The Complete Guide to Selling Inherited Property in Virginia

Thinking about selling inherited property in Virginia? If so, you’re not alone. In fact, according to a recent survey by Charles Schwab, 70% of people who inherit a home from their parents will end up selling it.

There are a number of reasons for this, but regardless of the why, it’s the how that becomes most important. This guide will walk you through everything you need to know about selling an inherited home in Virginia. 

What Is Inherited Property?

Inherited property is any asset that is passed down from a deceased person to their heirs or beneficiaries. This can encompass just about anything, from personal items that may have only sentimental value to cash, investments, furniture, vehicles, and of course, homes. 

In Virginia, inheriting property usually involves a legal process known as probate. This is when a court oversees the settlement of any debts and the distribution of leftover assets to the appropriate parties.

To make selling inherited property in Virginia as simple and straightforward as possible, it’s important to understand the legal and financial implications of doing so.

Steps to Take After Inheriting Property in Virginia

Start the Probate Process

The probate process in Virginia is initiated by filing a petition with the circuit court. This must be done in the county in which the deceased owner resided. The court will then appoint an executor or administrator, who will be responsible for managing the estate. This includes identifying assets, paying taxes and debts, and distributing what’s left to the heirs.

The probate process can take anywhere from a few months to a year or more. During this time, it’s critical to keep the lines of communication open and stay as organized as possible.

Conduct a Property Assessment

Once the probate process has been initiated, you’ll want to get the ball rolling on assessing and assigning value to the inherited property. This will allow you to determine the fair market value of the property and establish the tax basis, which will come into play once the property is sold. (We’ll cover this in greater detail below.)

Prepare the Property for Sale

You’ll also need to decide whether you want to sell the home As-Is or invest in any repairs or renovations necessary to make it more marketable. 

In most cases, people who inherit homes try to sell them as quickly as possible. That way they can minimize the amount of time, effort, and money they’ll need to invest in the property. 

If you do decide to fix the place up, keep in mind that you will also be responsible for the financial upkeep until it is sold. 

Legal Aspects of Selling Inherited Property in Virginia

Transfer of Ownership and Title

In Virginia, the designated heir or named beneficiary is required to provide proof of inheritance and complete new deed paperwork in order to have the title of the property officially transferred into their name. This process is typically handled during probate and must be completed before the property can be sold.

Clear Property Liens

In many cases, inherited property comes with debts and liens. These obligations must be addressed prior to selling. Start by requesting a payoff statement from the mortgage company and check with the local records office to see if there are any unpaid property taxes or liens. 

Disclosure 

According to Virginia law, sellers must disclose certain information about a home’s condition. Specifically, it is mandated that any and all known defects or other problems that could impact the home’s value be revealed to potential buyers in advance. Failure to do so could result in serious legal consequences.  

A few examples of what must be disclosed before selling inherited property in Virginia include:

• Condition of the property and any improvements that may have been made.
• Any and all known issues with the property’s title (even those that haven’t been formally recorded).
• The existence of easements.
• Any and all building code violations.
• Flood risk (whether the home is in a special flood hazard area or has experienced flood damage in the past).
• The existence of any pending lawsuits against the property.

Financial Implications of Selling Inherited Property in Virginia

Taxes 

 

• Transfer Tax: A transfer tax is a fee the government charges when real estate ownership changes. In Virginia, transfer tax is levied at a rate of $0.25 cents per $100 of the portion price or fair market value of the property, whichever is greater.  
• Property Tax: This is a local tax based on the value of the property. Like any other real estate, inherited property incurs property tax. Virginia’s property tax rate varies by county, but the average is 0.87% of the assessed value.
• Estate Tax: While Virginia does not impose estate taxes, the federal government might, depending on whether the value of the estate exceeds the exemption limit. 
• Inheritance Tax: Only a few states impose an inheritance tax. Fortunately, Virginia isn’t one of them.
• Capital Gains Tax: This tax is assessed on the amount the property has appreciated 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 up before selling, you will be responsible for any and all associated expenses.
• Ongoing Upkeep: Until the property sells, the heir(s) must foot the bill for keeping all expenses up to date, including property taxes, utilities, insurance, maintenance costs, etc.
• Real Estate Commissions: Real estate agents receive a certain percentage of the sale price as compensation for their work. The amount may vary slightly and can possibly be negotiated, but it is typically around 6%. 
• Closing Costs: These costs cover the logistics of selling, such as attorneys’ fees, title insurance, and recording fees. Closing costs generally run between 2-5% of the sale price.

Documents Required for Selling Inherited Property in Virginia

Before you can move forward with the sale of the property you’ve inherited, you’ll need to gather and prepare all the necessary paperwork. In Virginia, this includes the following:

• Proof of Ownership: You will receive this document at the conclusion of the probate process.
• Death Certificate: Some parties involved in a home sale, like title companies and mortgage lenders, may require a copy of the previous owner’s death certificate.
• Property Title Records: A clear title is required to sell an inherited home in Virginia. This includes proof that the title is now in your name and that there are no liens on the property.
• Property Tax Records: You’ll also 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, Virginia mandates that all sellers complete and submit a disclosure document attesting to the condition of the property. 

Options for Selling Inherited Property in Virginia

There are a number of ways to sell an inherited home. The most common include:

For Sale by Owner (FSBO)

Your first option is to sell your home entirely on your own. This means no real estate agent, so no commissions. It also means you’re completely on your own for the entire process. Here are a few specific pros and cons to consider.

Pros: 

• Save money by eliminating commissions
• Maintain more control over the process

Cons:

• Selling a home on your own can be complicated and time-consuming
• Lack of experience and access to resources can lead to delays
• Potential tax and legal issues could arise

Real Estate Agent

Hiring a real estate agent is another popular option for selling inherited property in Virginia. Of course, this option also comes with a few benefits and downsides as well.

Pros:

• Market experience and access to more resources.
• Negotiation skills to get the best price.
• Paperwork and documentation to ensure tax and legal compliance.

Cons:

• Commission and other fees can add up
• Lack of control over the process
• Traditional home sales can take a long time, especially in a down market

Cash Buyer / Real Estate Investor

The third option is to work with a cash buyer. These sales are typically handled much faster than traditional sales, but they do have their own disadvantages to consider.

Pros:

• No commissions and, in some cases, no closing costs
• Quick cash sale in as little as 7 days
• Sell the property As-Is (no investment in repairs/renovations)

Cons:

• Sale price likely to be below full market value
• Not as much room to negotiate
• Potential for scams if not careful about choosing a reputable investor

Challenges to Selling Inherited Property in Virginia

Here are a few common issues with inherited property so you can prepare for them in advance.

Multiple Heirs

Inheriting a home on your own can be complicated enough without adding in multiple people, personalities, and emotions. Things can get especially messy if one or more of the joint owners decide they don’t want to sell or refuse to sign probate. 

In Virginia, not all owners are required to agree in order to sell inherited property, but if one or more are refusing, the courts may need to get involved. This is typically handled through what’s known as a partition action, and it can make an already tense situation worse. 

Even if all owners are in agreement about selling, deciding how and when 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, enlisting the help of a mediator may be your best option for reaching an amicable outcome.

Title Issues

A property can only legally be sold if it has a clear title. This means ownership must have been properly transferred, and there are no liens, disputes, or encumbrances associated with it. 

Individuals who inherit property from a deceased loved one often have to resolve challenges like settling outstanding debts, negotiating with creditors, and dealing with liens and other legal issues. 

If you’re struggling with a particularly messy situation, a real estate attorney can help guide you through the process and make sure everything gets taken care of accordingly. 

Poor Property Condition

Sadly, many inherited homes are in poor condition by the time they are passed down to their new owner(s). This happens a lot when it’s an inheritance from a family member who is elderly or in failing health. In situations like this, keeping up with maintenance on a home can be incredibly challenging. 

If you plan on selling and the home is in serious disrepair, you could face tens of thousands of dollars in expenses to bring it up to sellable condition. And this would all be out of pocket. 

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

This is why many people who sell inherited property in Virginia choose to work with a cash buyer. While the sale price may be a bit lower than the market value, there’s no upfront outlay of expenses to fix it. And because you can sell it much faster, there are fewer general upkeep expenses to worry about.

Some investors (like House Buyers of America) will even purchase the property with all the belongings still inside. This is a particularly attractive option for messy homes. The seller gets to walk away with cash in hand, and the buyer takes care of all the clean-out. 

Avoiding Probate Court in Virginia

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

• Revocable Living Trust: This allows the 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: If you own the property with someone else, you can set it up as Joint Tenants with Right of Survivorship. This is a legal arrangement through which the surviving owner would automatically inherit your share of the property upon your death without having to go through probate.
• Gift the Property: In Virginia, a homeowner can gift their property to someone, which essentially transfers ownership of the property to another person. It should be noted that there are a lot of legal and tax considerations with this type of transaction.

Most of these things need to be completed prior to one’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 recommend consulting with an attorney or a qualified financial advisor.