Inherited a Sarasota Home? Your Complete Guide to Probate, Taxes, and Whether to Sell Now or Wait

0:00Welcome back to my real estate podcast with David Liberatore. I'm your host. And today we're diving into something that affects a lot of people, but doesn't get talked about nearly enough.

0:10What to do when you inherit a home here in Sarasota. David, thanks for being here. This is a topic that I think a lot of our listeners are either dealing with right now or will deal with at some point.

0:21So I'm really glad we're covering it. Hey, thanks for having me. Yeah. Inherited property is such a unique situation because it combines real estate decisions with legal and tax considerations all at once.

0:33Most people inherit a home and they're not quite sure where to even start. Do they keep it? Do they sell it? And if they do sell, when's the right time?

0:42There's a lot to unpack. Right. And I think that's the thing. It's not just a real estate question.

0:47You've got probate, you've got taxes, you've got emotional attachments sometimes. So let's start at the very beginning. When someone inherits a property here in Sarasota, what's actually the first step they need to take?

0:59Like before they even think about selling. So the first thing is understanding the probate process. In Florida, if the property goes through probate, which it often does, you can't actually sell it or make major decisions about it until the probate is settled.

1:15That process can take anywhere from a few months to over a year, depending on the complexity of the estate. During that time, you're kind of in a holding pattern. You might still have mortgage payments, property taxes, insurance, all those expenses keep coming, so understanding where you are in the probate timeline is crucial before you make any selling decisions.

1:36Oh, wow. So you're saying people could be paying all these expenses while they're just waiting for probate to clear? That's a real financial consideration.

1:46And I imagine that factors into whether someone should sell quickly once they can, right? Exactly. And here's where it gets interesting.

1:53There's something called a step up in basis. When you inherit a property, the tax basis essentially resets to the fair market value on the date of death. So if your parent bought a home for $200,000 and it's worth $500,000 when they pass, your new basis is $500,000.

2:13That's huge because if you sell shortly after inheriting, you avoid capital gains taxes on that appreciation. But if you hold it and it appreciates further, then you'd owe capital gains on the new appreciation.

2:28That's one of the biggest reasons to consider selling sooner rather than later from a tax perspective. Okay, that's a game changer. So the step up in basis is basically a huge tax advantage that you only get at the moment of inheritance.

2:43Once you inherit it, the clock starts ticking in a way. But then there's also the emotional side, right? Some people inherit a family home and they're not thinking about taxes. They're thinking about memories.

2:56How do you navigate that conversation with clients? That's real and I always acknowledge it, but I also help people separate emotion from financial reality. Sometimes keeping an inherited property makes sense.

3:09Maybe it's in a premium area like Golden Gate Point or Laurel Park where property values are strong, or maybe you have family members who want to live there, but if you're inheriting a property you don't want to live in, don't have family for, and it's costing you money every month, holding onto it for sentimental reasons can actually hurt you financially.

3:29I always say, honor the memory in other ways, but let the property work for you or someone else who will appreciate it. That's really thoughtful. So let's talk about the actual timing question.

3:40You mentioned the step up in basis and how that incentivizes selling sooner. But are there situations where waiting actually makes sense? Like what if the market is down right now or the property needs work? Great question.

3:53So if the property needs significant repairs, you might want to get those done before selling. That can actually increase your sale price and net proceeds. But here's the thing.

4:04You're still paying carrying costs while you're doing those repairs. We usually run the numbers. Does the repair cost plus the carrying costs over the next six months get you a better net result than selling as is sometimes yes, sometimes no.

4:20As for market timing, look, nobody can predict the market perfectly, but in Sarasota, we've got a pretty strong market fundamentally. I usually recommend people focus on their personal financial situation rather than trying to time the market.

4:35The step up in basis advantage is real and immediate. Waiting means you lose some of that advantage and you're paying expenses the whole time. That makes total sense.

4:46And I imagine there are also some specific Sarasota considerations, right? Like we've got some unique insurance issues and special assessments in certain areas. Does that factor into the inherited property decision?

4:58Oh, absolutely. Citizens insurance depopulation is a real issue for some properties here. If you inherit a condo or a home in an HOA, you need to find out if they're pending special assessments.

5:13I actually covered this in another piece we did. Special assessments can really impact your bottom line if you're selling. And if you're in a luxury property over a million dollars, there are other considerations around buyer pool and marketing strategy.

5:27The point is you need to do a full property audit before you decide to hold or sell. What's the insurance situation? Are there assessments?

5:36What's the market like for that specific neighborhood? All of that informs the decision. So it really comes down to doing your homework and understanding all the moving parts, the legal stuff, the tax stuff, the property specific stuff, and then making a decision based on actual numbers, not just emotion or assumptions.

5:56David, for someone listening right now who just inherited a property or is about to, what's the one thing you'd want them to know? Get professional help early. Talk to a real estate agent who understands inherited properties.

6:09Talk to a tax advisor and maybe a probate attorney. The cost of that advice is tiny compared to the mistakes people make by going it alone. And understand your timeline.

6:20The step up in basis is a real advantage that doesn't last forever. Make informed decisions quickly, and you'll be in a much better position financially and emotionally. That's solid advice.

6:31David, thanks so much for breaking this down. I know it's a complex topic, but you made it really accessible. For anyone listening who wants to dig deeper, we've got resources on our site about probate, taxes, and timing your sale, all specific to the Sarasota market.

6:47David, great having you on the show. Thanks for having me. Always happy to help people navigate this stuff.