How to Sell an Inherited House in Colorado: Complete Guide

Understanding Property Inheritance in Colorado

When someone passes away in Colorado, their property typically transfers to heirs through one of several mechanisms:

• Will: If the deceased had a will, it specifies who inherits the property
• Intestate succession: Without a will, Colorado law determines inheritance based on family relationships
• Trust: Property held in a living trust passes directly to beneficiaries without probate
• Joint tenancy: Property owned as joint tenants with right of survivorship passes automatically to the surviving owner
• Transfer-on-death deed: Colorado allows beneficiary deeds that transfer property upon death

Understanding how you inherited the property is the first step in determining what you need to do to sell it.

Colorado Probate Basics

Probate is the legal process of validating a will and transferring assets to heirs. In Colorado, most inherited real estate requires probate unless it was held in a trust or had a transfer-on-death deed.

Types of Probate in Colorado

• Informal probate: The most common type for straightforward estates. Handled by the court clerk without a hearing. Faster and less expensive.
• Formal probate: Required when there are disputes, complex assets, or the will is contested. Involves court hearings and judicial oversight.
• Small estate affidavit: For estates with less than $70,000 in personal property and $70,000 in real property, you may be able to use a simplified process.

Probate typically takes 6-12 months in Colorado, though complex estates can take longer. The good news is that you can often sell the property during probate once you have been appointed as personal representative.

Steps to Sell an Inherited House in Colorado

1. Determine if probate is needed: Check how the property was titled and whether any probate-avoiding mechanisms were in place.
2. Open probate (if required): File the necessary paperwork with the county district court where the deceased lived.
3. Get appointed as personal representative: The court will appoint you to manage the estate, giving you authority to sell property.
4. Get the property appraised: You will need to know the fair market value for tax purposes and to ensure a fair sale.
5. Decide how to sell: Choose between listing with an agent, selling for sale by owner, or accepting a direct offer.
6. Complete the sale: Transfer title to the buyer and distribute proceeds according to the will or intestate succession.
7. Close the estate: File final paperwork with the court to formally close the probate.

Tax Implications of Selling Inherited Property

One advantage of inherited property is the "stepped-up basis." This means the property's cost basis for capital gains purposes is its fair market value at the date of the owner's death, not what they originally paid.

Example

Your parent bought a house for $100,000. At their death, it was worth $400,000. Your basis is $400,000 (the stepped-up value). If you sell for $410,000, you only owe capital gains tax on $10,000 of appreciation, not $310,000.

Colorado Tax Considerations

• Colorado has no state inheritance tax
• Colorado has no estate tax (though federal estate tax may apply to large estates)
• Capital gains are taxed as regular income in Colorado (4.4% flat rate)
• Property taxes must be kept current during the sale process

Note: Tax laws are complex and change. Consult a tax professional for advice specific to your situation.

Your Options for Selling an Inherited House

1. List with a Real Estate Agent

Pros: Potentially higher sale price, professional marketing, agent handles negotiations.

Cons: Agent commission (typically 5-6%), may require repairs and staging, takes longer (average 60-90 days), showings can be disruptive.

Best for: Properties in good condition when time is not a factor.

2. Sell For Sale By Owner (FSBO)

Pros: No agent commission, full control over the process.

Cons: Requires significant time and effort, may get lower offers without professional marketing, still requires repairs and showings.

Best for: Those with real estate experience and time to manage the sale.

3. Sell to a Direct Buyer

Pros: Fast closing (as few as 7-14 days), no repairs needed, no showings, no agent commissions, certainty of sale.

Cons: Typically below full retail market value (though often net proceeds are similar after accounting for repairs, commissions, and carrying costs).

Best for: Properties needing repairs, out-of-state heirs, time-sensitive situations, avoiding the hassle of traditional sales.

Timeline: What to Expect

Here's a general timeline for selling an inherited house in Colorado:

Total timeline: 6-12 months for a traditional sale during probate, or as few as 2-3 months if selling to a direct buyer and expediting the process.