A person’s property is often the largest asset that they will leave behind and it is important to value it accurately during the probate process.
We look at the best methods to determine the value of a probate property depending on circumstances including an overview of time, cost and accuracy to help you make an informed decision about which route is best for you.
The ‘personal representatives’ of the deceased are ultimately responsible for valuing the property, and other parts of the estate.
“A person’s property, money and other positions are collectively known as their ‘estate’ when dealing with inheritance”
The ‘personal representative’ will usually be the executor, or executors, named in the will. In cases where no executor is named an administrator will be appointed.
It is necessary to value the property and other assets, and also to identify any outstanding debts and liabilities in order to apply for a ‘grant of representations’ also known as ‘probate’. If the deceased was the sole owner of the property only when probate is granted can a personal representative sell the property.
Valuing an estate can be a complicated task and you can seek the professional help of a solicitor to help you with this undertaking.
In cases where value of the estate is going to surpass the inheritance tax (IHT) threshold of £325,000 an accurate valuation is a necessity. Any inaccurate valuation could be challenged by HMRC leading to an investigation, if the investigation finds you negligent in valuing the property you could be fined.
If the value of the estate is going to fall well below the IHT threshold then a less accurate valuation figure can be used but you should still attempt to make it as accurate as you can.
The method of valuing the property for probate will to some extent depend on the overall value of the estate, as previously stated if the estate falls above the tax threshold then it is in all parties best interest for the valuation to be as accurate as possible. For example if the valuation was higher than it should be you would end up paying more inheritance tax than is necessary, and we wouldn’t want that.
It is worth noting here what is meant by the value of a house. For probate purposes the value of the property is the ‘market value’ at the date of death of the deceased. This is what a buyer would be willing to actually pay for it. This can vary from an estate agents valuation which we will get onto later.
If the value of the entire estate (not just the property) is likely to fall well below the £325,000 mark then you could take it upon yourself to do the valuation. You could use tools available to you online such as Rightmove or Zoopla to find the recent sold prices of similar properties in the same area. You could then compare the condition of those properties to yours and make a judgment on whether they would be worth less or more than the property you are valuing. If you know of the purchase price of the property or of recent professional valuations you can also use the nationwide’s house price index calculator to see how much the property has potentially changed in value since it was purchased. If you are not familiar with valuing property this could prove too tricky and at this point you will want to seek the help of a property professional.
You could ask a local estate agent to come around and value the property, the majority will offer this as a free service since they would be hopeful of getting the listing if the property is put up for sale at a later date.
Remember to ask them for a realistic sale price rather than an on market price, estate agents will often inflate valuations in order to secure listing only to drop the asking price once the house is on the market if it fails to get any interest.
It is also a good idea to ask for a valuation from 2 – 3 agents and take the average of them rather than just going on the judgment of a lone agent.
If the value of the estate is going to be very close to the threshold then the best course of action would be to have a probate valuation carried out by a Royal Institute of Chartered Surveyors (RICS) registered surveyor.
The surveyor will visit the property and carry out a detailed inspection following the guidelines laid out by RICS. They will also conduct some additional research into the local market and recent sold prices before sending you a report which will outline their valuation.
There will be a cost involved in this service but HMRC are less likely to challenge a valuation by a certified professional so in the long run the expense can essentially pay for itself.
If the property does not fall into the category of a standard residential property; for example a farm, land or business premises then you will need what is known as a “red book survey” this again needs to be carried out by a RICS registered surveyor but due to the more nuanced and specialist nature requires additional time and expertise.
Perhaps the best way to determine the true value of the property is to secure a sale. Although it is not possible to sell a property until probate is granted, that is when the executor is given the legal powers over the estate, it is still possible to market the property. Although you should bear in mind that any sale agreed before probate is granted cannot legally ‘complete’ and given that probate can take many months (or even longer for complicated estates) a private buyer might be put off by this wait, you may also find estate agents unwilling to take on the property due to this uncertainty around timeframes. There is an alternative to an open market sale however and those buyers won’t be put off by a potential wait and can be in a position to complete as soon as probate is granted.
While the evaluation of an entire estate can take many months to complete you can get a valuation of the property turned around fairly quickly. If you are using local estate agents they will usually be able to view the property in no longer than a week and provide their valuation within a few days after viewing if not immediately.
If going down the surveyor route, to a certain extent when the inspection is booked will depend on yours and their availability, a surveyor will be able to have a valuation to you within a few days to a week of carrying out their inspection.
If you were using a house buying service to secure a sale it would generally take several days for them to finalise an offer which would be subject to survey if you were to accept it.
Generally an estate agent won’t charge for a valuation although some might if you have no intention of selling the property and costs can range from around £50 – £100 although it is worth shopping around several agencies before paying. Prices for a RICS survey for probate valuation purposes can start from around £200 but can reach up to £800 depending on the value and type of property which will determine its complexity.
HMRC is responsible for cases of inheritance tax, they will refer provided property valuations to an executive agency of HMRC known as the Valuation Office Agency (VOA) to carry out an informal assessment of the accuracy of the valuation using data available to them such as previous sold prices of the property or surrounding properties at the time of death.
If the VOA thinks that the market value could differ from the value submitted it can open an investigation and ask for more details from the personal representatives or agent acting on their behalf (such as a solicitor) they may also request access to the property to carry out a physical inspection.
If the VOAs valuation differs from the original figure then they will seek to agree a new value with the executor. If both parties cannot agree on a value then the case could be taken to a tribunal.
The personal representative of the estate is responsible for the security of the deceased’s possessions including property. This means that the property should have adequate insurance in case anything were to happen to it such as vandalism, theft, a burst pipe or a fire. If it is the case that the property will be empty for more than 30 days insuring it can become more difficult and costly due to the increased perception of risk in the eyes of insurance. It is worth shopping around and reading any potential policies carefully to ensure that you are getting adequate cover for your purposes. It is possible to get policies that include cover for legal expenses should the property become occupied by squatters, if this were the case the legal expenses can run into thousands of pounds.
The personal representative cannot legally sell a probate property until you have the ‘grant of representation’ giving them the legal right to administer the deceased estate including the property. It is possible to market the property and even to agree a sale before probate is granted but the sale cannot be completed until probate is granted, which can take many months.
Find out everything you need to know about selling an inherited property by reading our guide.
If the estate qualifies for having to pay inheritance tax this has to be paid 6 months after the deceased passed away. Once the inheritance tax is paid only then can you apply for probate (20 days after you have returned the relevant tax forms to HMRC).
Now you might be thinking that if you can’t sell the property until probate is granted but you have to pay inheritance tax before, how can you pay it. Well when it comes to certain assets such as property you can opt to pay instalments, meaning you will have to make a payment every year which although is interest free for the first payment accrues interest on subsequent payments. Once the property has been sold the remaining balance of the inheritance tax must be paid in full.
Along with the property additional assets need to be valued in order to calculate the gross value of the estate, some of these are as follows;
You will also need to take in to account any gifts the deceased gave to anyone in the 7 years before they passes away and the value of any trusts that they were the beneficiary of.
There are companies out there that will buy your house directly from you and can turn around a sale in a few weeks meaning you can access your inheritance sooner than if you were to have to sell your house on the open market, which could take up to 9 months or more to fully complete, you would also have the peace of mind knowing that you didn’t have a big tax bill hanging over your head for the foreseeable future since you could pay it off in full sooner.
You may have heard of these companies called ‘quick sale’ or ‘we buy any house’ companies and want to avoid them like the plague due to the industry’s negative reputation but there are some very reputable house buying companies out there and they offer a very valuable service in the case of inherited property.
The downside to this service is that you receive less than full market value for the property, in general this is around 80% of the market value but in cases of inheritance, companies qualify for a special stamp duty relief exemption meaning that they can pay up to 85% on probate houses. Some companies will even help with house clearances.
We’ve reviewed the top house buying companies and rated them against our gold standard of best practices, to see our list of top rated house buyers click the button below.
A person’s house is usually the single most valuable asset that they pass on after their death. It is important to ascertain an accurate figure for its worth as it will contribute significantly towards the calculation for inheritance tax purposes. There are several methods that you can use with the most accurate, and thus the most costly being a probate survey from a RICS registered surveyor. If you are having trouble valuing the assets of an estate it might be worth seeking professional help from a probate solicitor.
A house valuation for probate should be the market value of the property i.e. the price that someone would be willing to pay after marketing the property for a reasonable amount of time. This could be lower than an ‘on market price’ valuation that might be given by an estate agent since a property will often be marketed at a higher price initially than it eventually sells for.
While it is not necessary to have the house spotlessly tidy for a probate valuation it is a good idea to have all areas of the property readily accessible to the agent or surveyor so they can assess the true condition of the property and be able to spot any potential issues such as damp or cracking.
How to value an estate – https://www.gov.uk/valuing-estate-of-someone-who-died/check-type-of-estate
Applying for probate – https://www.gov.uk/applying-for-probate/apply-for-probate
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