Probate Property & Estate agents
How to Value an Inherited Property
When a loved one dies their appointed executor needs to get a ‘grant of representation’, or ‘probate’, in order to be legally able to deal with their deceased estate, passing on their assets as set out in their will. To do this the entire estate needs to be valued, which includes valuating how much their home and other properties are worth, even if the beneficiaries are not planning to sell any of them.
Before obtaining an estate agent market appraisal, or a RICS (Royal Institution of Chartered Surveyors) valuation, you can start to research yourself by comparing prices of other properties in the area that are on the market. By using a property comparison website, for example Rightmove or Zoopla (although Rightmove is more user friendly), you can gain a reasonable approximation of what the valuation will be.
To use Rightmove, click on this link: https://www.rightmove.co.uk/house-prices.html and it will open up a page where you can enter the deceased home’s full postcode into the middle cell (then press ‘List view’). Or you can use this link: https://www.rightmove.co.uk/house-value.html, which will give you a more comprehensive report on the house valuation and the area statistics.
Tip: While a deceased property is going through probate it is most likely to be left un-occupied, if this is the case it needs to be properly insured with ‘empty property insurance.’ You may find that when a property is left empty for more than 30 days at a time (be it for probate or any other reason) it can be difficult to get basic insurance cover.
You can also request your local reputable estate agent to value the property, if you take this route get 2 or 3 valuations and then take the average price. An estate agent’s probate valuation/market appraisal is often provided free of charge (as the agent will be bidding to take the property on to their books to gain a sales transaction). The value you submit and any calculations you make must be justifiable, should you be asked by the Inland Revenue when submitting the IHT (Inheritance Tax) forms.
Tip: Remember to be aware that a few estate agents may give you a suggested asking price which is higher than the value. This would lead to an inflated probate valuation, meaning that the beneficiaries could be liable for more IHT than was necessary. To avoid this ask the estate agent to provide an “expected selling price” as well as an “asking price”.
When is it worth paying for a surveyor’s valuation?
If the property is of non-standard construction (unconventional construction or materials or both, for example a prefabricated building, a wooden framed build etc), or is the only one of its type, or there have been no recent sales of similar properties in the area so it’s difficult to establish the market value, it may be necessary to pay for a RIC’s for a professional valuation.
Obtaining a professional valuation may also be the best choice if the property is very dilapidated or is on a large plot of land which could be suitable for development. HMRC are also more likely to accept a valuation provided by a RIC’s written report. In most cases a property is the most expensive asset in a person’s estate and for that reason it is very important to get an accurate representation of its value.
RICS surveyors have a royal charter code and their probate valuation is indemnified by insurance.
Is the probate property near the IHT threshold?
When a property is above the inheritance tax threshold then a RIC’s probate valuation may be necessary. These chartered surveyors follow a set of professional rules set out in the ‘Red Book’, which is issued by the Institution. The Red Book details mandatory best practice guidance for their members undertaking valuation reports. A RIC’s chartered surveyor, after viewing the property, will provide you with a probate valuation report that is fully compliant to the government’s inheritance tax laws. The valuations will take into account the property use, condition and market factors in more depth than an estate agent would. For that reason, as a professional body, some solicitors may insist on a RIC’s probate valuation as it is deemed to be more accurate for tax thresholds payments.
How is ‘property value’ defined?
For probate purposes the property value is defined as its ‘open market value’, which is what the house would reasonably sell for on the open market to a buyer.
When can an inherited property be sold?
When you inherit a property you can only sell it once probate has been granted, although it can be put on the market before that time.