Selling an inherited house in Toronto: to a builder or on the open market?

Key takeaways

• A builder prices the lot by what the zoning allows on it. A family prices the house as it stands. Get both numbers before the estate decides.
• Under subsection 17(2) of Ontario's Estates Administration Act, a sale made only to divide the estate needs approval from a majority of the heirs holding at least one half of the interests.
• Ontario's estate administration tax is $15 for every $1,000, or part of $1,000, of the estate's value above $50,000.
• The Canada Revenue Agency treats the house as sold at fair market value just before death, and the principal residence designation stops at the date of death.
• A clearance certificate protects the estate trustee before the sale money goes to the heirs. The CRA says its review can take up to 120 days.
• Toronto's Vacant Home Tax is 3 percent of the assessed value, with an exemption for up to three tax years after an owner dies, if the estate declares every year.

Two buyers, two ways of pricing the same house

When a parent's house passes to an estate, the family usually asks one question first: what is it worth? In Toronto there are two answers, because two kinds of buyer look at the same property in different ways.

A family buyer prices the house. They look at the rooms, the roof, the basement and the schools nearby, and they compare it with houses that sold on the same street. An older house that needs work gets a lower price from this buyer, because the family will pay for the repairs after they move in.

A builder prices the lot. It looks at the width of the lot along the street (the frontage), its depth, the zoning and how many homes the lot could hold once the old house is taken down. The guide on how builders price land explains that calculation step by step. The condition of the house matters less to this buyer, because the builder plans to replace it.

Many estate houses are the kind a builder looks for: an older house, owned by one family for decades, on a lot where today's zoning allows more homes than the lot holds now. City Council's decision of June 25 and 26, 2025 allows residential buildings with up to six units in the Toronto and East York District and in Ward 23, and those rules are now in force. The multiplex zoning guide sets out what each part of the city allows. That is why an estate can receive a letter or a call from a builder within months of a death.

The right buyer is the one whose offer leaves the estate with the most money after costs, risk and time. Nobody can say which buyer that is without both numbers.

When a builder sale can suit an estate

This section is my own view, from the way I compare offers with owners.

A builder sale can suit an estate when:

• The house needs repairs that no heir wants to manage, or to pay for from the estate.
• The heirs live outside Toronto, or in different cities, and want fewer showings and visits.
• The lot is wider or deeper than the lots around it, sits in an area that allows a sixplex, or faces a Major Street, so a builder can plan more homes on it.
• The family wants to sell the house as it is, once the contents are removed, without staging it.

An open market sale can suit an estate better when the house is in good repair on a typical lot, and families on that street compete for houses like it. In that case a family may pay more for the house than a builder will pay for the land.

There is also a third choice. An estate can list the house on the open market and let builders make offers alongside families. The agent then compares every offer on the same terms: the price, the conditions, the deposit and the closing date. The guide to reading a builder's offer explains each of those terms in plain words.

Compare what the estate keeps

Compare offers on what the estate keeps after the sale, because that is the money the heirs share. These are the points I go through with an owner for each offer:

Every month the estate holds the house adds to its costs. The estate still pays property tax, insurance and utilities, and an empty house may owe the City's Vacant Home Tax, explained below. A builder offer with a higher price and a closing two years away can leave the estate with less than a lower offer that closes in 90 days. Work out the figures for each offer before choosing.

Who signs, and when the heirs must agree

The estate trustee, often called the executor, signs for the estate. Before anyone lists the house or signs an offer, ask the estate's lawyer three questions:

1. Does the estate trustee have the authority to sell, and does it come from the will, from Ontario's Estates Administration Act, or from both?
2. Does the estate need a certificate of appointment from the Superior Court of Justice, often called probate, before the sale can close?
3. Do the heirs have to agree to the sale?

The Estates Administration Act answers part of the third question. Subsection 17(1) says the estate trustee's power of sale under the Act can be used to pay debts and also to divide the estate among the people entitled to it. The heirs do not have to agree, except where the sale is made only to divide the estate. For that kind of sale, subsection 17(2) asks for the approval of a majority of the people entitled to the property, holding together at least one half of all the interests in it.

Two groups need someone to approve for them. The Children's Lawyer can approve for an heir who is a minor. The Public Guardian and Trustee can approve for a mentally incapable person who has no guardian or attorney for property. A judge can also allow the sale without the heirs' agreement.

The same Act sets a time limit. Under subsection 9(1), real property that the estate trustee has not sold or distributed within three years after the death passes to the people entitled to it, unless the trustee registers a notice called a caution in the land registry office. Check that date against the closing date of any builder's offer.

Ontario's estate administration tax

If the estate applies for an estate certificate, Ontario charges estate administration tax on the value of the estate. The Government of Ontario's Estate Administration Tax page, updated June 24, 2026, sets these rules:

• No tax on the first $50,000 of the estate's value.
• $15 for every $1,000, or part of $1,000, above $50,000.
• Real estate in Ontario counts at its value less any mortgage, collateral mortgage or lien on it.
• The estate pays the tax as a deposit when it applies to the Superior Court of Justice. Once the certificate is issued, the deposit becomes the tax.
• The estate representative files an Estate Information Return within 180 calendar days after the certificate is issued.

Here is an example with a value I chose only to show the arithmetic. An estate worth $1,200,000 after its mortgage pays $17,250: that is $15 for each of the 1,150 thousands above $50,000. The estate's lawyer works out the real amount from the full list of assets.

Income tax on the house, at death and after

The Canada Revenue Agency's page on capital gains for someone who died, modified January 20, 2026, sets three rules that matter for an estate house.

1. At death: the person who died is treated as having sold their capital property, real estate included, at fair market value immediately before death. Any gain is reported on Schedule 3 of their final return, unless the house goes to a spouse or common-law partner or another exception applies.
2. The principal residence: if the house was their principal residence, some or all of that gain may be exempt. The legal representative still designates it on the final return with Schedule 3 and Form T1255. The designation applies only until the date of death, and the land that counts is usually limited to half a hectare (1.24 acres).
3. After death: if the estate sells the house later, the gain is generally the difference between the sale price and the fair market value reported on the final return, plus the costs of selling, and it goes on the estate's T3 return. If an heir sells after the house has been transferred to them, the heir reports it on their own return.

So the value at death is used twice: on the final return, and as the starting point for the estate's own sale. Ask an accountant how to set that value and how to keep a record of it.

The clearance certificate

Before the sale money goes to the heirs, the estate trustee should know about the clearance certificate. The CRA's page Apply for a clearance certificate, modified January 20, 2026, says the certificate lets the legal representative hand out assets without the risk of being personally responsible for amounts that the person who died or the estate owes to the CRA. If the representative hands out assets without one and tax is owing, they are personally liable up to the value of what they handed out.

The request is made on Form TX19. The CRA says its review can take up to 120 days when all the documents are provided, and longer if it decides to audit. For a house sale, this means the money from closing may stay in the estate's account for some months. Tell the heirs about this wait early.

An empty estate house and the Vacant Home Tax

While the family decides, the house often stands empty. The City of Toronto's Vacant Home Tax page, modified November 2, 2026, sets the rate at 3 percent of the property's Current Value Assessment (the value used for property tax), starting in 2024. A house counts as vacant when it is empty for six months or more in a tax year, and also when the owner does not file a declaration by the deadline. The declaration for 2026 is due by April 30, 2027.

Two exemptions matter for an estate:

• Death of a registered owner: it can be claimed for up to three consecutive tax years when the owner died in that tax year or in the two tax years before it. The City asks for a death certificate.
• Transfer of legal ownership: it applies when the closing date falls in the tax year and the property passes completely to a new owner. Name changes, and adding or removing an owner, do not qualify.

Here is an example with a value I chose: on an assessment of $1,000,000, 3 percent is $30,000 for one year. That bill can arrive if the estate holds an empty house past the third tax year, or misses a declaration. My post on the Vacant Home Tax for an estate house goes through the declaration in more detail.

A practical order of steps

This order is my own suggestion. The lawyer's advice comes first.

1. Meet the estate's lawyer about authority to sign, the certificate, the heirs' agreement and the three-year date.
2. Meet an accountant about the value at death and the tax on a later sale.
3. File the Vacant Home Tax declaration each year and claim the exemption that fits.
4. Find out what the lot could hold. The guide to checking your lot shows how to read the City's maps.
5. Get an open market value and at least one builder's view of the lot.
6. Compare what the estate keeps from each offer, after costs and time.
7. Share each offer with the lawyer, and keep every heir informed before anyone signs.

There is no obligation to sell to a builder, or to sell at all. Some families rent the house out or move into it. With both prices known, the estate can choose on the facts.

Questions to ask before the estate decides

• Who has the authority to sign, and does this sale need the heirs' approval?
• What was the house worth on the date of death, and who recorded that value?
• Which Vacant Home Tax exemption applies, and for which years?
• What could the lot hold, and would a builder pay more for it than a family would pay for the house?
• How long can the estate wait for a closing, and what does each month cost?

To talk through an estate house before you meet the lawyer, see how I work with sellers, or use the contact page. Before you ask what the house down the street sold for, ask a different question: what would a builder see on this lot?

Frequently asked questions

Is it better to sell an inherited Toronto house to a builder or list it on the open market?

It depends on whether the lot is worth more to a builder than the house is worth to a family. A builder pays for what the zoning lets it build on the lot. A family pays for the house as it stands. Ask an agent to show both numbers side by side, then compare what the estate keeps after costs, conditions and the time each sale takes to close.

Who can sign the sale of a house that belongs to an estate in Ontario?

The estate trustee signs for the estate, usually the person the will names as executor. Before any offer is signed, the estate's lawyer should confirm that person's authority and whether a certificate of appointment from the Superior Court of Justice is needed before closing. Ask the lawyer how long that step takes, because the closing date in any offer has to allow for it.

Do the heirs have to agree before an Ontario estate sells a house?

Sometimes. Under subsection 17(2) of Ontario's Estates Administration Act, a sale made only to divide the estate needs the approval of a majority of the people entitled to it, holding together at least one half of all the interests. A sale to pay the estate's debts does not need their agreement under subsection 17(1). Those rules cover the powers this Act gives, so ask the estate's lawyer what the will itself allows.

What happens if one heir is a child when an estate sells a house in Ontario?

For a sale made only to divide the estate, when a person entitled to share in the house is a minor, subsection 17(2) of Ontario's Estates Administration Act lets the Children's Lawyer give approval for that child. The Children's Lawyer must be satisfied the sale is in the interest of the estate and the people entitled to it. A judge can also allow the sale without the heirs' agreement. Plan for this step before you accept a closing date.

How much estate administration tax does an Ontario estate pay on a house?

Ontario charges no estate administration tax on the first $50,000 of the estate's value and $15 for every $1,000, or part of $1,000, above that. A house in Ontario counts at its value less any mortgage or lien on it. The estate pays the tax as a deposit when it applies to the Superior Court of Justice for an estate certificate.

Is there capital gains tax when an inherited house in Toronto is sold?

The Canada Revenue Agency treats the person who died as having sold the house at its fair market value just before death, and any gain is reported on the final return. If the house was their principal residence, some or all of that gain may be exempt. A later sale by the estate reports the difference between the sale price and that value on the estate's T3 return. Ask an accountant.

Does the principal residence exemption still apply after the owner dies?

The Canada Revenue Agency says the deceased person's principal residence designation applies only until the date of death. A rise in value while the estate holds the house is reported by the estate when it sells. The legal representative still has to designate the house on the final return, using Schedule 3 and Form T1255, even where the whole gain up to death is exempt.

What is a clearance certificate, and does an executor need one before paying the heirs?

A clearance certificate from the Canada Revenue Agency lets the legal representative hand out the estate's assets without the risk of being personally responsible for tax the person who died or the estate still owes. Without one, if tax is owing, that person is liable up to the value of what was handed out. The request uses Form TX19, and the review can take up to 120 days.

Can an inherited Toronto house sit empty without paying the Vacant Home Tax?

Yes, for a limited time, if the estate claims the exemption. The City of Toronto's death of a registered owner exemption can be claimed for up to three consecutive tax years when the owner died in that tax year or the two before it, with a death certificate as proof. The estate still has to declare the house every year, or the City treats it as vacant.

Who files the Vacant Home Tax declaration when an estate house is sold?

It depends on the year. The City of Toronto says that when a house sells within the tax year being declared, either the buyer or the seller can file. When it sells after that year, the seller must file, because only the seller knows how the house was used. For a sale that transfers the whole property, the transfer of legal ownership exemption can cover the year the sale closed.

What happens if an estate does not sell or transfer a house within three years in Ontario?

Under subsection 9(1) of Ontario's Estates Administration Act, real property the estate trustee has not sold or distributed within three years after the death passes to the people entitled to it under the will, or under the rules for an estate with no will, unless the trustee registers a notice called a caution in the land registry office. A caution delays that for three years from its registration.

Should an executor fix up an estate house before selling it to a builder?

A builder that plans to replace the house prices the lot, so new paint, floors or a kitchen do not enter its price. A family buyer may pay more for a house in good repair. In my view, get a builder's number and an open market number before spending estate money on repairs, and ask the heirs and the lawyer before any large cost.

Sources

1. Estate Administration Tax. Government of Ontario. Updated June 24, 2026. Accessed November 5, 2026.
2. Estates Administration Act, R.S.O. 1990, c. E.22. Government of Ontario, e-Laws. Consolidated from January 1, 2022. Accessed November 5, 2026.
3. Taxable capital gains on property, investments, and belongings. Canada Revenue Agency. Modified January 20, 2026. Accessed November 5, 2026.
4. Apply for a clearance certificate. Canada Revenue Agency. Modified January 20, 2026. Accessed November 5, 2026.
5. Vacant Home Tax. City of Toronto. Modified November 2, 2026. Accessed November 5, 2026.
6. Multiplex Housing. City of Toronto. Modified August 26, 2026. Accessed November 5, 2026.

Planning and development potential is property-specific and subject to zoning, approvals, site conditions, municipal review and other due diligence. This guide gives general information. For legal, tax or financial advice, ask your own lawyer and accountant.