probate question

[probatequestion]

don't really know how to put this...

an acquaintance has passed away and the children are keep to sell us their mother's house privately, bypassing the hassle of putting it on the market and paying estate agent's fees. they also won't need to do much clearing up and can leave it in the shocking state it's in. BUT they'll want us to make a decent offer and have not given us any indication of what they're prepared to accept.

we have no idea what they've put the value down as on the probate forms and we want to make a reasonable offer in the right ballpark.

it's a delicate situation - they're obviously upset over the death of their mother, otoh they've told us they're desperate for a quick sale so don't seem to be emotionally attached to the house.

is there anyway of finding out what they've filed the property as being worth?

When my dad took over his dads house the family had to get two estate agents valuations for probate, this also satisfied his siblings financially when the rest of the estate was divided.

Sorry reread post, I realise you're past that stage.

yes, i think they've got the estate agents' valuations. will the agents have modified the valuation according to what it's for? ie. valued it lower for probate? or given a high valuation in the hopes that the property will be sold through the agent with the highest valuation?

My limited experience is they give an indication of achievable value not an on the market price.

Are there similar properties you could do a sold prices search on?

yes we have been looking... problem is very few houses in the area are sold and aren't easily comparable eg. 6 bedroom house vs 3 bedroom house (this house). people tend to buy and then live in them for 30 or 40 years. there's maybe one sold every year or so, hence why we're keen to buy it!

it would be very very handy to know what they've put in their probate form. is there anyway of (anonymously) finding out?

The Grant of Probate will possibly state a value of the entire estate, but not individual assets. It depends on the value of the estate though I think (has been a while since I've taken much notice!)

If the estate is not chargeable to IHT then they may have submitted an estimated value. Why does it matter to you what value they have submitted? I might be being dim (or could be the wine...) but I can't fathom why it would affect your offer?

I would just call an agent and ask them what sort of value they would be likely to attribute to that sort of property in that sort of area - pretend you're the vendor if it helps. At least they'll probably tell you vaguely what it might be worth.

because they said to us that they'd want it to go for more than the probate value.

they told us what the agent's valuations were but we feel they're extortionately high. we've been looking for a house in the area for a while and have a gut feel about what it's worth. but we want it so badly that we're losing perspective. we're hoping that they put the value at the lower end of the spectrum, not the upper end, which we can't afford. not likely is it?

ok so i guess there isn't any way of finding out...

No no no - don't lose perspective!

Decide what you think is (a) fair and (b) affordable for you - then say , 'look, I don't know how much you were hoping to get for it but we love the house and would love to buy it and live there - this is what we are able to offer for it. We won't be offended if you turn it down and decide to go with an agent'.

Often people just want to get the house sold and move on, so you never know.

It seems odd that they want it to go for more than the probate value tho - they'll have to pay capital gains tax if the profit exceeds the annual allowance, which is half the personal allowance for an estate (so not much). Very strange.

i think the house is worth quite a bit. i don't think she was well off so the house will be most of the estate. i'd be surprised if there was much else. she was nearly 90 and lived quite frugally. maybe she stashed gold under the floorboards so they're definitely into inheritance tax territory. i don't think they have to pay capital gains tax as they didn't buy the property.

you're right though - that is what we should do - decide what we feel is right and make the offer.

thanks for taking the time to reply both of you

You could take a few photos and go into an agent and ask outright. It's in their interests to befriend you in most areas buyers are hard to come by so they'll probably want your details to add to their lists.

"i don't think they have to pay capital gains tax as they didn't buy the property."

Sorry but that's not how it works. You get an 'uplift' on death - so you pay IHT if any is due on the probate value (but no CGT even if the deceased bought it for £1 and it's worth £200,000 on death), then if you sell it for more any profit is assessed to CGT agains the vendor (either the executors or the beneficiaries if it is transferred to them before sale).

(Ex-probate solicitor)

ahaaaa that's very interesting!!

but isn't inheritance tax 40% and capital gains tax 28%? so it would make sense to put a low value down so you'd pay less tax overall? i'd imagine that the HMRC would be on the lookout for that sort of thing so they couldn't be silly about it.

also, are they allowed to sell it to us before they get probate?

thank you for the info. i feel i should be paying you £250 consultation fee...

ANTagony, good idea, but i think the agents would recognise it and i'd probably be none the wiser. it's a very small area!

They can't complete on a sale without a Grant of Probate although they can market it for sale and accept an offer.

Returning a lower value for IHT purposes is fraud - and if the estate is taxable, someone called the District Valuer will investigate the value returned and 'approve' it for IHT purposes - so it would be quite hard (though probably not impossible!) to save money in the way you suggest. In my experience, if the estate is taxable, an estimated value will not be sufficient for IHT purposes and the Revenue (and District Valuer) will require a formal valuation. They may query the formal valuation if they don't agree with it - although not sure if they can substitute their own value (think they can but it's never happened to me - I've always had my valuations agreed!)

i see. very helpful, thank you!

so if they end up selling it for less than the valuation do they get a rebate on the tax or is the tax bill paid when the assets are liquidated?

You can submit a revised valuation and get a rebate on IHT paid but only if you can show the sale value was the correct value (you don't get anything back if property prices go down between submission of your papers and the sale - only if the sale value accurately reflects what the probate value 'should' have been - you're more likely to succeed with this sort of argument where the property is unusual and difficult to value I would think).

IHT on property can be paid in instalments over 10 years, but becomes due in full if the property is sold. You can choose to pay up front if you prefer, although the interest rate applied is not commercial and intended only to reflect the delay in payment (so more closely reflects the rate that would apply to savings in the bank) so no advantage to doing so.

If you're paying that much for a property, you'd be barmy not to get your own valuation. Why skimp on such an investment?

thank you very much. i think we'll make what we feel is a good offer, and if they refuse then let it go on the open market. we know what our budget is so that's the bottom line really. if we can't afford it, and someone else can, then that's the way it goes. it's my gut feel that it's been grossly overvalued, so it might go in our favour to go on the market anyway.

thanks everyone for taking the time to reply.