How do you value an inherited property? This is an episode most of us will face during our lifetime. In this blog we find out the background to this dilemma when someone passes on. By reading this article we hope it will give you a clearer understanding on this subject on ‘Probate property.’ When considering how do you value an inherited property, the details become crucial.
When a loved one dies their appointed executor needs to get a ‘grant of representation’, or ‘probate’. They need this to be legally able to deal with the deceased estate, passing on their assets as set out in their will. To do this the entire estate needs to be valued. This includes valuing how much their home and other properties are worth, even if the beneficiaries are not planning to sell any of them.
Understanding how do you value an inherited property can greatly simplify the process.
This needs to be done by an estate agent market appraisal, or a RICS (Royal Institution of Chartered Surveyors). Before obtaining a market appraisal, 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, open up this 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, 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 unoccupied. 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.
It is essential to know how do you value an inherited property to avoid complications during probate.
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. The agent will be bidding to take the property on to their books to gain a sale. The value you submit and any calculations you make must be justifiable, should you be asked by HMRC when submitting the IHT (Inheritance Tax) forms.
When searching for answers on how do you value an inherited property, consulting professionals can help.
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, it may be necessary to pay for a RIC’s for a professional valuation. Examples are, 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.
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. For that reason it is very important to get an accurate representation of its value.
Remember, knowing how do you value an inherited property ensures you are prepared for any financial implications.
RICS surveyors have a royal charter code and their probate valuation is indemnified by insurance.
Is the probate property near the IHT threshold?
Clarifying how do you value an inherited property is vital in estate planning.
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. This is because it is deemed to be more accurate for tax thresholds payments.
For many, the question of how do you value an inherited property is one that requires careful consideration.
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 dealing with such matters, understanding how do you value an inherited property is key.
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.
Asking how do you value an inherited property can direct you to the right resources.
Are you still uncertain on what to do next?
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