The Guide to Selling Inherited Property in Texas

Inheriting a home can be an overwhelming experience—especially if you don’t intend on keeping it. If you recently inherited property in the state of Texas and you’re thinking of selling, you’ll need to know what you’re getting into so you can plan accordingly. 

This comprehensive guide will walk you through everything you need to know about selling an inherited home in Texas to make the process as smooth and uneventful as possible.

What Is Inherited Property?

Inherited property refers to any asset that is transferred from a deceased individual to their heirs or named beneficiaries. This can include a wide range of items, from sentimental personal belongings to cash, investments, vehicles, and, of course, real estate.

In the state of Texas, the inheritance process typically involves a legal procedure known as probate. This is when a court of law ensures that all of the deceased’s debts are settled, and any remaining assets are transferred to the appropriate parties.

To make selling inherited property in Texas as simple and straightforward as possible, it’s important to gain a clear understanding of the legal and financial implications of doing so.

What to Do After Inheriting Property in Texas

Initiate the Probate Process

You can start the probate process in Texas by filing a request, known as a petition, with the county court where the deceased owner resided. This must be done within four years of the date of death. 

Once this petition is filed, the county clerk will then post a public notice. This gives potential heirs the opportunity to contest (or challenge) the will. This notice will typically remain up for a period of two weeks. 

If there are no challenges to the will, the county court will then confirm that it’s valid and officially give the estate executor the legal authority to manage the estate. This process will include identifying assets, notifying beneficiaries and creditors, paying taxes and debts, and distributing what’s left to the heirs.

Keep in mind that the probate process can take anywhere from several months to a year or more. During this time, it’s essential to remain as organized as possible and keep the lines of communication open.

Assess the Property

Once the probate process has been initiated, you’ll want to start assessing the inherited property and establishing its value. In the case of an inherited house, it’s imperative that you get a professional appraisal done as soon as possible. This will not only determine the home’s fair market value, but it will also establish the property’s tax basis, which will come into play once it is sold. (We’ll cover this in more detail below.)

Prepare the Property for Sale

Next, you’ll need to decide whether you want to invest in the repairs or renovations necessary to make the home more marketable, or sell it As-Is. In most cases, people who inherit homes tend to sell them as quickly as possible. This allows them to limit the amount of time, effort, and money they’ll need to invest in the property. 

If you do decide to tackle repairs or renovations before selling, understand that you will be responsible for the continued financial upkeep on the property until it is officially sold. 

Legal Aspects of Selling Inherited Property in Texas

Transfer of Ownership and Title

In Texas, the title of the property must officially be transferred into the name of the heirs or beneficiaries. This process is typically handled during probate and must be completed before the property can be sold. 

If the decedent died without a will, a sworn statement known as an Affidavit of Heirship must be filed and the deed must be signed by the heirs to transfer ownership.

Clear Property Liens

In some instances, an inherited home may still have some outstanding debts, such as a mortgage or home equity loan. There may also be liens on the property. These obligations must be addressed and settled before the property can be sold. Start by requesting a payoff statement from the mortgage lender and check with the local county records office to find out if there are any unpaid property taxes or liens. 

Disclosure 

If the inherited property you are selling is a single family home, Texas law requires that you file what’s known as a Seller’s Disclosure Notice. Specifically, the seller must disclose any and all known issues that could impact the home’s value. Failure to do so could result in legal consequences.  

The Seller’s Disclosure Notice covers a variety of things, including but not limited to:

• A list of all appliances and systems in the property
• Any current defects or items in need of repair
• Prior inspection reports

The seller must also disclose any known conditions with the property such as aluminum wiring, settling, asbestos, foundation repairs, lead paint, etc., as well as information regarding any structural modifications, violations of deed restrictions, claims for property damage, pending lawsuits, and more.

Financial Impact of Selling Inherited Property in Texas

Taxes 

• Property Tax: Texas levies property taxes as a percentage of the home’s appraised value. So, for example, if your property tax rate is 1.6%, and your home value is $100,000, you will owe $1,600 in annual property taxes. Rates vary by county, and range anywhere between 0.3% to 2.5%+.
• Estate Tax: While Texas does not impose estate taxes on the state level, the federal government might, depending on whether the value of the estate exceeds the exemption limit. 
• Inheritance Tax: Only a handful of states impose an inheritance tax. Fortunately, Texas is not one of them.
• Capital Gains Tax: This tax is assessed on the increase in value from the date of the deceased owner’s death to the date of the sale. Capital gains taxes are due the year in which the property is sold.

Other Expenses

• Repairs/Renovations: If you decide to fix the property before putting it on the market, you will be responsible for any and all expenses associated with those repairs and/or updates.
• Ongoing Upkeep: Until it sells, the heir(s) are responsible for keeping all expenses associated with the property up to date, including property taxes, utilities, insurance, maintenance costs, etc.
• Real Estate Commissions: Real estate agents charge a percentage of the sale price as compensation for their work. The amount may vary slightly, and can possibly be negotiated, but it is usually around 5-6%. 
• Closing Costs: These costs cover all the administrative tasks associated with selling a home, such as attorneys’ fees, title insurance, recording fees, etc. Closing costs generally range around 2-5% of the sale price.

Documents Required for Selling Inherited Property in Texas

Before you can sell inherited property in Texas, you’ll need to gather and prepare all the required paperwork. This includes the following:

• Photo Identification: Current photo ID will be needed for paperwork throughout the selling process to verify your identity as the heir and/or seller.
• Proof of Ownership: As the heir or beneficiary, you should receive this document at the conclusion of the probate process.
• Death Certificate: Some of the parties involved in a home sale, like mortgage lenders and title companies, may require a copy of the death certificate.
• Property Title Records: A clear title is required to sell an inherited home in Texas. This includes proof that the title has been transferred to your name, and that there are no liens or other obligations associated with the property.
• Property Tax Records: You will need to show proof that all property taxes have been paid and that there are no municipal or other tax liens on the property. 
• Seller Disclosure: As mentioned earlier, Texas requires certain sellers to complete and submit a disclosure document attesting to the condition of the property. 

Options for Selling Inherited Property in Texas

There are several options for selling an inherited property in Texas. The most common include:

For Sale by Owner (FSBO)

Your first option is to sell your home on your own without a real estate agent or other third party. Here are a few pros and cons to consider for this option.

Pros

• Save money by not having to pay real estate commissions (5-6% of the sale price).
• Maintain more control over the process.

Cons

• Can be a complicated and time-consuming process.
• Lack of industry experience and access to resources could lead to delays.
• Potential tax and legal issues could arise.

Real Estate Agent

Hiring a real estate agent is another option for selling an inherited home in Texas. Of course, this option also comes with a few advantages and disadvantages as well.

Pros

• Real estate market experience and access to more resources.
• Negotiation skills to get the highest sale price.
• Documentation and paperwork to ensure tax and legal compliance.

Cons

• Commission and other fees can be costly.
• Lack of control over the process.
• Traditional home sales can take a while, especially in a buyer’s market.

Cash Buyer / Real Estate Investor

The third option is to work with a real estate investor who will pay cash for the property. These transactions are typically much faster than traditional sales, but they do have a few downsides to consider.

Pros:

• Zero commissions and, in some cases, no closing costs.
• Quick sale (as few as 7 days).
• Property can be sold As-Is (no investment in repairs/renovations).

Cons:

• Sale price might be slightly below market. 
• Not as much wiggle room for negotiation.
• Potential for scams if not careful about choosing a reputable cash buyer.

Challenges to Selling Inherited Property in Texas

Here are a few common problems that arise with inherited property so you’ll know what to expect and can prepare for them in advance.

Multiple Heirs

Inheriting a home on your own can be a complicated and emotional experience. Add in multiple other heirs and things can get messy—especially if one or more of the joint owners decide they don’t want to sell or refuse to sign probate. 

In Texas, not all owners are required to agree to sell, but if one or more are refusing, you may need to get the courts involved. This is a legal process known as a partition action, and not only can it be time-consuming and costly, but it can make an already tense situation even worse. 

Even if all owners agree to sell, deciding when and how to do so can open an entirely new can of worms. 

If you’re one of multiple beneficiaries and you are at an impasse on how to move forward, a mediator who is experienced in these types of disputes may be your best option for reaching an amicable outcome.

Title Issues

A property cannot legally be sold in Texas unless it has clear title. This means ownership must be properly transferred and there are no liens, disputes, or encumbrances associated with the home. 

Beneficiaries who inherit property often find themselves having to resolve issues, like paying outstanding debts, negotiating settlements with creditors, and dealing with liens and other legal issues. 

If you’re struggling with a particularly complicated situation, it might be worth enlisting the help of a real estate attorney to help you navigate the process. 

Property in Disrepair

Sadly, by the time a home is passed down to its new owner(s), it is often run down and in serious disrepair. For instance, someone who was elderly or in failing health at the time of their death may have found it difficult to keep up with the maintenance on their home. 

If you plan on selling and the property needs a lot of work, you could be facing tens of thousands of dollars in out-of-pocket expenses to bring it up to sellable condition. 

Then there are the costs associated with maintaining the home while you’re fixing it up. For example, there may still be a mortgage, as well as other household expenses to manage.

This is why many people who sell inherited property in Texas choose to work with a cash buyer. While the offer may be slightly lower than market value, there’s no upfront outlay of expenses to fix the house up before the sale. And because you can sell it much faster, there are fewer maintenance expenses to worry about as well.

Some investors (like House Buyers of America) will even purchase the property without requiring the seller to clean it out. The seller can simply collect their payment and walk away from the property. This is a particularly attractive option for hoarding situations.

Avoiding Probate Court in Texas

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

• Revocable Living Trust: This allows the home owner to maintain control over their property while they are still alive and then transfer it to its rightful heir(s) upon death. Placing assets in a revocable living trust bypasses the probate process and transfers the property directly to the inheritor.
• Joint Ownership with Right of Survivorship (JTWROS): If you co-own the property, you can set it up as Joint Tenants with Right of Survivorship. This is a legal arrangement through which the surviving owner automatically inherits the deceased owner’s share of the property upon their death, without having to go through probate.
• Transfer on Death Deed (TODD). A Transfer on Death Deed allows the homeowner (a.k.a. transferer) to directly transfer ownership of the property upon their death without having to pass through probate. The TODD must be recorded in the county where the property is located prior to the transferor’s death.

Most of these things need to be completed prior to the property owner’s death. If you are in the process of planning your estate and are considering one of the above strategies to help your heirs avoid probate, we strongly suggest consulting with an attorney and/or a qualified financial advisor for specific guidance.