Selling Inherited Property in Texas: How to Handle Land and Estates

I inherited property in Texas, what should I do first?

If you believe you have inherited property you intend to sell, the first goal is to get clear title to the land or real estate. Clear title means there are no questions about the property ownership and that the land can be sold legally. Understanding this is the initial step in how to sell inherited property.

In the case of inheritance, this often means taking the property through the legal process known as probate. Probate involves paying off any debts that remain on the deceased's estate and distributing their assets, like the property, to the beneficiaries or heirs. Successfully completing this is crucial before the selling of inherited property can occur.

The exact process you'll follow when selling an inherited property depends on whether there was a will in place when the property owner passed away.

Property inherited through a will

The process for selling inherited property is typically more straightforward if there was a valid will. Typically, the will specifies who will inherit the property and designates an executor (or executrix if it's a woman) to distribute the property to the heir or heirs. An executor is a person named to carry out the terms of the deceased's will, including facilitating the transfer necessary to sell inherited property.

Estates worth less than $75,000

When there is a will, an estate worth less than $75,000 is not required to go through formal probate court proceedings in Texas. Instead, once 30 days have passed since the individual's death, the heirs would file a small estate affidavit with the court having jurisdiction over the estate. This is one of the key documents required for selling inherited property in this situation. Once approved by the court, the heirs can use the affidavit to acquire property from the estate and proceed with the sale.

Estates worth more than $75,000

Estates worth more than $75,000 will generally have to go through the formal probate process. Probate ensures the deceased's will is executed according to their wishes. During this process, the executor will handle the debts and liabilities of the estate before any asset, such as the real estate intended for sale, can be distributed. This process confirms that the inherited property can be sold legally by the rightful heirs.

Land or Property inherited without a will (Intestate)

If the property owner passed away without a will (known as dying intestate), the property will be distributed according to the intestate succession laws of Texas. A small estate affidavit can still be filed if the value is less than $75,000.

Normally, an affidavit of heirship will be used if the estate is worth more than $75,000 and consists primarily of real estate. The affidavit of heirship provides a family tree to show who the rightful heirs are and what their relationship is to the deceased. This is another crucial document when navigating how to sell inherited land or property without a will.

Once the affidavit of heirship is complete and filed, an attorney or title company can prepare a deed transferring title to the heirs. The affidavit of heirship and the new deed are recorded with the deed records of the county where the property is located. Once those steps are complete, the heirs have clear title and can proceed to sell the inherited property.

Prepare the inherited property or land to sell

Once you've obtained clear title, you'll want to start thinking about preparing the property for sale. Unless you decide to sell an inherited property as-is to a cash buyer, you'll probably want to do some maintenance. The maintenance will help to show your land or property in the best possible light to prospective buyers. This could be anything from mowing or bush hogging (selling inherited land often requires this), mending fences or a gate, or taking down a run-down building.

If you've inherited a ranch or farmland, there may even be crops to harvest, livestock to tend to, or farm equipment to sell off before you focus on the selling of the property itself.

Once the property is cleaned up, you'll want to take photographs. Unless you're selling to a neighbor or family member, you'll need high-quality photos to get buyers interested when you decide to sell your inherited property. Normally, it's worth having a professional real estate photographer do this, especially for land, as they have specialized equipment like drones to capture aerial imagery.

Tax implications when selling inherited property in Texas

Heirs often wonder about taxes associated with selling inherited property in Texas. Fortunately, there is no inheritance tax in Texas. There is a federal estate tax, but this is only triggered for estates worth several million dollars (the threshold changes, so check current federal law).

You may, however, owe federal capital gains tax depending on when you sell the inherited property. A capital gain occurs when you sell real property for more than its tax basis. When you inherit real estate, the property's tax basis usually "steps up" to its fair market value at the date of the owner's death. This means that if you sold the property relatively quickly after inheriting it, you might owe little to no capital gains tax.

But if you wait to sell the property and it appreciates further, you may have to pay more taxes. Capital gains tax is due on the profit (selling price minus stepped-up basis) made after a property owned for at least one year is sold (long-term capital gain). In 2024, the tax rate on long-term capital gains is 0%, 15%, or 20% depending on your overall taxable income and filing status.

Internal Revenue Service Publication 544 explains the tax rules for the sale of property, including how to calculate a gain or loss. You need to report the selling of inherited property, including vacant land, as a capital gain or loss on your tax return.

Options to Sell Inherited Land As-Is

Once you've decided you want to sell inherited property, there are three main ways to approach the sale, particularly for Texas land. The traditional way is to list it with a real estate agent.

The real estate agent will market the property, try to find a buyer, and help you with most of the paperwork involved in the selling of inherited property. The benefit of working with a real estate agent is they will aim to get the best possible market price for you. The downside of working with a realtor for inherited land is that it can take a long time to sell vacant land, and there's no guarantee you'll find a buyer quickly. You may also need to invest money in cleaning up the land before it's ready to list.

You could also choose to sell the inherited property by owner (FSBO). Going this route, you'll be responsible for all the marketing, dealing with potential buyers, negotiating contracts, and understanding the legal requirements. With inherited land, selling FSBO might be complicated, especially if there are multiple heirs, as most of the work will fall to one person while coordinating with others. The benefit is saving on real estate agent commissions.

The alternative is to sell inherited land directly to a cash buyer. The inheritance process is already complicated enough, and this can save you significant time and effort. When you sell an inherited property to a cash buyer, you'll typically be selling it as-is, so you won't have to make any repairs or preparations. The main disadvantage is that the offer will likely be below full market value.

Still, some landowners just want to move on quickly. If you're thinking, "I need to sell my inherited property without hassle," this might be the best route. The convenience of selling hassle-free may be more important than getting the absolute top price. It's also often the fastest way how to sell inherited land. The whole process typically takes only a couple of weeks. If you like the idea of selling your inherited land quickly, consider requesting a cash offer.

Please consult your financial advisor, accountant, real estate attorney, or tax specialist regarding your specific situation. This article is for informational purposes only and does not constitute tax or legal advice for selling inherited property in Texas.