Thoughts on using estate agents rather than surveyor for IHT purposes?

[IHTProbate]

Siblings seem keen on using estate agent quotes for IHT purposes. I have concerns (especially as one of the agents is a chain well known for overvaluing). We are cash poor and wondering if that’s driving the decision. Thoughts? I feel quite strongly that need to have a surveyor - house likely to go above £1m. TIA. Solicitor pretty uncontactable.

For my parents house we were advised by our solicitor to get 3 valuations from respected estate agents and went with the middle valuation (and take the lower end if given a range). That is the figure we put for IHT.
We were told if they were unhappy with the valuation they may ask for a surveyor, but this didn’t happen for us. The house eventually sold for more than that figure so we then had to pay some extra.

As first poster, each time we've used min three estate agents valuations and gone with average.
I don't see the benefit of using a surveyor unless the value is challenged.

I've just paid for a survey. £300 well spent imo

Well, mum has, not me.

You know you can get cheques from the deceased estate for this kind of thing don't you op?

Are you looking for a low or a high valuation?

Fine to use an estate agent as long as you tell them the valuation is for probate purposes. They usually drop the valuation a bit from a marketing valuation.

One estate agent seems to have come up with a Mickey Mouse figure. There is no money in the estate. I just want a realistic number really.

3 estate agent estimate sis what we do for my dads estate thought his was below the threshold. A surveyor will do a red book valuation which can be legally relied upon and if the will was ever contested etc then it could be relied upon.

I think it depends on the complexity of the estate and why there is a disagreement as to whether to use agents or a surveyor?

It’s a simple estate, but there will be IHT. The disagreement seems about the upfront cost.

Are you going to be selling the house soon or keeping ?

I would advocate for a surveyor but if you’re selling asap it coukd be irrelevant.

in theory whatever you lose or gain on IHT is balanced out by eventual capital gains tax

Standard practice to use 3 estate agents and use the middle valuation for IHT purposes.

Our solicitor told us to use 3 estate agents and take the average. As a pp said, explain the valuation is for probate purposes.

Just use the EA valuations, it really makes little difference anyway. When you finally actually sell the property you submit the actual figures to HMRC and they work out what it should have been. They then either add or deduct to the total (or send you/ask you to pay the difference if you choose to pay upfront.)

The problem is that EAs overvalue sometimes which = more IHT
Are they aware it is for probate?
I don't think HMRC refund anything if you sell for less!

We did the same for my MIL. Not that her property was worth anything like £1m. I can't see why you would use a surveyor.

Actually i believe they do - if the sale happens within 4 years, and it's the trustees who deal with the sale.

Yes they do, there is a form online you have to print out and send in. We have just been through this ourselves.

I think they do refund, but charge different interest rates. I think cgt and IHT are different rates too.

You won't need to pay cgt.

Only the proportion that goes over the threshold for iht is taxable. Once the property is sold, then you complete the hmrc form to request a return of any iht that has been overpaid. Annoyingly, this has to be printed and returned by post and cannot be done online, but is otherwise very straightforward.

Always use a surveyor and get a proper Red Book valuation if you are likely to have any kind of issue about payment of tax (if you are over the threshold) because HMRC will want to speak to your surveyor about it. A surveryor's valuation is exactly what it says a formal valuation of what the property is worth.

Estate agents are just having a punt to persuade you to sell with them. Estate Agents are well known to overvalue as a way of getting in the the trade. They all do this to greater or lesser extents so getting an average of three won't help you here because the property will almost certainly be over valued. Who hasn't had the experience of estate agents then telling you it won't sell because the market has turned but it was never going to sell at that price to start with.

The solicitor handling my late MIL's estate just got three estate agents to come round and she took the average of their pricing. This can be a good thing as they're pretty realistic about prices, especially if condition is a factor as it was with us. Surveyor's don't sell houses, so I don't think they'll be much help unless there are serious issues like subsidence and structural faults.
You don't have to pick an agent who tends to overvalue - you can choose anyone you like.

LOL. Ignore this. Anyone who says surveyors don't sell houses obviously doesn't know what they are talking about!

Google "a red book valuation". It is one of the most rigorous sets of standards for valuations and is a formal evidence-based valuation carried out by a RICS surveyor. It is the most reliable form of valuation and is preferred in any circumstance when a valuation is required especially if there is a risk of dispute with HMRC.

I strongly disagree with this, having just been theough thw whole process hmrc were perfectly satisfied with two simple EA evaluations and it was easy to get the overpaid tax returned once the sale was completed. You don't need to spend money on anything fancy, just use the free EA ones.

How big was the discrepancy between EA valuations?

If the house is high value and if the estate is over the nil rate threshold it might still be worth paying for a red book valuation for reasons of cashflow and certainty. For an estate that is below the nil rate band and a house worth £150,000, probably not worth doing. For a higher value estate and a house worth £1 million, it is almost certainly worth doing.

If the average of the EA valuations is too high by £10,000, then an extra £4,000 of IHT would be due within 6 months of the date of death. if it is too high by £100,000 then an extra £40,000 would be due. Even if that ultimately can get refunded, there is a need to come up with the cash in the meantime, unless there is high confidence that the achievable selling price will be lower.

The cost of the redbook valuation might be £1k, and that money is lost, but that might be a better deal than having to pay a higher amount of IHT upfront.

Furthermore, if the house gets sold a few years later at a somewhat higher price than the redbook valuation, that redbook valuation may allow the further uplift in value to get charged at lower CGT rates instead of having a backdated increase to the IHT bill with interest charged additionally on top of that extra IHT amount. With Estate Agency valuations, there may be a higher risk that HMRC will challenge the valuation used for IHT purposes.

Caveat for @IHTProbate this is certainly not advice - I have no qualifications in this area - I just just have a certain (some would say unhealthy) level of curiosity about matters related to estate planning and IHT, and that prompted me to think about your scenario and to discuss it with ChatGPT. But, depending on the sums at stake, it may be worth checking with your own advisors and/or reading other posters who will certainly take delight in tearing to shreds the many flaws they are likely to find in my reasoning.