How to Manage Selling Property Out of State Successfully

Who needs to sell property in another state?

There can be a number of reasons people need to sell land out of state. Maybe you've inherited the property from a family member, but no longer live in the area yourself . If you live far away and the property doesn't have sentimental value to you, selling the land may simplify your life.

In other cases, you may be helping a relative or friend who needs to sell their real estate due to illness, divorce or other family issues. If a loved one turns to you in this situation, you want to help them sell the property for a reasonable price without a complicated process .

Another reason people may need to sell vacant land out-of- state is because they've moved or are moving soon. You didn't get around to selling your land before moving, but you don't want to keep paying property taxes on a long distance property .

• Inherited

• Moved away

• No longer use recreational property

Options for selling out of state property

For the most part, you have all the same options to sell land out of state as you would locally. What's more difficult is that you may not know people nearby who can help you sell the property. For example, you may need a realtor, a handyman to clean up the property, or a photographer to take listing photos. Finding those people is a little bit harder from another state.

Sell with a real estate agent

You can search for qualified real estate agents on websites like Zillow and Realtor.com. You want to find a realtor that specifically has local experience selling LAND . Not every real estate broker will take land listings. Also, many of them do not have the right experience to get your land sold. When you look at an agent's listings, are most of them land sales? Do their listings have many professional photos that show the land's full potential? Does the listing description include lots of relevant details,? Or does it just say '2 wooded acres for sale?' These are all factors to consider when selecting your land selling agent.

Sell for sale by owner

Another option you have is to roll up your sleeves and sell the land by owner . This can be quite difficult long distance, but could work if your real estate is in a highly-desirable area.

You'll have to find local service providers to help create your initial listing . For example, you may need a landscaping company to clean up the property. You'll also need a company that can make a For Sale sign with your phone number and take it to your property. Lastly, you'll need to find a photographer to take pictures of the land so you can create an online listing.

You'll want to post your real estate for sale on several websites to gain wide exposure. To learn more, see How to Sell Land Online .

Do I need a real estate attorney to sell land?

No, you don't need a real estate attorney to sell property in another state, but you may find it helpful for certain steps. It's possible to draft your own sale contract without an attorney. We recommend using template contract forms from the local real estate commission.

You may want to hire an attorney to help you with the closing. An attorney can draft the deed for you. The deed is the legal document that transfers ownership. Some attorneys also provide escrow services. They will transfer the purchase funds from the buyer to the seller when the deed is signed.

Online land buyers

The alternative to listing your real estate with a realtor or selling it yourself is to sell to a cash buyer. This can save you quite a few steps. You won't need to search for and interview realtors or create your own marketing to sell land by owner. The disadvantage is you'd be selling the property at a discount.

Still, for some people the convenience of selling hassle-free is more important than getting the full market price . It's also the fastest way to sell land - the whole process typically takes less than two weeks to sell land. If you like the idea of selling your out of state land quickly, consider requesting a cash offer today.

Navigating taxes when selling property in another state

Selling land you own in a state where you don't reside brings up an important topic: taxes. Understanding your potential tax obligations is crucial before you finalize the sale to avoid unpleasant surprises down the road. While the specifics can vary greatly depending on your situation and the states involved, here are the key areas you need to be aware of.

Capital gains tax on property sold out of state

When you sell land (or any property) for more than you originally paid for it (your "basis"), the profit is generally considered a capital gain. This gain is subject to taxation at both the federal and state levels.

• Federal Capital Gains: The IRS taxes capital gains, with rates typically depending on how long you held the property (short-term vs. long-term) and your overall income level.
• State Capital Gains: Here's the key for out-of-state sellers: The state where the property is physically located generally has the primary right to tax the income (capital gain) generated from its sale. Even if your home state also has an income tax, you'll likely owe taxes first to the state where the land was sold. Your home state might offer a credit for taxes paid to another state to prevent double taxation, but you'll need to navigate the rules for both states. Don't assume you only pay taxes where you live!

Long term capital gains tax is due on any profit made after a property owned for at least 1 year is sold. In 2024, the tax rate on long-term capital gains is 0%, 15%, or 20% depending on your tax bracket and filing status.

There can be exceptions for inherited properties . The cost basis for an inherited property is the market value of the land at the time of inheritance. So if the property's sold quickly after inheritance, there may not be a capital gain. That's one way the heirs can cut or eliminate capital gains tax.

FIRPTA (foreign investment in real property tax act)

If you are not a U.S. citizen or resident alien (i.e., you are considered a "foreign person" for tax purposes), be aware of FIRPTA. This federal law requires buyers (or more commonly, the closing agent/title company) to withhold a portion of the gross sales price (often 15%) to ensure potential U.S. tax obligations are met by foreign sellers.

• Who it Affects: Primarily non-resident alien individuals and foreign corporations/entities.
• What it Means for Sellers: Even if you are a U.S. citizen, you will likely need to sign an affidavit at closing certifying your non-foreign status to prevent this withholding. If you are subject to FIRPTA, the withholding is sent to the IRS. You would then file a U.S. tax return to report the sale, calculate the actual tax owed, and potentially receive a refund if the withheld amount was too high.

State-specific non-resident withholding

Similar to FIRPTA at the federal level, many states have their own requirements for withholding taxes when property is sold by someone who doesn't live in that state.

• Purpose: To ensure the state collects potential income tax due on the capital gain from non-resident sellers who might otherwise not file a state tax return there.
• Variability: This is highly state-specific. Some states have mandatory withholding (often a percentage of the sales price or the estimated gain), some have exemptions if the gain is below a certain threshold, and some have no withholding requirement at all.
• Action Required: It's important to research the specific non-resident withholding laws for the state where your land is located early in the selling process. The closing agent or title company will typically handle the actual withholding if required, deducting it from your proceeds.

How do I report the sale of vacant land?

Internal Revenue Service Publication 544 explains the tax rules for selling property including how to calculate a gain or loss. You need to report the sale of land as a capital gain or loss. To do so, use IRS Form 8949 to calculate the amount of gain or loss from the sale. Then transfer the results to Schedule D and Schedule I, which are addendums to IRS Form 1040.

Handling the closing process when you're out of state

You've navigated the marketing, negotiation, and due diligence. Now it's time for the final step: the closing. But how does this work when you're hundreds or thousands of miles away? Fortunately, closing on a property remotely is quite common. In our land buying business, we buy properties out of state frequently and it's not an issue at all.

Here are the common methods used for remote closings:

• Mobile Notary: For added convenience, a mobile notary can be arranged to come directly to your home or office at a scheduled time. They bring the documents, verify your identity, witness your signature, and handle notarizing everything on the spot.
• Remote Online Notarization (RON): Online notarization allows you to sign documents electronically and have them notarized via a secure audio-visual connection with a commissioned remote notary. Ask your title company if this is an option for your transaction.
• Power of Attorney (POA): Less commonly, you can grant someone you trust in the state where the property is located the legal authority to sign the closing documents on your behalf. This person is called your "attorney-in-fact" (they don't necessarily have to be a lawyer).

Your title company or closing attorney will guide you on the available and most suitable options for your specific situation and location.

Please consult your financial advisor, accountant, lawyer, or tax specialist. This article is for informational purposes, and is not tax or legal advice.