Valuing Property for IHT - House was on market at time of death

eve1978

Hi all
I have a rather tricky situation after the passing of my mum 8 weeks ago and a unresolved ancillary relief court order from her divorce. I expect I will be posting here a lot over coming months, as there are many layers of complication to her estate. First thing is her estate is comfortably over the threshold for IHT.

Mum owned 2 jointly held properties with her ex husband, one of which has been on the market for 9 years (6 years voluntarily, 3 years as required by court order) and hasn't sold for one reason or another, but mainly to do with tactical blocking by the ex. Also the house is in a very good area but is on a private road with difficult access off a dual carriageway, plus was built in the 60s, is a little dated etc, so interested parties don't come along that often.

Not long (4 weeks) after she passed away a serious buyer materialized and made an offer which was rejected, he then countered twice and has made his final offer.

The ex husband rejected the latest offer as I believe he wants to force the estate to accept a low-ball offer, as he tried with my mother, which I simply won't play along with.

I have accepted the purchaser's offer as executrix, subject to obtaining the grant of probate before completion.

My question at this point is can I use this offer as my open market valuation figure for the property in lieu of a surveyor report? Common sense tells me yes and I plan to discuss with a surveyor and HMRC. The nature of the property make it a difficult task for surveyors to determine value, they tend to view it as a prospective building site and a previous RICS valuation valued it at 20% lower than this offer. I'm concerned that if I instruct a surveyor they will present me with a valuation that is unusable for my purposes.

Many of the conditions of the hypothetical sale appear to be met, apart from the acceptance element, although the estate has accepted with regards to mum's share. My decision to accept springs mainly from the fact that this property has only received 3 offers in 9 years, and to forfeit a buyer is quite a gamble in this context. The last offer in 2015 was for exactly the same amount and I believe the ex rejects because he has no intention to sell.

If anyone has thoughts or experience of such a situation please do advise. Much appreciated.
Eve

Yorkshireman99

eve1978 wrote: »

Hi all
I have a rather tricky situation after the passing of my mum 8 weeks ago and a unresolved ancillary relief court order from her divorce. I expect I will be posting here a lot over coming months, as there are many layers of complication to her estate. First thing is her estate is comfortably over the threshold for IHT.

Mum owned 2 jointly held properties with her ex husband, one of which has been on the market for 9 years (6 years voluntarily, 3 years as required by court order) and hasn't sold for one reason or another, but mainly to do with tactical blocking by the ex. Also the house is in a very good area but is on a private road with difficult access off a dual carriageway, plus was built in the 60s, is a little dated etc, so interested parties don't come along that often.

Not long (4 weeks) after she passed away a serious buyer materialized and made an offer which was rejected, he then countered twice and has made his final offer.

The ex husband rejected the latest offer as I believe he wants to force the estate to accept a low-ball offer, as he tried with my mother, which I simply won't play along with.

I have accepted the purchaser's offer as executrix, subject to obtaining the grant of probate before completion.

My question at this point is can I use this offer as my open market valuation figure for the property in lieu of a surveyor report? Common sense tells me yes and I plan to discuss with a surveyor and HMRC. The nature of the property make it a difficult task for surveyors to determine value, they tend to view it as a prospective building site and a previous RICS valuation valued it at 20% lower than this offer. I'm concerned that if I instruct a surveyor they will present me with a valuation that is unusable for my purposes.

Many of the conditions of the hypothetical sale appear to be met, apart from the acceptance element, although the estate has accepted with regards to mum's share. My decision to accept springs mainly from the fact that this property has only received 3 offers in 9 years, and to forfeit a buyer is quite a gamble in this context. The last offer in 2015 was for exactly the same amount and I believe the ex rejects because he has no intention to sell.

If anyone has thoughts or experience of such a situation please do advise. Much appreciated.
Eve

In this situation you must get a professional valuation by a RICS surveyor. They will probably liaise with HMRC and the district values. You also need paid for professional advice from a solicitor who has experience in this field. Anything else would leave you wide open to a claim from the other party. Trying to DIY in such circumstances would be sheer folly.

eve1978

I have a legal background so I am fairly comfortable DIYing probate for the most part. I have spoken to a number of solicitors and they have provided patchy advice, most have no experience of such a situation.

I am however concerned that surveyors (based on past experience) will provide valuations that are not in keeping with the offer, i.e. too low. The issue is that HMRC may perceive my actions as unconscionable if I do not declare the offer.

Also I should add the original court order is still enforceable and I could force sale if I was so inclined but that is by the by. I am concerned immediately with the valuation question.

Yorkshireman99

An offer is just that and not a valuation. If there is any doubt of the open market value then HMR&C will ask the District Valuer to provide a value. As I am sure you know it is seldom possible to establish a precise value so having a RICS surveyor to negotiate for you is usually an advantage. The only real way to prove it is to auction the property. Then the only question is how much the value has moved since the date of death. As for the lack of acceptable offers over nine years that suggests the expectations were too high as any valuer will tell you. Finally if the property is subsequently sold at a significantly different value from that used for probate then HMR&C will be willing to amend the probate value retrospectively.

As for the solicitors I would looking for one who has expertise in divorce rather than any old High Steet solicitor.

getmore4less

I think the real issue here will be getting the sale to completion.

Buyers for this type of property can often smell the lack of a motivated seller so move on hence the lack of offers.

Divorce and probate are the the worst two areas for non motivated sellers, you are now dealing with both even though it is the same party on one side.

Now you have one how long will the potential purchaser wait if there is a non motivated seller.

I would investigate the next thing that needs doing to enforce the court order that has been lingering for 3 years.

if you have evidence of obstructive tactics lack of offers and now have a buyer then the court may sanction the sale.

A put up or shut up may be a useful step(there is a legal name for these but I can never remember it).

I would still get backup valuations for the case where the sale does not materialize.
I would use HMRC guidance on what to use they will probably want to adjust up anyway if the sale goes through and more IHT is due.

not going to look now, but IIRC there is room for comment on the relevant IHT form to provide more details.

nothing evidences a open market value more than a arms length sale.

20% is not a big difference and if the two latest offers have been similar even though some time apart that is a reasonable indication open market is some where close unless there are some hidden howlers in a survey.

wwl

A genuine offer, especially for a "difficult" property is a far more accurate indication of value than anything a surveyor would come up with, whether HMRC would accept this depends how sensible they are, and if you can shoe that it has been marketsed properly.
I just sold my late mother's place, which was in need of major refurbishment, and the RICS surveryor's probate value was way over what was actually achievable because they didn't take into account that it wasn't mortgageble in its present state, and so only sellable to cash buyers.

Yorkshireman99

wwl wrote: »

A genuine offer, especially for a "difficult" property is a far more accurate indication of value than anything a surveyor would come up with, whether HMRC would accept this depends how sensible they are, and if you can shoe that it has been marketsed properly.
I just sold my late mother's place, which was in need of major refurbishment, and the RICS surveryor's probate value was way over what was actually achievable because they didn't take into account that it wasn't mortgageble in its present state, and so only sellable to cash buyers.

Was this an actual paid for valuation by a RICS surveyor?

eve1978

Thank you all for your feedback. It seems perhaps that the offer, which is an open market offer, combined with one or two RICS surveys is the way to go. The valuation process to my mind is a hypothetical simulation of what we have experienced in actuality. The offer will hopefully carry some weight with HMRC if put to them in a transparent and open fashion. I will make sure that surveyor is briefed on the property's history on the market, and they should take into account.

The completion matter I am not so concerned about, as the prospective buyer has no chain and doesn't have a strict time line. They are very much dream buyer for a probate property. However the other party (ex husband) wants to buy my mother's share and anything less than arms length sale appears to be a risk to the estate. At least not until DV has approved the valuation.

With that all in mind I have a few other queries

How may surveys does HMRC recommend per property?

Is it also the case that HMRC does not always allow downward revision of IHT when properties sell for less than probate valuation?

Does anyone have experience of a HMRC/DV challenge and know the sorts of timeframes involved?

Thanks again
Eve

wwl

eve1978 wrote: »

Is it also the case that HMRC does not always allow downward revision of IHT when properties sell for less than probate valuation?

No. If a poperty sells within 4 years you can claim back the IHT on the difference.
https://www.gov.uk/government/publications/inheritance-tax-claim-for-relief-loss-on-sale-of-land-iht38

wwl

Quote: Originally Posted by wwl
A genuine offer, especially for a "difficult" property is a far more accurate indication of value than anything a surveyor would come up with, whether HMRC would accept this depends how sensible they are, and if you can shoe that it has been marketsed properly.
I just sold my late mother's place, which was in need of major refurbishment, and the RICS surveryor's probate value was way over what was actually achievable because they didn't take into account that it wasn't mortgageble in its present state, and so only sellable to cash buyers.

Was this an actual paid for valuation by a RICS surveyor?

Yes it was.

Yorkshireman99

eve1978 wrote: »

Thank you all for your feedback. It seems perhaps that the offer, which is an open market offer, combined with one or two RICS surveys is the way to go. The valuation process to my mind is a hypothetical simulation of what we have experienced in actuality. The offer will hopefully carry some weight with HMRC if put to them in a transparent and open fashion. I will make sure that surveyor is briefed on the property's history on the market, and they should take into account.

The completion matter I am not so concerned about, as the prospective buyer has no chain and doesn't have a strict time line. They are very much dream buyer for a probate property. However the other party (ex husband) wants to buy my mother's share and anything less than arms length sale appears to be a risk to the estate. At least not until DV has approved the valuation.

With that all in mind I have a few other queries

How may surveys does HMRC recommend per property?

Is it also the case that HMRC does not always allow downward revision of IHT when properties sell for less than probate valuation?

Does anyone have experience of a HMRC/DV challenge and know the sorts of timeframes involved?

Thanks again
Eve

You only need one paid for value by a RICS or equivalent qualification. Note that "value" given free of charge are worth what you pay for them. A competent surveyor will be able to negotiate with the District Valuer. as I am sure you know property valuing is not a precise science. HMR&C will allow amendment of the value for four years. Ask around for a recommendation of surveyor and ask him about his record on negotiating with the DV. As for the offer it really means nothing, unless or until the persons.
signs contract