Selling an Inherited Property

1. Understanding the Will (Before You Can Sell the House)

Ultimately, the contents within the Will determine pretty much everything regarding the sale of an inherited property.

When handling the estate of the deceased, you must ensure that you’re following the wishes outlined in the Will.

If there is no Will, you will need to follow the rules of intestacy to become the effective owner of the property.  Only then will you be able to sell.

What if I Can’t Find the Will?

If you’re unsure where the Will is, consider contacting:

• The Principal Registry of the Family Division
• A care home or hospital (if the person passed away there)
• Professional Will writing companies
• Solicitors or accountants
• Banks or building societies
• The National Will Register

Check the Will is Valid (Before You Can Sell the House)

For a Will to be legally binding, the following rules must apply:

• The Will writer was over 18 years old at the time
• There is no evidence of undue pressure
• The person writing the Will was of “sound mind”
• There were two adult independent witnesses present
• These two witnesses also signed the Will
• The Will is dated

Wills put together professionally are more legally watertight, especially when the divisions of the estate are more complex.

If the Will is deemed not to be valid, the distribution of the estate will follow the rules of intestacy (see below).

Note that there may also be a Codicil, a legally binding document written by the person who passed away to make changes to the Will.

Understand the Contents of the Will

When the contents of a Will lack clarity, you may need to consult legal advice.

This could be the case if:

• You are not able to understand the terms
• Parts of the Will seem confusing or open to interpretation
• The division of the estate is complex
• Part or all of the estate will pass to children under the age of 18
• Money or property is placed in some form of trust
• Part of all of the estate consists of foreign property, land or investments
• The estate or property was owned under a corporate entity with more than one other shareholder
• The person who passed away owned a business or had significant shareholdings
• People were financially dependent on the person who passed away (who are not immediate family)
• The terms of the Will are disputed

2. Intestacy Rules if There is No Will

If there is no evidence of a Will, intestacy rules apply to the inherited house.

This allows someone to inherit the estate if they were married, in a civil partnership, or beneficial joint tenants with the deceased. If there is a joint bank or building society account, the other partner will inherit its contents by default.

The partner will inherit all personal property and belongings, the first £322,000 of the estate and half of the remaining estate.

If the estate is worth over £322,000 and the deceased has children, they will inherit the other half of the remaining estate.

Those who are divorced from the deceased cannot inherit under intestacy rules. The same applies to a previous civil partner or somebody who cohabited as a partner.

Intestate Rules Related to Other Members of the Family

The following relatives can also inherit under intestacy:

• Children with unmarried parents
• Adopted children
• Grandchildren or great-grandchildren (if their parent or grandparent has already passed away or died before they reach the age of 18 years old without marrying)
• Siblings, nieces, nephews and parents (only if there are no surviving spouses, civil partners, children, grandchildren or great-grandchildren)
• Other relatives (in the following order: grandparents, uncles/aunts, half-uncles/aunts, cousins and half cousins.

If children are under 18, trustees will manage the inheritance on their behalf.

Close friends, cohabiting partners, carers and relations by marriage cannot inherit any part of the estate if there is no Will.

Bona Vacantia

Under intestacy rules, the estate passes to the Crown when there are no surviving relatives.

This is known as bona vacantia.

What Happens to Jointly Held Property?

Inheritance of a property depends on whether you owned it through a beneficial joint tenancy or a tenancy in common.

Beneficial Joint Tenancies

In this case, joint owners of a property automatically inherit the other share of the property when the other owner passes away, becoming the sole legal owner.

3. The Probate Process

Probate is the legal process of organising the inherited estate of a person who has passed away, which is usually carried out by an executor.

If you want to manage the estate, you need to apply for probate unless:

• You have joint ownership of the estate with your spouse or civil partner
• You have a joint bank or building society account (and the estate owner had no other bank accounts)
• The sum of money left in the estate is less than £5,000
• There is no property, land, significant business interests, or shares within the estate.

If you choose to move forward without legal advice, please make sure you are fully aware of the consequences of your decisions.

The Role of the Executor

The Will of the person who passed away specifies an executor. They are responsible for carrying out the wishes of the Will and paying outstanding debts, inheritance tax and other costs.

An executor can be a relative, friend, solicitor, or accountant. In England and Wales, an executor may also be a Public Trustee or a solicitor.

They must apply for a ‘grant of probate’ before they can start the process.

If there is no Will, a relative or close friend can apply for a ‘grant of letter of administration,’ which gives them the same authority as an executor.

Legal Fees for Probate Cases

Many executors prefer to use a probate solicitor to handle the process for them, which can ease some of the hassle and stress.

Probate solicitor fees vary depending on the complexity and size of the estate.

To save money, some people fill out the probate paperwork themselves and use a solicitor to check through everything.

Starting The Probate Process

When you first start the probate process, you’ll need to understand the estate’s overall value.

You or the solicitor working on your behalf will need to fill in the PA1P (probate application) form and either the Inheritance Tax form IHT400 (if the estate is worth over £325,000) or the Inheritance Tax form IHT205 (if the estate is worth under £325,000). If you don’t intend to sell the inherited house, you will need to have the property valued.

Send these to the closest Probate Registry Office alongside the Inheritance Tax form, death certificate and three copies of the will.

Note that different rules apply in Scotland and Northern Ireland.

4. Settling Debts

Once there is a grant of probate, any unpaid debts must be cleared or managed before you think about selling the inherited property.

The total debt includes both unsecured and secured debts.

Dealing with Debts in Probate Cases

After checking the terms of each loan, the beneficiaries of the estate may take on the debts.

Or, it may make more sense to use the contents of the estate to pay the debts off.

Provided there is enough equity in any owned property or other assets, you may also decide to use the proceeds of an eventual sale to clear what is owed.

We advise prioritizing debts and costs as detailed in the infographic below:

It is also worth noting the following:

• If there is a guarantor responsible for any of these debts, they will be liable
• If there are joint debts, the loan contract will specify how to deal with the debts
• There may be an insurance policy is in place to pay off the debt in the event of death

Where to Find Support

Dealing with unpaid debts makes most people anxious.

Fortunately, most lenders will be sympathetic as long as you regularly communicate with them.

If you are still unsure about how to deal with the extra financial burden, the following organisations can help:

Free advice, support and guidance via a range of online resources. Shelter also has a helpline open 365 days a year (8am to 8pm on weekdays and 9am to 5pm on weekends). The regular number is 0808 800 4444. In emergency situations, you can call 0808 1644 660.

Search for information online or enter your postcode/town in the orange box to contact your local office directly.

The organisation provides education, information and advice aimed at simplifying money matters. Call 0808 808 4000 Monday-Friday 9am–8pm and Saturday 9:30am-1pm (their offices are closed on Sundays).

If the person was a business owner or shareholder and has outstanding debts, this organisation can provide you with some useful advice. Call 0800 197 6026 Monday-Friday 9am–5.30pm (offices are closed at the weekends).

A charity that provides confidential support and advice to anyone worried about loans or debt issues. Call 0800 043 4050 Monday-Friday 8am–8pm and Saturday 9:30am-3pm (their offices are closed on Sundays).

An online resource with debt and budget management advice. Please note that this is not a direct advisory service.

Also remember, if you feel your lender is unfair, don’t be afraid to send a formal complaint to their head office. You can find the email address on your mortgage documents or via a Google search.

5. Selling Inherited Property 

Once the legal and tax processes are complete (i.e. there is a grant of probate), you will need to start thinking about your options regarding the sale of the inherited property.

Here are some ideas worth considering:

• If you’re inheriting property as a second home, renting out your property can be a good idea.  Here it will be necessary to understand your responsibilities as a landlord.  If there is a mortgage, you will also have to obtain a ‘consent to let’ (this usually lasts for about 12 months).
• If you have a mortgage, it is often worth talking to the lender or a qualified mortgage broker to see if you can get a competitive deal (by remortgaging).  Provided the remortgage debt is not too high, this is often a good option;
• Selling the property may be an idea, especially if the home is now too large or unfit for your requirements.  Note that you can put your inherited house on the market any time you wish, however, a sale cannot complete until you have a grant of probate.  Please also be sure you understand your obligations regarding taxes.

After clearing the debts, you can finally think about what to do with an inherited property.

There are a few possibilities:

• Keeping the property – if it’s your family home already, there is a sufficient amount of equity and you can afford to pay the mortgage.
• Renting out the property – in this case, if there is a mortgage, you will have to obtain a ‘consent to let’ (this usually lasts for about 12 months).  Remember to understand your responsibilities as a landlord and also the implications of Section 24, particularly if you plan to take over the mortgage and are in the higher income tax bracket.
• Remortgaging – talk to the lender or a qualified mortgage broker to see if you can get a competitive deal.
• Selling the inherited property – if the home is unfit for your requirements…

Quick Inherited Property Buyers (7-Day Fast Sale)

If you’re an inherited property owner looking for a quick cash sale, opting for a property buying company may be preferable. In this case, a third party will buy the house directly from you in a guaranteed sale.

Below are some of the key benefits of a house buying company:

• No need to deal with the hassles of estate agents and an open market sale.
• Suitable for properties in any condition, even those in need of refurbishment
• No estate agency or solicitor fees
• Complete the sale in 7 to 28 days – or in line with your own timeframes
• Cash advances possible
• The sale is 100% guaranteed
• No empty property council tax, insurance and other bills
• Chance to avoid additional probate solicitor fees due to a quick sale

Sell Inherited Property Through an Auction House

Selling your property to an auction house is another route you may want to consider. This may result in a faster sale as a buyer legally commits to the purchase once they make a winning bid and a bidding war can result in a competitive price.

However, the process can take just as long as an estate agency sale.

Estate Agent Sale of Your Inherited Property

If you decide to sell the inherited property, using an estate agent is the most common choice.

There are some potential drawbacks here. The process often takes longer than many expect, there are estate agent fees and other charges involved.  You may find it difficult to sell the property if it needs refurbishment or modernisation.

However, if the property is in a desirable area and you are in no particular rush to sell, it can be a good option.

For those who want to take the traditional route without the fees, consider PropertySolvers’ express home sale service. This helps you achieve a quick sale at the best price possible, with no up-front fees.

We believe the best time to sell a house is in the first two weeks of the house going on the market since this is when the interest and excitement are highest. So, we take our 16-year knowledge of buying and selling homes to get you an offer within just 28 days.

What’s more, have no tie-ins whatsoever on our sales contracts.  If you’re not happy with our service, you’re free to leave with no questions asked.

Further benefits include:

• Floorplans and professional photography
• A high-impact FOR SALE board
• Access to all major property portals (including Rightmove, Zoopla, Prime Location, the House Shop, Home.co.uk)
• Accompanied viewings (including weekends)
• 24/7 chat service to organise a viewing or receive an offer
• Weekly sales reports (with up-to-date information from Rightmove and Zoopla)
• Complete sales progression
• No sale, no fee

6. Paying Off the Mortgage When Selling an Inherited Property

If you have inherited a property with secured debt against it, the mortgage company may:

• Request for full redemption (i.e. request you pay back the mortgage immediately). This may mean you will need to sell the property, although most lenders will be sympathetic to your situation as long as you keep up with the mortgage payments.
• Wait for proceeds of the estate to come through, the funds of which can pay down some or all of the mortgage debt.  If you take out another mortgage, there may be a requirement to sign new terms.
• Request the clearance of any outstanding mortgage debt using an endowment, life insurance policy, or mortgage protection policy.
• Ask you to take over future mortgage payments. Again, the lender may request new mortgage terms.

If you do not know who the mortgage lender is, you may need to download the Title Register from the Land Registry or ask a solicitor to find out.

Remember to read the mortgage contract closely – especially the ‘payment after death’ section.  Seeking professional legal advice where necessary.

Note that, when selling a mortgaged property, you will normally have to pay early redemption penalties.  This is because the terms of the loan are ending before the official mortgage end date.

7. Tax When Selling Inherited Property

When selling inherited property, you may need to pay taxes, including capital gains tax.

Note that there’s no need to pay stamp duty on inherited properties.

Disclaimer

Please note that the Directors at Property Solvers Limited are not solicitors, accountants or inheritance tax specialists.  Although we make every effort to provide complete and accurate information, Property Solvers makes no warranties, express or implied, or representations as to the accuracy of content in this blog post.

You should always seek professional advice before making any decision, especially when it relates to a property or other assets of significant value.

8. Frequently Asked Questions