal probate may be required.

In Massachusetts, the probate process can take anywhere from several months to a year or more, depending on the estate. During this time, it’s in your best interest to remain as organized as possible.

Conduct a Property Assessment

Once you’ve initiated probate, you’ll want to get a jump on getting the property valued as soon as possible. This will not only help you determine what the selling price should be, but it will also play a role when it comes time to pay your taxes. (More on this below.) For best results, the home should be evaluated by a professional real estate appraiser.

Prepare the Property for Sale

Next, you’ll need to decide whether to sell your inherited property As-Is or fix it up to increase its value. When it comes to inherited property, most heirs choose to sell as quickly as possible to avoid having to invest a lot of time and money into the home. If you do decide to do repairs or renovations, you’ll be financially responsible for those, as well as the upkeep of the property until it sells.

Legal Aspects of Selling Inherited Property in Massachusetts

Transfer of Ownership and Title

In the state of Massachusetts, a property’s title must be legally transferred into the name of the heirs or beneficiaries before it can be sold. To do this, you’ll need to obtain a copy of the property deed and title to ensure clear ownership. This step is typically handled during the probate process, when the assets are officially distributed to their rightful new owners.

Pay Off Mortgages and Clear Liens

Inherited homes often come with existing mortgages, property liens, and other legal and/or financial encumbrances. These must be dealt with before you can sell. To start, request a payoff amount from the mortgage lender, and check with the local county records office to determine if there are any liens or other obligations that need to be settled.

Disclosure

Massachusetts is one of the few states that still follows the old common law rule of “caveat emptor,” also known as “buyer beware.” What this means is that sellers are required to disclose very few things about the property and buyers must ask the right questions and have the home professionally inspected before purchasing.

There are two things that sellers must disclose in the state of Massachusetts:

• The existence of lead paint in the house
• The presence of a septic system

That said, if a prospective buyer asks questions, the seller cannot lie or do anything to hide the truth.

Financial Impact of Selling Inherited Property in Massachusetts

Taxes

• Property Tax: Once you inherit a house, you become responsible for the ongoing property taxes. In Massachusetts, the property tax rate varies from county to county, but is around 1-2% on average.
• Transfer Tax: Massachusetts imposes a transfer tax on the sale of any real estate. This is a fee paid to the state whenever a property changes hands and is typically based on the sale price of the property.
• Estate Tax: Massachusetts also assesses a state-level estate tax. Unfortunately, compared to the dozen other states that impose this type of tax, the exemption in MA is quite low ($2 million). Additionally, the federal government may also levy an estate tax if the value of the estate exceeds the exemption limit.
• Inheritance Tax: Only a handful of states impose an inheritance tax. Fortunately, Massachusetts is not one of them.
• Capital Gains Tax: If your inherited property increases in value from the date of the previous owner’s death to the date of sale, you will likely be on the hook for capital gains taxes.

Other Expenses

• Renovations/Repairs: If you choose to make the property more marketable by doing repairs or renovations before selling, you will be financially responsible for any and all updates performed.
• Ongoing Upkeep: The heir or beneficiary is also on the hook for the cost of maintaining the property until it sells. This includes expenses such as mortgage payments, property taxes, insurance, utilities, etc.
• Real Estate Commissions: Most real estate agents are compensated for their work through a commission, which is typically calculated as a percentage of the sale price. The percentage may vary slightly, and you may be able to negotiate, but in Massachusetts, it’s usually around 5-6%.
• Closing Costs: These costs cover all the administrative tasks associated with real estate transactions, such as insurance, attorneys’ fees, recording fees, etc. In Massachusetts, closing costs are usually around 6-9% of the sale price.

Documents Required for Selling Inherited Property in Massachusetts

Before you can sell inherited property in Massachusetts, you’ll need to gather and/or prepare the following documentation:

• Photo ID: Current photo identification is required throughout the selling process to verify your identity as the heir and seller.
• Proof of Ownership: This document is usually provided to the new owner at the conclusion of the probate process.
• Death Certificate: Most of the parties involved in the sale of a home, including the mortgage provider and title company, will require a certified copy of the death certificate.
• Property Title Records: Clear title is required to sell an inherited home in Massachusetts. This includes proof that the title is now in your name, and that there are no liens, or other legal or financial encumbrances associated with the property.
• Property Tax Records: You may be required to show proof that the property in question does not have any municipal or other outstanding taxes.
• Seller Disclosure: As referenced above, Massachusetts requires sellers to disclose certain known facts about the property, including the existence of lead paint and/or a septic system.

Options for Selling Inherited Property in Massachusetts

There are several options for selling inherited property in Mass. The three most common include:

For Sale by Owner (FSBO)

First, you can sell the home on your own without the help of a real estate agent. Here are a few advantages and downsides to this option.

Pros:

• Maximize profit by avoiding real estate commissions (5-6% of the sale price)
• Maintain much more control over the process

Cons:

• Can be confusing and time-consuming
• Lack of experience and access to industry-related resources
• Potential for legal and/or tax issues

Real Estate Agent

Another option for selling an inherited home in Massachusetts is to partner with a real estate agent. Of course, this option also comes with its own pros and cons.

Pros:

• Real estate experience and exclusive industry access
• Ability to negotiate a higher sale price
• Assistance with documentation to ensure tax and legal compliance

Cons:

• Commission and other fees can eat away at your profits
• Lack of oversight
• Traditional home sales can take a long time, especially in a buyer’s market

Real Estate Investor/Cash Buyer

The third option is to work with a real estate investor who will buy the property for cash. Here are a few caveats to considering this option.

Pros:

• Pay no real estate commissions and, in some cases, no closing costs
• Quick, seamless transaction (close in as few as 7 days)
• Ability to sell the property As-Is (no investment in repairs/renovations)

Cons:

• Sale price may be slightly lower than the going market rate
• Not as much room for negotiation
• Risk of scams if not careful about choosing an experienced, reputable cash buyer

Challenges to Selling Inherited Property in Massachusetts

Individuals who sell inherited property in Massachusetts often find themselves having to deal with issues that can cause costly delays. Here are a few potential scenarios you may encounter and how to deal with them.

Multiple Heirs

As if inheriting a home isn’t complicated enough. Add in multiple heirs or beneficiaries—each with their own personality, emotions, and preferences—and you’ve got a recipe for disaster.

For instance, what do you do if one of your siblings refuses to sign probate or says they don’t want to sell? In most cases, all co-owners must agree to sell the inherited property, however, the sale can be forced through a legal process known as a partition action. But this can be timely, expensive, and cause irreparable damage to relationships.

Even if all heirs agree to sell, deciding exactly how and when to do so can open up a whole new can of worms.

If you and your fellow beneficiaries are struggling to reach an agreement for how to proceed, your best course of action may be working with a mediator who is experienced in these types of situations.

Title Issues

As mentioned previously, property cannot be legally sold in Massachusetts unless it has clear title. This means ownership must have been transferred to the heir or beneficiary, and there are no liens, disputes, or encumbrances associated with the property.

Unfortunately, individuals who inherit homes often find themselves having to deal with a variety of title-related issues, such as outstanding taxes or property liens. If you’re struggling with a particularly complex situation, enlisting the help of an experienced real estate attorney may be your best option.

Property in Disrepair

Wouldn’t it be great if the property you inherited was in turnkey condition? Unfortunately, this is rarely the case. In fact, many people who inherit homes also inherit a bunch of problems associated with those homes.

If the house you inherited is in disrepair, you’ll need to decide whether it’s worth investing the time and money it will take to get it up to sellable condition. To cut down on expenses and make the experience as straightforward as possible, most inheritors choose to sell the property As-Is, as quickly as possible.

This is where a cash buyer can come in handy. A reputable real estate investor will purchase the property in whatever condition it happens to be at the time of sale. This means now outlay of expenses for repairs or renovations.

You may even be able to walk away without even cleaning out the interior of the property. This is a particularly attractive option for situations where there was hoarding prior to the owner’s death.

Avoiding Probate Court in Massachusetts

Most inherited properties in Massachusetts must go through probate, which takes time and can be expensive. Thankfully, there are a few ways to get around this:

• Trust: A trust allows a third party (a.k.a. the trustee) to hold assets on behalf of beneficiaries. Assets contained within a trust, including real estate, are not considered part of the estate and are therefore not required to pass through probate.
• Joint Ownership with Right of Survivorship (JTWROS): If you co-own the property, you can set up a legal arrangement known as Joint Tenants with Right of Survivorship. With JTWROS, the surviving owner automatically inherits the deceased owner’s share of the property upon their death, without the need for probate.
• Life Estate: A life estate allows a property owner to retain full ownership while alive and automatically transfer the rights to that property to the named survivors upon their death.
• Gift the Property: In the state of Massachusetts, a homeowner can gift their property to someone, which essentially transfers ownership to another person. It should be noted that there are a ton of legal and tax considerations with this type of transaction, so be sure to do your homework if you plan on gifting your home.

Most of these estate vehicles must be set up prior to the property owner’s death. If you are in the process of planning your estate and are considering one of the above avenues to help your beneficiaries avoid probate, we recommend consulting with an experienced estate attorney and/or a qualified financial advisor for tailored guidance.