You Inherited a House in Auburn: Rent It, Sell It or Hold It

The keys are in your hand, but the house is not yet yours to lease

A parent or relative has died, and you are standing in a quiet house in Auburn with a stack of mail on the counter. Siblings have opinions. A neighbor asks whether it will be for rent. The first decision is not rent or sell; it is who has the legal right to make either choice.

The California courts' guide to property after someone dies explains that how the property was owned decides the process. Some homes pass without going to court. Others need a judge to appoint a personal representative first.

Who can sign a lease or a listing

Look at the deed and any trust papers. The answer usually falls into one of these groups, based on the courts' simple transfer page and formal probate overview:

• Living trust: the successor trustee named in the trust acts under the trust document, without probate court.
• Joint tenancy: the surviving joint owner gets the property.
• Transfer-on-death deed: the property can pass to the person named on it.
• Probate: a judge appoints a personal representative (an executor or administrator). The courts say formal probate typically takes 9 to 18 months, sometimes longer.
• Small estates: some estates under a set value can use simpler procedures; the courts publish the current limits on form DE-300.

Renting while probate is open

A personal representative can rent out estate real estate in limited ways without a court order. Under Probate Code 9941, if it is to the estate's advantage, the representative may lease without court authorization when the rent does not exceed $5,000 a month and the term does not exceed one year, or when the lease is month to month at any rent. A longer or larger lease needs a court order under section 9942.

Most property managers ask to see the paperwork that shows authority, such as the trust and a trustee certification or the court's letters, before signing a management agreement. Until someone holds that authority, hold off on signing anything with a tenant or a buyer.

Property tax: what Prop 19 does and does not protect

A death is usually a change in ownership for property tax. The Board of Equalization's Prop 19 page says the parent-child exclusion now covers a family home that was the parent's principal residence and becomes the child's principal residence, or a family farm. A transfer of a rental home between parents and children does not qualify. At least one heir who receives the home must apply for the homeowners' or disabled veterans' exemption within one year of the transfer.

Even a qualifying family home has a value cap: the excluded amount is the current taxable value plus $1,000,000, adjusted every two years. And if the heir later moves out, BOE says the home gets a new taxable value as of the next lien date. In plain terms, if the house becomes a rental, plan on a reassessed tax bill.

Siblings do not all have to move in. BOE says that when a family home goes to two children, the exclusion can apply as long as at least one of them lives there as a principal residence and files for the exemption within a year, with the other requirements met.

File the change in ownership statement on time. BOE's change in ownership FAQ says that after a death with no probate, it is due within 150 days of the date of death; with probate, it is due when the inventory and appraisal is filed.

Income tax: the value at the date of death

IRS Publication 551 says the basis of inherited property is generally its fair market value on the date of death, or on the alternate valuation date if the estate's representative chooses it. California is listed as a community property state, where both halves of community property generally take a new basis when a spouse dies. IRS Publication 544 adds that inherited property is treated as held for more than one year, however long you actually own it.

Keep a written record of that date-of-death value, such as an appraisal, because it is the starting point for gain if you sell and for depreciation if you rent. A CPA can apply these rules to the estate's facts.

An empty foothill house needs attention now

Vacant houses get into trouble quietly. Keep the utilities on so the heat and well pump work, forward the mail, and ask a neighbor to call you if anything looks wrong. Then work through these before you decide anything else:

• Insurance: call the insurer, report the death and that the house is empty, and get the answer in writing. California's standard fire policy in Insurance Code 2071 excludes loss while a building is vacant or unoccupied beyond 60 consecutive days, unless the policy provides otherwise in writing.
• Water and septic: if the house is on a private well or septic system, have licensed providers check them before anyone moves in. A rental must have an approved water supply with hot and cold running water and an approved sewage system under Civil Code 1941.1.
• Fire clearance: Auburn's fuel modification rule (AMC 100.87) applies to anyone who owns or leases a dwelling in a Fire Hazard Severity Zone, and a sale in a Very High zone needs a defensible-space inspection within six months before transfer.
• Lead: if the home was built before 1978, a lease requires the federal lead disclosure and the EPA pamphlet under 40 CFR 745 subpart F.

Choosing a path with the other heirs

Renting can make sense when the heirs agree to keep the house for years, someone is ready to fund repairs, and the reassessed tax bill still leaves room for a reasonable return. Run the full numbers first; the post on calculating the true ROI of an Auburn rental lists the costs owners miss, and the hidden costs of self-managing covers the time side.

Selling is often simpler when heirs need cash, disagree, or live far away. Holding the house empty while the estate settles costs insurance and upkeep with no income. If the house was your own home rather than an inheritance, the rules differ; see rent or sell your Auburn house.

A property manager is the wrong hire if the heirs plan to sell within a few months. If you do decide to rent, SPMG's services page lists what full-service management covers, and a discovery call is the next step.