The Guide to Selling Inherited Property in Michigan

Have you recently inherited a home in Michigan and are thinking about selling it? If so, you probably already know how complicated and confusing the process can be. With so many important factors to consider, like taxes and probate, not to mention the emotions involved with losing a loved one, it can all feel overwhelming.

Fortunately, we’ve already done all the legwork for you. This comprehensive guide will cover everything you need to know about selling inherited property in Michigan.

What is Inherited Property?

Inherited property is anything that a deceased person leaves behind for their heirs or beneficiaries. This can include items of value, such as vehicles or homes. It can also include personal belongings that may not have monetary value but are sentimental in nature.

In the state of Michigan, the inheritance process usually involves what’s known as probate. This is when a court oversees the settlement of the decedent’s estate, ensuring that all outstanding debts are paid, and that any remaining assets are properly distributed to their new rightful owners.

Before selling an inherited home in Michigan, it’s crucial that you understand what steps to take, when, and in what order. Let’s explore this in greater detail below.

What to Do When You Inherit a Home in Michigan

Initiate Probate

The first step after inheriting property in Michigan is to start the probate process. This is done by filing a petition, along with the will (if one exists) and death certificate, with the probate court in the county in which the decedent lived. The court will then confirm and officially begin probate proceedings.

In Michigan, the probate process can take anywhere from seven months to a year or more, depending on how complex the estate is and other factors. Throughout this time, it is extremely important that you try to stay as organized as possible. Doing so will improve your chances of a smooth and uneventful process.

Have the Property Assessed

Once probate has officially begun, the next step is to have the property appraised. This should be done by an experienced professional, as the result will serve two main purposes. First, it will help determine the current market value of the home, so you’ll know how much to list it for. Second, it will determine the property’s tax basis, which will come into play once you’re ready to sell. (We’ll go into this in greater detail below.)

Prepare the Property for Sale

You’ll also want to start getting the property ready for sale. Depending on the home’s current condition, you’ll need to decide whether it’s worth investing in any necessary repairs or renovations to make it more marketable, or if it’s better to simply sell it As-Is. Keep in mind that if you choose to fix the place up, you’ll also be responsible for all expenses associated with maintaining the property until it sells.

Legal Aspects of Selling Inherited Property in Michigan

Transfer of Ownership and Title

In the state of Michigan, an inherited home cannot be sold until its title is officially transferred into the name of the rightful new owner. This important step is typically handled during the probate process.

Pay Off Mortgages and Clear Liens

It’s not uncommon for an inherited property to come with certain legal and financial obligations. For example, there may still be an outstanding mortgage, or it could have liens associated with it. These things must be cleared up prior to the property being sold.

Disclosure

Michigan law requires that sellers provide certain information to potential buyers about any known issues that might negatively impact the value of the property. Specifically, sellers must disclose any and all material defects, including:

• Structural defects
• Plumbing and electrical problems
• Water damage or flooding issues
• Pest infestations
• Environmental hazards
• Legal disputes related to the property

This must be provided in writing. Failure to do so could result in serious and costly legal repercussions.

Financial Impact of Selling Inherited Property in Michigan

Taxes

• Property Tax: Property taxes in Michigan can vary greatly by county, but the average effective rate is about 1.32%.
• Transfer Tax: Michigan charges both a state and county tax on the transfer of real estate over $100. County tax is assessed at a rate of $0.55 per $500 or fraction thereof, while the state tax is $3.75 for each $500 or fraction thereof.
• Estate Tax: While Michigan does not levy an estate tax, the federal government might, depending on whether the value of the estate exceeds the exemption limit.
• Inheritance Tax: There are only a few of states that impose an inheritance tax, and fortunately, Michigan isn’t one of them.
• Capital Gains Tax: If your inherited property appreciates in value between the date of the previous owner’s death and the date of the sale, you will most likely be required to pay capital gains taxes.

Other Expenses

• Repairs/Renovations: If you decide to repair or remodel the property before selling it, you will be responsible for those costs.
• Ongoing Maintenance: Until the property officially sells, whoever inherited the home is on the hook for all expenses, including mortgage payments, utilities, insurance, etc.
• Real Estate Commissions: Most real estate agents charge a commission for the work they do to help sell a home. In Michigan, the average real estate commission is 5-6% of the sale price.
• Closing Costs: Closing costs cover all the logistics of a real estate transaction, such as attorneys’ fees, title insurance, loan origination fees, etc. In Michigan, closing costs are typically around 6-9% of the sale price.

Documents Required for Selling Inherited Property in Michigan

You’ll need the following documentation to sell a property in Michigan:

• Photo Identification: A current photo ID will be required throughout the selling process.
• Proof of Inheritance: This documentation is usually provided to the heir or beneficiary during the probate process.
• Death Certificate: Most of the parties involved with the sale of inherited property will require a certified copy of the death certificate.
• Property Title Records: You’ll need to show proof that the title of the home has been transferred to your name, and that there are no existing liens, or other encumbrances.
• Property Tax Records: You may also be required to show evidence that there are no outstanding taxes associated with the property.

Options for Selling Inherited Property in Michigan

There are few options for selling inherited property in Michigan. The three most common include:

For Sale by Owner (FSBO)

As the new owner, you can choose to sell the property on your own, without the help of a real estate agent. There are a few advantages and disadvantage to this option.

Pros:

• Save money on real estate commissions
• Enjoy greater control over the process

Cons:

• Can be a confusing process
• Lack of experience and access to resources
• Chance of potential legal and/or tax issues

Real Estate Agent

Another option is to work with a local real estate agent. Of course, this option also comes with its own pros and cons.

Pros:

• Industry expertise and access to more resources
• Skilled at negotiating for a higher sale price
• Proper documentation to ensure tax and legal compliance

Cons:

• Commission and other fees can eat away at your profits
• Less control over the process
• Traditional home sales can be a long process

Real Estate Investor/Cash Buyer

The third option is to sell to a cash investor who is willing to purchase the property for a lump-sum payment. Here are a few benefits and drawbacks to this option.

Pros:

• Zero commissions and, in some cases, no closing costs
• Quick, easy transaction (close in as few as 7 days)
• Option to sell the property As-Is (no output of $$ for repairs or renovations)

Cons:

• Sale price might be slightly below market rate
• Not as much room for negotiation
• Risky if you aren’t careful about choosing a reputable cash buyer

Challenges to Selling Inherited Property in Michigan

Unfortunately, selling inherited property in Michigan isn’t always as straightforward as one would like—especially if one of the following scenarios occurs.

Multiple Heirs

The inheritance process is complicated enough without adding multiple heirs or beneficiaries into the mix. Things can get especially hairy when one or more of your new co-owners decides they don’t want to sign probate or refuses to sell.

Even when things are amicable and everyone agrees selling is the best option, then there’s the matter of deciding on when and how, which can further complicate the situation.

If you and your fellow co-heirs are at an impasse as to what the next steps should be and you want to avoid court (which we strongly recommend), working with a mediator who is experienced in these situations might be your best bet.

Title Issues

As mentioned above, inherited property cannot be legally sold in the state of Michigan unless it has clear title. It’s not uncommon for an inherited home to have a lien on it, or outstanding taxes due, which can impede the ability to transfer title.

If you are dealing with a particularly complex situation or you’re just unsure of how to proceed, a skilled real estate attorney could provide some much-needed guidance.

Property in Disrepair

Inherited homes are frequently in serious disrepair by the time they are transferred to their new owner. There are various reasons this can happen. For example, the previous owner may have been elderly or unwell, rendering them unable to keep up with regular maintenance.

Bringing a property like this back to a marketable state can be extremely expensive, often running into the thousands or even tens of thousands of dollars. As the new owner, these costs would typically fall on you, along with ongoing expenses such as utilities, property taxes, and upkeep.

In scenarios such as this, selling the property to a cash buyer can be the most practical solution. If the home’s condition is particularly poor, selling it As-Is to a real estate investor may be your best—or even your only—option, as some banks might refuse to approve a mortgage for severely damaged homes.

Selling to a cash buyer allows you to receive a lump-sum payment and walk away without having to invest further time or money into repairs or cleanup. Some investors are even willing to handle the contents left in the home, which can be a major relief, particularly in hoarding situations. This approach can save you time, money, and stress.

Avoiding Probate in Michigan

In Michigan, most inheritances are required to go through probate, which can be a time-consuming and costly process. Fortunately, there are a few ways to avoid this:

• Living Trust: A living trust allows the homeowner, also known as the trustee, to maintain control over the property while alive and then have the successor trustee distribute the property to its new owner upon death, without requiring probate.
• Joint Ownership with Right of Survivorship (JTWROS): People who co-own property can set up a Joint Tenancy with Right of Survivorship (JTWROS). With this arrangement, when one owner dies, the surviving owner automatically inherits their share, bypassing probate.

• Gift the Property: In the state of Michigan, you are allowed to gift real estate to someone else. It’s very important to note, however, that this type of transaction can involve significant tax and legal considerations.

If you're in the process of planning your estate and are looking for ways to help your heirs avoid the probate process, we recommend consulting with an experienced estate attorney and/or a qualified financial advisor to receive guidance on your specific situation.