Key Takeaways
- If you won’t live in the house, California’s tax rules favor selling sooner. The county reassesses an inherited home to market value as of the date of death, and the exclusion that softens the increase requires you to move in within one year.
- Federal stepped-up basis resets your cost basis to the home’s date-of-death value, so appreciation after that date is taxable when you sell.
- Report the death to the county assessor within 150 days. Out-of-state heirs can close without traveling to California.
Inheriting a house is rarely just a real estate decision. You’re facing two: keep it or sell it, and if you sell, how to handle it from wherever you live. This guide starts with the tax rules behind the keep-or-sell choice, then walks through the six steps to sell an inherited house in California, including how out-of-state heirs close without traveling.
Martin Feinberg, a Los Angeles real estate agent with almost 40 years of experience, wrote it for heirs living in another state or country while the house sits empty.
Inherited a home in the area around Los Angeles and need to sell it?
Call Martin 7 days a week at 310.729.6573.
Should You Keep or Sell an Inherited House?
If you won’t move into the house, selling is usually the better financial move. California reassesses an inherited home to market value as of the date of death, and every month you hold an empty house adds property tax, insurance, and upkeep costs. Appreciation after the date of death also becomes taxable gain. The tax rules point toward selling, but family, timing, and the local market still count.
Three things need your attention right away:
- Security. Empty houses draw squatters and vandalism. Many homeowners policies exclude vandalism after 60 consecutive days of vacancy, so call the insurer early.
- Carrying costs. Property tax, HOA dues, utilities, insurance, and maintenance bill monthly whether or not anyone lives there.
- Deadlines. File Form BOE-502-D with the county assessor within 150 days of the death. Penalties may apply to late filings.
Whether to keep or sell comes down to your plans for the house:
- Keep it if you or a sibling will move in within one year (the Board of Equalization (BOE) says only one sibling needs to live there), or you can carry the costs and want future appreciation. Renting the house ends the Proposition 19 exclusion, the parent-child property tax break.
- Sell it if you live out of state, won’t qualify for the exclusion, or co-heirs want cash instead of co-ownership.
How Is Inherited Property Taxed in California?
Two tax rules shape this decision, and both start the day the owner dies. The county reassesses the home to market value as of that date, which usually raises the property tax bill. Federal law also resets the heir’s cost basis to that same value, which largely erases federal capital gains tax on appreciation from before the inheritance.
Proposition 19 and the Reassessment Rule
Since February 16, 2021, Proposition 19 has limited the parent-child exclusion. A death counts as a change in ownership, and the county reassesses the home to market value as of that date, even when it sits in a trust or probate, according to the BOE.
Take a hypothetical home with a $300,000 taxable value and a $1.5 million market value on the date of death. At the 1% statewide rate, the annual tax goes from about $3,000 to $15,000. The county mails a supplemental bill for the increase, and you have 60 days from the notice to appeal.
There is one exception. A child keeps the parent’s lower value only if the home was the parent’s principal residence, and the child moves in and files for the homeowners’ exemption within one year. The exclusion is capped at the parent’s taxable value plus $1,044,586 for transfers through February 15, 2027. Under that cap, the hypothetical home’s taxable value would be $455,414 (about $4,554/year). For absentee heirs, this exclusion rarely applies, and the home is reassessed at full market value.
The Stepped-Up Basis Advantage
The IRS says the basis of inherited property is generally its fair market value on the date of death. Taxable gain is the sale price minus that basis, so appreciation during the parent’s lifetime drops out.
Hypothetically, if the parents paid $200,000 and the house was worth $1.5 million on the date of death, an heir who sells for $1.5 million has no taxable gain from the price increase, before selling costs. Without the step-up, the gain would be $1.3 million.
Property tax resets to the higher value on the date of death, and the tax-free window on appreciation closes the same day. Holding adds a monthly carrying cost, and if the market rises, it adds taxable gain too. Selling locks in the stepped-up basis before either grows.
This is a general explainer, not tax or legal advice. A CPA or tax attorney can run your numbers.
The Process: Steps to Sell an Inherited House in California
Once you’ve decided to sell a house you inherited, six steps take it from legal authority to closing.
Step 1: Obtain Legal Authority to Sell
- Property in a trust: The successor trustee can sell immediately with the trust documents and a successor trustee certification. A trust also generally avoids probate court.
- Property in probate: The executor or administrator must petition the court for authority to sell. The court typically grants it, but California superior courts say a probate case typically takes nine months to one and a half years, or longer. Statutory fees under Probate Code § 10810 run on the home’s gross value, so a $1.5 million house, mortgage or not, generates about $28,000 each for the attorney and the executor.
- Multiple heirs: All heirs must agree and sign the listing documents and sales contracts. Disputes can delay a sale.
Step 2: Prepare the Property for Sale
You have three options:
- Sell as-is. This is fastest and avoids upfront spending, but it almost always lowers the price.
- Make cosmetic updates. Paint, cleaning, minor repairs, and landscaping improve presentation and typically provide a good return.
- Renovate. This can raise proceeds, but it takes capital, time, and oversight.
Most absentee heirs sell as-is or with light updates. Managing major renovations from a distance is a real challenge.
Step 3: Work with a Local Real Estate Professional
Selling inherited property in California from out of state is challenging. Look for an agent with:
- Probate and trust sale experience
- Deep knowledge of the local Los Angeles market
- Willingness to coordinate with out-of-state sellers
- A network of contractors and cleanout services
- Strong marketing and negotiation skills
The right agent handles pricing, showings, and negotiation for you.
Step 4: Price the Property Strategically
Are you trying to sell as fast as possible? Absentee sellers often want to close quickly and avoid ongoing expenses. But pricing too aggressively leaves money on the table. That’s why many inherited properties sell below market value. Our team runs a comparative market analysis of recent neighborhood sales, weighing market conditions, property conditions, your timeline, and competing listings.
Get the date-of-death value from the executor or trustee before you set a price. A sale near that number leaves little taxable gain, and every dollar above it is taxable. The right price typically draws multiple offers.
Step 5: Handle Disclosures, Offers, and Inspections
California requires you to disclose known material defects, even in an as-is sale. The Transfer Disclosure Statement lets you mark items you have no knowledge of, but inspect thoroughly first, because undisclosed known issues can create liability after closing.
Your agent presents each offer, and you compare price, contingencies, financing, and timeline. Buyers typically order home and pest inspections, then request repairs or price cuts. If the lender’s appraisal comes in low, the price may drop, or the buyer may add cash.
Step 6: Close the Sale
Out-of-state sellers can close without traveling to California, but the deed must be notarized. You can sign before a mobile notary where you live, or use remote online notarization with a notary commissioned in a state that allows it. California-commissioned notaries can’t perform remote online notarization yet, according to the National Notary Association, though recorders accept out-of-state remote notarizations in counties that e-record. Confirm the method with your escrow officer before you sign.
Sellers typically pay:
- Agent commission (negotiable, and since August 2024 sellers aren’t required to pay the buyer’s agent)
- Title insurance (in some counties)
- Transfer taxes
- Negotiated repairs or credits
- Prorated property taxes
- Outstanding liens or judgments
Proceeds arrive by wire after escrow closes. Send your CPA the settlement statement so the gain is measured against the stepped-up basis.
Working with Martin Feinberg: Expertise in Inherited Property Sales
Whether you’re still deciding or ready to sell, an inherited house in Los Angeles goes more smoothly with an agent who understands the local market, probate and trust sales, and out-of-state clients. With almost 40 years of experience, Martin Feinberg has guided countless families through inherited property sales. We understand the emotional complexity of selling a family home. We also know the financial pressure of mounting carrying costs. Our service includes:
- Accurate Property Valuations: Deep knowledge of Los Angeles neighborhoods, whether you’re considering selling in Culver City, Santa Monica, or downtown LA
- Vendor Coordination: Cleanout, repairs, inspections, and staging while you stay in your home state
- Estate Sale Expertise: Probate court requirements and trust sale processes
- Tax-Smart Guidance: Working with your tax professionals to optimize timing and minimize capital gains exposure
- Clear Communication: Regular updates regardless of time zone
- Proven Marketing: Professional photography and targeted marketing
If you’ve inherited property in Los Angeles and you’re wrestling with whether to keep or sell, or you’re ready to move forward with a sale, we’re here to help. Contact Martin Feinberg for a complimentary consultation and property evaluation. Let’s discuss your inherited property and develop a strategy that aligns with your goals.
Please text 310.729.6573 or email martin@martinfeinberg.com directly for immediate attention.