Selling an inherited property
Last updated on December 14, 2023
Have you just inherited a property? Are you responsible for selling the home of a loved one who passed away? There are several steps to take before an inherited home can be put up for sale. With all the legal procedures, the fees to account for and the precautions to take, it’s not unusual to feel a little lost. We break it down into understandable steps.
Summary:
- Estate sales in Quebec
- The main steps to take before selling the home
- The documents required to sell a home passed down to you
- Are there taxes on inherited real estate?
- The 3 precautions to take
- Why buy an inherited property?
Estate sales in Quebec
After a person dies, their assets are transferred to the successors (people who inherit according to law or the will). The successors become heirs after exercising their right of option, meaning after they decide whether they will accept or refuse the succession.
A succession may be legal (without a will) or testamentary (the deceased had written a will). The will may contain one or more bequests and the beneficiaries of these bequests are called heirs.
In the event of a legal succession, all the heirs are liquidators (also known as executors) with full rights, while in a testamentary succession, the deceased would usually have named one or more liquidators in the will. After the death, the liquidator does what is necessary to transfer the assets to the heirs; this transfer is called the declaration of transfer. If the liquidator keeps the right of possession of the assets, then the liquidator will be responsible for selling the property. If the liquidator renounces possession and the goods go to the heirs, then they will handle the sale in their own name.
So, if you are the sole heir, the decision to keep or sell the home is yours alone. However, if there are several inheritors, everyone must agree on how the sale will be done. If ever one of the heirs wants to keep the house, dividing the inheritance will be more complex and will likely take longer to settle.
Call a notary as soon as you begin the process. Notaries are indispensable allies who will guide you through the required steps, give you useful advice and help you avoid costly mistakes.
Keep relations civil… if possible!
Although it’s easier said than done, managing a succession always goes better when all the heirs have good relationships. If just one person refuses to sell the property, that’s enough to stop the entire process. When there’s cooperation and respect, the sale generally goes faster.
The main steps to take before selling the home
After a loved one has died, certain legal procedures must be applied before selling the assets. This includes a home—often the most important asset—which can’t be sold immediately after the death.
First, the reading of the will must take place to find out who the liquidator(s) will be. Next, the transfer of ownership of the deceased’s home to the new owner should be done. This procedure requires the declaration of transfer to be signed before a notary. This document will become the title deed of the succession.
Once the declaration has been signed, the liquidator has the legal right to sell or donate the property on behalf of the succession. If there isn’t a liquidator, the heirs can conduct the sale, but they must all be in agreement.
The liquidator or testamentary administrator is expected to carry out the wishes of the deceased according to law and to pass on the assets to the heirs.
The documents required to sell a home passed down to you
The notary needs the following documents in order to obtain the declaration of transfer in Quebec:
- The death certificate issued by the Registrar of Civil Status
- A copy of the will
- A title showing acquisition of the property (like the deed of sale)
- The certificate of localisation
- The deceased’s civil status (married, divorced, single, etc.)
- Any other document required by the notary depending on the situation
As long as the declaration of transfer is not signed, selling the property is not allowed. Afterwards, the 7 documents to have on hand when selling your home are the same as needed with a regular sale.
Are there taxes on inherited real estate?
In general, if the property is the deceased’s main residence, you will not have to pay income tax on the capital gain. However, if the property is a secondary residence, like a cottage or an income property, it is subject to taxation.
At the time of the owner’s death, the property is deemed to have been sold at its fair market value. That means that if the property was purchased for $175,000 fifteen years ago and is now worth $325,000, the capital gain is $150,000 ($325,000 - $175,000 = $150,000). While a primary residence is tax exempt, half of the capital gain of a secondary residence is taxable ($150,000 x 50% = $75,000).
So if it’s a secondary residence, the succession will have to pay a certain amount to the government. Fortunately, the income tax can be paid from the profit made by selling the property or with insurance purchased by the deceased for this reason.
The 3 precautions to take
Selling an inherited property differs from selling a regular property in a few ways. The owner may have lived in the home for quite a long time. Also, the heirs rarely know the specifics of the property and don’t want to be held responsible for potential problems. For these reasons, an inherited property is often sold without legal warranty, meaning at the buyer’s risk.
1. Selling without legal warranty
In Quebec, all real estate assets are automatically sold with a legal warranty to protect the buyer. However, the warranty may be waived in certain cases, such as when a home has been inherited or repossessed, or when the seller wants to avoid being sued for defects they were not aware of.
To reduce the chance of legal recourse, you should fill out the declaration of the seller to the best of your knowledge. You should also include a clearly written clause regarding the legal warranty in both the declaration of the seller and the offer to purchase.
In the case of a succession, DuProprio notaries recommend adding the following statement (in light of section 1733 of the Civil Code of Quebec) in clause 8 of the Offer to Purchase form: “This sale is without legal warranty and is entirely at the buyer’s risk.”
Keep in mind that even if it is noted that the sale is without legal warranty, the seller is still expected to declare all known defects. Section 1733 of the Civil Code states that “A seller may not exclude or limit his liability unless he has disclosed the defects of which he was aware or could not have been unaware and which affect the right of ownership or the quality of the property.” In all cases, the seller must follow the law, act in good faith and not mislead the buyer. Section 1733 also mentions that the seller is in no way exempt from their personal acts or omissions.
2. Preparing the house for sale
Quite often, the successors are hoping for a quick sale. For this to happen, you’ll have to keep the work to a minimum, particularly because the expenses will have to be covered before the sale and shared among the heirs. Of course, the time that will be spent preparing the property, listing it and negotiating the price must also be discussed.
As with any dwelling, we recommend sprucing up the home by depersonalizing, decluttering, cleaning and doing a few quick and inexpensive fixes. Don’t forget the exterior: the potential buyer gets an impression of the property within the first few seconds.
3. Setting the best asking price
Estimating the value of a house is always a tricky step. A chartered appraiser will help you understand the market value of the real estate asset. However, remember that the future owner will be at risk if they refuse the legal warranty and if they don’t have all the relevant information on the property. This is why inherited properties are sometimes sold slightly below value.
Avoid relying on the municipal assessment, which does not reflect the true market value of the property.
Why buy an inherited property?
Selling an inherited home without warranty can benefit the potential buyer in several ways:
- A potentially lower selling price
- A quick sale (if successors agree)
- The possibility of buying furniture as well, depending on the situation
In fact, some buyers are looking for a golden opportunity, and your inherited home might be it.
DuProprio can help you sell your inherited property without missing any vital steps. Call us at 1-866-387-7677 to learn more about our services, and take the first steps toward saving the commission with a broker-free transaction.
