How Do You Sell a House in a Trust?
You may have heard about creating a trust to hold real estate, but you may also wonder, “How do you sell a house in a trust, and what are the benefits?” If you’ve researched the process, you know it involves more than simply handing the deed to the property and receiving payment. Selling a house owned by a trust can be a complex process, but with the right guidance, it can be done.
But what are the exact steps? And much more importantly — when is it worth it?
Understanding the Basics of a Trust
A trust is a legal arrangement in which one person, the trust settlor or grantor, transfers assets to another, known as the trustee, who manages the assets. A trust can hold anything from vehicles, bank accounts, valuable items, and real estate.
By the terms established by the grantor, the trustee administers the trust for the benefit of the beneficiaries.
Types of Trusts
There are four main types of trusts:
- Revocable trust: A trust that the grantor can change or terminate during their lifetime.
- Irrevocable trust: A trust that the grantor cannot change or terminate once created.
- Living trust: A trust created during the grantor’s lifetime is often revocable, and a trustee manages the assets in the trust.
- Testamentary trust: A trust created through a person’s will and takes effect after the person’s death. The trustee manages the assets to benefit the beneficiaries.
Revocable (Living) Trust vs. Irrevocable Trust
The assets under an irrevocable trust are safe from creditors and will not be taxed as part of the grantor’s estate after they have passed away. If a home is held in a revocable trust, it will be liable to estate tax when the grantor dies, and creditors may be able to sue the grantor and require the sale of assets to satisfy obligations.
Consequently, the revocable trust grants more flexibility but provides less security, whereas the irrevocable trust gives up flexibility in exchange for more protection.
Steps to Selling a House in a Trust
What do you do if you want to sell a home you acquired in a trust? The first step is to contact the trustee, who is in charge of the trust and may give further information (and may even need to approve the sale).
Get an Appraisal
After you’ve been given the green light, the next step is to get a professional appraisal of the property. An appraisal is a valuation of the property by a licensed appraiser. Not only do prospective buyers want to know they’re getting fair market value for the property, but an appraisal is required to obtain financing and it’s also important for tax purposes.
Notify All Beneficiaries
You must notify the beneficiaries that you intend to sell the house. The beneficiaries of a trust have a vested interest in the property, and any sale of that property could potentially affect their interests.
Get the Necessary Documents
You will need the trust agreement, the deed to the property, and any other relevant legal documents before you sell a house owned by a trust. The transaction must conform to the trust’s conditions; therefore, your lawyer must have expertise in real estate and trust law. Your attorney will review all documentation to ensure the sale is legal and all requirements are met.
Hire a Real Estate Agent
Find a real estate agent with experience selling houses owned by trusts to help you market the property. This includes taking professional photographs, creating a listing, and promoting the property through online listings, social media, and open houses.
Accept an Offer and Close
Review each offer you receive on the property carefully with your real estate agent and attorney to ensure the terms are fair and in compliance with the trust agreement. Once you have received and reviewed offers, the next step is to accept one and close the sale. Last but not least, after the sale is finalized, the trustee will hand over the deed to the purchaser and must also submit a written record of the transaction to the beneficiaries.
Sell Your House in a Trust to a Cash Buyer
While many don’t think so, you can sell a house in a trust to a cash investor. The trustee of the trust would have the authority to negotiate and execute the sale on behalf of the beneficiaries. It’s also important to ensure that the terms of the sale are consistent with the terms of the trust and that all necessary legal requirements are met.
Benefits of Selling Your House in a Trust to a Cash Investor
Selling a house in a trust to a cash investor can be an excellent strategy for benefiting the trust’s beneficiaries.
Here’s why:
- Bypass traditional sales process and avoid lengthy delays, costly repairs, and other expenses
- Greater flexibility and control over terms of the sale, allowing for negotiation of a favorable price and closing date
- Quick and efficient access to inheritance for beneficiaries
- Ability to use the sale proceeds for beneficiaries’ financial goals and needs
- Potential for reduced tax liability compared to traditional sales
- Preservation of privacy compared to the public probate process
- Asset protection for assets in the trust
- Streamlined process managed by the trustee on behalf of the beneficiaries
- Opportunity for the sale to be part of a larger estate planning strategy.
Use a Cash Buyer When Selling a House in a Trust
Selling a house in a trust can seem challenging to many; however, it doesn’t have to be. It all comes down to having a network of professionals with the experience behind their actions to ensure a smooth transaction.
At HomeGo, we developed a better way to simplify the process for motivated sellers. A 30-minute in-home walk-through by one of our licensed real estate agents could mean a same-day cash offer. When you’re ready to sell, look to HomeGo for a fast offer.
