Daniells Harrison Chartered Surveyors regularly deal with probate valuations for property. Rob Hurlstone, Head of Residential General Practice and RICS Registered Valuer explain the steps involved in property probate valuations and why it’s crucial not to cut corners.
The probate process
When someone passes away, the executor of their will needs to get a ‘grant of representation’, commonly known as probate, in order to have the legal right to deal with their estate and pass on their assets as set out in their will.
To do this, their entire estate needs to be valued which includes money, property and possessions. If the estate value exceeds Government proscribed limits a valuation must be undertaken for Inheritance Tax purposes and reported to HMRC even if the beneficiaries are not planning to sell any of the estate.
The important point about probate is the value of the deceased person’s property must be calculated based on the value on the date of the person’s death. It’s not a future prediction of the price but what it would fetch in today’s market.
For probate purposes, the property’s value is defined as its open market value. When calculating the open market value of a house, a flat or land for probate, our surveyors consider a number of factors that could affect how much it’s worth. These might include any development opportunities on the land, repairs required to the property and recent sales of similar properties in the area. Any peculiarities (such as a buyer desperate to purchase the property and willing to pay well over the odds) should be ignored.
HMRC advises that there may be something about the property that makes it particularly appealing, such as an unusually large garden or access to other development land. “If it has features that make it more attractive to buyers, the valuation may need reflect this,” it says. Equally, though, if the house is in a poor state and needs repairs, the person doing the valuation should consider reducing the value to take this into account.
Why use a RICS surveyor for a probate property valuation?
HMRC “strongly recommends” that people use a professional valuer such as a RICS Chartered Surveyor to make sure you get an accurate value for the property. Property valuations can be complex and getting them wrong can lead to HMRC disputing your inheritance tax liability. If HMRC believes the executors have been “negligent” in the way they have done the valuation, the estate could end up being landed with a fine of up to 100% of the extra liability.
Valuations can be provided by an estate agent, often free of charge. These are more likely to be challenged by HMRC than a formally prepared report by a Chartered Surveyor. An estate agent may not value to the same guidelines as a Chartered Surveyor who will have to value in accordance with “red book “ requirements as prescribed by the RICS.
Note also that you may be able to claim the surveyor’s valuations costs back from the estate.