I Inherited a House. Now What?

Inheriting a house can put you in an unusual position.

On one hand, you've received what may be a valuable asset. On the other, that property often belonged to a parent, grandparent, spouse, or someone else close to you. You may be dealing with their belongings, attorneys, paperwork, family members, and decisions about a home that carries a lot more meaning than its market value.

Then the practical questions start.

Do I sell the house?

Do I owe taxes?

What if my siblings inherited it with me?

What was the house worth when my loved one passed away?

Do I need an appraisal?

If you've recently inherited residential real estate, you don't need to make every decision immediately. But there are a few things worth understanding before you sell, transfer, rent, renovate, or make other major decisions involving the property.

Here's where I would start.

First, Don't Rush to Sell the Property

Unless circumstances require an immediate sale, give yourself some time to understand what you've inherited.

Before deciding what to do with the house, you'll want to know things like:

• Who legally owns or controls the property?

• Is the property held in a trust or going through probate?

• Is there a mortgage or other debt?

• Are there multiple beneficiaries?

• What is the property worth?

• What was it worth when the owner died?

• Are there property tax implications?

• What could happen from a tax standpoint if you sell it?

You may ultimately decide that selling is absolutely the right choice.

The point is to understand the property and its financial situation before making that decision.

An estate attorney, CPA or tax professional can be particularly valuable at this stage because the right answer will depend on your individual circumstances.

Do I Pay Taxes When I Inherit a House?

This is one of the first questions people ask, and it's important to separate inheriting the property from eventually selling the property.

Receiving an inheritance generally isn't treated as taxable income for federal income-tax purposes.

But that doesn't mean taxes can never become relevant.

If you later sell an inherited property, for example, the difference between your tax basis in the property and the amount realized from the sale can affect the calculation of a capital gain or loss.

And this is where something called basis becomes very important.

What Is Stepped-Up Basis on an Inherited House?

Let's use a simplified example.

Suppose your parents purchased their Bay Area home decades ago for:

$200,000

By the time your parent passes away, the property is worth:

$1,200,000

You inherit the property and eventually sell it for:

$1,250,000

You might assume that your taxable gain is:

$1,250,000 - $200,000 = $1,050,000

But inherited property generally receives a basis related to its fair market value as of the decedent's date of death, subject to applicable tax rules and exceptions.

So, in our simplified example, if the appropriate basis were $1,200,000 and the property later sold for $1,250,000, the calculation would look very different from simply using the original $200,000 purchase price.

This concept is commonly referred to as a step-up in basis.

The actual tax calculation can involve additional factors, so this is something you should confirm with your CPA or qualified tax professional.

But it creates an important real estate question:

How do you establish what the house was worth on the date your loved one passed away?

That's where a date-of-death appraisal may come in.

What Is a Date-of-Death Appraisal?

A date-of-death appraisal is a real estate appraisal that develops an opinion of what a property was worth as of the date the owner died.

It's a type of retrospective appraisal, meaning the effective date of the valuation is in the past.

For example, imagine your mother passed away on:

March 15, 2024

It's now 2026, and your CPA tells you that you need to establish the fair market value of her house as of the date she died.

The question we're trying to answer isn't:

What is the house worth today?

It's:

What was the house worth on March 15, 2024?

Those can be two very different numbers.

Can You Get a Date-of-Death Appraisal Years Later?

Often, yes.

This surprises a lot of people.

You don't necessarily need to have had an appraiser standing at the property immediately after your loved one passed away.

A qualified appraiser can perform a retrospective appraisal at a later date when sufficient relevant information is available to develop a credible opinion of value.

The appraiser researches the market as it existed around the historical effective date.

That can include analyzing sales from the relevant time period, historical listings and market conditions, available information about the property, and other data relevant to the assignment.

So if your CPA or attorney tells you:

"We need to know what this property was worth when your father passed away three years ago."

Don't automatically assume it's too late.

Talk to an appraiser about whether a retrospective valuation can be completed.

Why Can't I Just Use the Price We Eventually Sold the House For?

Because the sale date and date of death may be different dates.

Suppose someone passed away in January 2024 and the property wasn't sold until June 2025.

A lot can happen in 17 months.

The real estate market can appreciate or decline.

Interest rates can change.

The property may have been renovated.

Its condition may have changed.

Or the eventual transaction may have circumstances that require additional consideration.

The question in a date-of-death appraisal is specifically what the property was worth as of the historical effective date.

A later sales price may be useful information to an appraiser depending on the circumstances, but it doesn't automatically establish the property's value on an earlier date.

Can I Use Zillow to Determine Date-of-Death Value?

An online home-value estimate can be useful when you're simply curious about a property's approximate current value.

A date-of-death appraisal is different.

An appraiser is developing an opinion of value for a specific property as of a specific historical date.

That requires understanding the property itself as well as the market that existed at the time.

For a typical tract home, there may be plenty of historical comparable sales.

For a custom Bay Area home, acreage property, luxury residence, ADU property, or home with unusual characteristics, the analysis can become considerably more involved.

An automated estimate and a professional retrospective appraisal serve different purposes.

If an attorney, CPA, fiduciary, or tax professional is asking you to establish a property's historical fair market value, ask them what documentation they need before deciding what type of valuation to obtain.

What If My Brothers and Sisters Inherited the House With Me?

This is another situation we see frequently.

Imagine three siblings inherit their parents' home.

One wants to sell it.

One wants to keep it as a rental.

The third would like to buy out the other two and keep the house.

Now there are actually several issues to work through.

Before the siblings can have a meaningful discussion about a buyout, everyone needs a reasonable understanding of what the property is worth.

For example, if the property is worth $1,500,000, that gives the family a starting point for discussions about the property's equity and each person's interest.

But the appraiser doesn't determine how much each sibling is legally entitled to receive.

We determine the value of the real estate.

Attorneys, CPAs, trustees, fiduciaries, and the beneficiaries themselves can then address the ownership, tax, and distribution issues based on their respective roles.

An independent appraisal can be particularly helpful when family members have different opinions about the property's value.

What If One Sibling Wants to Buy the Others Out?

This is another reason an inherited property may need an appraisal.

Suppose three siblings inherit a house equally and one sibling wants to keep it.

Using an online estimate or someone's personal opinion of the value can create unnecessary disagreement.

The sibling keeping the property naturally doesn't want to overpay.

The siblings selling their interests don't want to accept less than their fair share.

An independent residential appraisal can give everyone a neutral starting point.

From there, the parties and their professional advisors can determine how the actual buyout should be structured.

Should I Sell, Rent, or Keep an Inherited House?

There isn't a universal answer.

Before deciding, I'd want to understand at least:

What is the property worth today?

Is there a mortgage?

What would it realistically rent for?

What repairs or improvements does it need?

What are the ongoing property taxes, insurance and maintenance costs?

Are multiple people inheriting the property?

Does anyone want to live there?

What are the potential tax consequences of selling?

Do you actually want to own this property?

That last question matters.

Sometimes a property is an excellent investment but doesn't fit the beneficiary's financial situation.

Other times, a family may be tempted to sell a valuable property quickly simply because managing it feels overwhelming in the months after someone's death.

There isn't a right answer that applies to everyone.

Get the information first. Then make the decision.

What About California Property Taxes?

If the inherited property is in California, there's another issue you should understand: Proposition 19.

California's rules regarding parent-child and grandparent-grandchild property transfers changed significantly under Proposition 19.

A transfer of a family home to a child doesn't automatically mean the property's existing taxable value will remain unchanged.

Whether an exclusion is available can depend on factors such as how the property is used, whether it qualifies as a family home, timing, value limitations, and other requirements.

This is separate from the federal income-tax concept of stepped-up basis.

That's an important distinction:

Property-tax reassessment and federal income-tax basis are not the same thing.

If you're inheriting California real estate, talk with the appropriate tax or legal professional about how Proposition 19 applies to your specific situation.

What Should I Do First After Inheriting a House?

You don't need to know everything immediately.

Start by getting organized.

Find the estate or trust documents and determine who has authority to make decisions regarding the property.

Gather information about the home, including the mortgage, property taxes, insurance, improvements, prior purchases, and other relevant records.

Talk with the estate attorney, trustee, CPA, or other professionals involved.

And ask one important question:

Do we need to establish the property's fair market value as of the owner's date of death?

If the answer is yes, that's when you should speak with a qualified real estate appraiser about a date-of-death appraisal.

It's generally better to identify the valuation requirement before selling, substantially renovating, or making other major changes to the property.

What Information Does an Appraiser Need?

If you're contacting an appraiser about an inherited property, don't worry if you don't have everything.

Start with:

• Property address

• Name of the deceased property owner

• Date of death

• Your contact information

• Attorney, CPA, trustee, or fiduciary information, when applicable

• Information about significant renovations or additions

• Any photographs or records showing the property's condition around the date of death

• Any important deadlines

One of the most useful things you can tell us is why the appraisal is needed.

That allows us to understand the assignment before beginning the valuation.

Inheriting a Home Is Different From Buying One

An inherited house isn't always just another piece of real estate.

It might be the home where you grew up.

There may still be family photographs on the walls, furniture in the rooms, and decades of belongings that someone now has to sort through.

At the same time, there are practical decisions that eventually have to be made.

You don't need to make all of them at once.

From the appraisal side, our role is relatively straightforward.

If you, your attorney, CPA, trustee, fiduciary, or other advisor needs to know what the property was worth on a particular date, our job is to independently research the property and market and develop a credible, well-supported opinion of value.

That doesn't decide whether you should sell the home.

It doesn't determine your taxes.

And it doesn't decide how an estate should be distributed.

It simply gives you and the professionals advising you an important piece of information so you can make those decisions with a clearer understanding of the real estate involved.

Need an Appraisal for an Inherited Property?

Nimbus Valuations provides residential date-of-death appraisals, retrospective appraisals, inherited-property valuations, and estate and trust appraisal services throughout the San Francisco Bay Area.

If you've inherited a property and aren't sure what type of appraisal you need, you can contact us with the property address, date of death, and a brief explanation of the situation. We can help determine the appropriate appraisal assignment before getting started.