An inherited property, multiple heirs – and countless questions. This situation leads to serious conflicts in over 50% of cases. This guide provides clear decision-making support for any community of heirs regarding real estate, helping to settle the estate fairly, quickly, and without costly disputes.
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The topic briefly and concisely
A neutral property valuation is the most important basis for avoiding conflicts in an inheritance community and for making fair decisions.
The joint sale of the property is usually the fairest and simplest solution to cleanly divide the estate and resolve disputes.
The forced sale by auction should be avoided at all costs, as it often leads to financial losses of 20-30% of the market value.
Are you facing the challenge of needing to make decisions about a property with co-heirs? You're not alone. An inheritance community is legally a forced community where all actions must be taken jointly, often leading to deadlocks. Without a structured approach, there is a risk of financial losses of up to 30% of the property's value and the destruction of family harmony. This article provides you with a practical decision-making guide that enables your inheritance community to assess the three core options for properties – selling, taking over, renting – based on facts and to find the financially smartest solution for all involved.
Understanding the Foundation: Why Unanimity in the Community of Heirs is Crucial
An inheritance community automatically arises when a testator leaves behind several heirs and no will dictates the division differently. Legally, you are part of a "community bound by the entirety" according to § 2032 BGB. This means the property belongs to all jointly and to no one individually, requiring 100% agreement for decisions. Even everyday administrative tasks can demand unanimous decisions, often leading to a standstill if even one heir obstructs. This legal hurdle is the main reason why a clear decision aid for an inheritance community regarding property is essential. Without it, disagreements quickly escalate. Therefore, the next logical step is to establish a common, indisputable factual basis.
Step 1: Create a neutral property valuation as a common factual basis
Before discussing a sale or takeover, the exact market value of the property must be determined. Emotional value perceptions lead to over 70% of disputes. Therefore, a professional, data-supported property valuation following an inheritance is not a cost factor, but an investment in peace. It serves as a neutral basis for all further steps. A legally binding appraisal costs from around €2,800, but these costs can be offset as a liability of the estate. With an objective figure on the table, payout amounts can be calculated fairly and sales offers realistically assessed. Tools like the Auctoa Inheritance Manager provide you with such a data-based foundation in just a few steps. With this knowledge, the three main options can be evaluated objectively.
Step 2: Analyse the options – sell, cash out or rent?
With a clear market value, you can explore the three core scenarios. Each option carries specific financial and personal implications that every member of the community of heirs needs to know. The decision depends on the goals of all co-heirs: Is it about quick liquidity, preserving the family estate, or generating long-term income? A careful analysis prevents any party from being disadvantaged. Here is an overview of the most common paths:
Sale to third parties: This is the most common solution, as it provides a clean and final financial separation. The proceeds are distributed according to the inheritance quotas.
Buyout of a co-heir: An heir wishes to keep the property and buys out the others. This requires a high financial capability of the heir taking over.
Joint renting: The property becomes a yield object. This creates ongoing revenue but also requires joint management with at least 10-15% of the annual income held as a reserve.
Sale of one’s own share: Each co-heir can sell their share, but the other heirs have a legal pre-emptive right of two months.
Selecting the right option is the central decision-making aid for a community of heirs regarding real estate and should be based on the financial goals of all parties involved.
Option A: The joint sale as the cleanest solution
The sale of the property on the open market is the fairest and simplest solution for most communities of heirs. The purchase price achieved is an objective measure that ends disputes about the true value. The proceeds are distributed according to the inheritance shares after deducting all costs, such as for property valuation or minor repairs. The speculation period is important: If less than ten years have passed between the original purchase by the deceased and the sale, the profit must be taxed. An exception applies if the deceased inhabited the property in the year of sale and the two previous years. A sale also frees all heirs from ongoing costs such as property tax and maintenance, which can quickly amount to several thousand euros per year. This route offers a clear conclusion, but what happens if an heir is determined to keep the family home?
Option B: A co-heir takes over the property and pays off the others
If an heir wants to take over the property alone, they must pay off the other co-heirs. The basis for the amount to be paid is the previously determined market value. For example, if the value of the house is 400,000 euros and there are four heirs with equal shares, the heir taking over must pay 300,000 euros to their three co-heirs. This process, known as partitioning, must be notarised. The advantage is that the property remains within the family. The challenge is financing the payment sum, which often requires taking out a loan. In addition, no real estate transfer tax is typically incurred when taken over by a co-heir, which offers a cost advantage of up to 6.5% compared to an external buyer. When neither a sale nor a takeover is an option, joint management becomes the focus.
Option C: Renting out together as a long-term investment
Retaining and renting out the property can be an attractive source of passive income. However, this turns the community of heirs into a landlord society, which brings new obligations. All decisions, from tenant selection to repairs, must still be made collectively. This poses significant potential for conflict in the future. Additionally, all co-heirs must declare the rental income for tax purposes. Another disadvantage: A rented property often fetches a sale price 15-25% lower than a vacant one. Before choosing this path, you should clearly define the management tasks. These include:
Drafting a legally compliant rental agreement.
Conducting the utilities billing (annually).
Establishing a maintenance reserve (at least 1 Euro per square metre per month).
Regularly reviewing possibilities for rent increases.
Organising and paying for repairs and maintenance.
If an agreement on none of these three options is possible, the last and worst alternative looms.
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If the heirs cannot agree, any co-heir can apply for a partition auction at the competent district court at any time. This is a form of forced auction intended to convert the indivisible property asset into divisible cash. However, such an auction often only achieves 70-80% of the actual market value. In addition, there are significant court and expert costs that further reduce the proceeds. The process can take over a year and often destroys family relationships permanently. Therefore, the partition auction should be seen only as a means of applying pressure to find a solution and not as a real strategy. A professional heir community mediation can help avoid taking this disastrous step. A structured approach is always the better way.
Conclusion: Proactive planning and data-driven decisions are key
What happens if an heir lives in the inherited house and does not want to move out?
If an heir lives in the house, the other co-heirs must agree. If they refuse to pay a compensation for use (similar to rent) or to compensate the others, the co-heirs can file a lawsuit for an agreement or, as a last resort, apply for a partition sale to dissolve the community.
What taxes are incurred for an inheritance community on a property?
Two main taxes may apply: 1. Inheritance tax, which each heir must pay on their share if it exceeds their personal allowance. 2. Capital gains tax (income tax) if the property is sold at a profit within ten years of being purchased by the decedent and was not owner-occupied.
Is a valuation report for the property mandatory?
An official valuation report is not legally required but is highly recommended. It is the only way to determine an objective value, which serves as the basis for compensating co-heirs, distributing the sale proceeds, and for submission to the tax office to avoid excessive inheritance tax.
How long does it take to dissolve an inheritance community?
The duration depends on the heirs' agreement. With a quick, amicable sale, the dissolution can be completed in 3-6 months. In the case of disputes, especially when a partition sale is necessary, the process can extend over several years.
What is the difference between selling a share of inheritance and selling a property?
In selling a property, the inheritance community sells the house to a third party. In selling a share of inheritance, an individual co-heir sells only their share of the entire estate (including the property) to another co-heir or an external investor. The inheritance community initially remains in place.
Can a partition sale be prevented?
A requested partition sale cannot be completely prevented, but it can be delayed. Co-heirs can apply for a temporary suspension for six months to gain time for an amicable agreement. The best way to prevent it is through a proactive agreement on sale or acquisition.
Additional useful links
Wikipedia provides a comprehensive overview of the legal situation of a community of heirs, where multiple heirs jointly manage an estate.
The Federal Statistical Office of Germany (Destatis) provides a press release with data and statistics on inheritance and succession.
The Deutsche Bank published a study from 2024 on inheritance and succession in Germany.
Statista offers a forecast on the number of inherited properties in Germany.
The Federal Chamber of Notaries (BNotK) provides a glossary of the Wills Registry with explanations of relevant terms related to wills and inheritance.
The Notaries’ Chambers offer a guide on the topic of communities of heirs, providing assistance and information for members of a community of heirs.
Wikipedia explains the basics of inheritance tax in Germany.
The Empirica Institute offers a study or publication on the topic of inheritance.
Wikipedia provides general information on the topic of inheritance.
Wikipedia describes the transfer of a share in an inheritance.
FAQ
What happens if an heir lives in the inherited house and doesn't want to move out?
If an heir lives in the house, the other co-heirs must agree. If the heir refuses to pay a usage fee (comparable to rent) or to compensate the others, the co-heirs can sue for a settlement or, as a last resort, apply for a partition auction to dissolve the community.
What taxes apply to a community of heirs for a property?
There may be two main taxes: 1. The inheritance tax, which each heir must pay on their share if it exceeds the personal allowance. 2. The speculation tax (income tax), if the property is sold at a profit within ten years of being purchased by the decedent and was not used by them.
Is a valuation report for the property mandatory?
An official appraisal report is not legally required, but it is strongly recommended. It is the only way to determine an objective value that serves as a basis for paying out co-heirs, distributing the proceeds from a sale, and submitting to the tax office to avoid excessive inheritance tax.
How long does it take to dissolve a community of heirs?
The duration depends on the agreement of the heirs. In the case of a quick, mutual sale, the settlement can be completed in 3-6 months. In disputes, especially if a partition auction becomes necessary, the process can extend over several years.
What is the difference between selling an inheritance share and selling a property?
In the sale of real estate, the community of heirs sells the house to a third party. In the sale of an inheritance share, an individual co-heir only sells their portion of the entire estate (including the property) to another co-heir or an external investor. The community of heirs initially remains intact.
Can a partition auction be prevented?
A requested partition auction cannot be completely prevented, but it can be delayed. Co-heirs can apply for a temporary suspension for six months to allow time for an amicable settlement. The best way to prevent it is through a proactive agreement on sale or takeover.
