What House Valuation Figure for Probate IHT Form - Builder Refurbishment Property

Bootie2025

I am Executor to a relative's estate.  There is a house to sell located in East London. It is a builders total refurbishment project as it is virtually derelict!  There is no wife or children, so the only allowance against tax is £325,000. Additionally, there are investments/savings, so IHT will definitely be due.

I had 3 local estate agents value house at £400,000 to £425,000 and their low value was because the amount of money that a potential purchaser will need to spent to refurbishment.  Houses that are done-up go for around £550,000.  Three different builders offered (obviously) lower around £350,000. 

My dilemma is that I wanted a more accurate figure to put on the Probate Inheritance Tax Form, as the tax is going to be @40%.  Tax has to be paid before Probate is granted, and then the house can be sold. 

I thought a RICS surveyor may be more accurate.  However they valued at £525,000 even though they could see the house was in a poor state, they valued at what it could be sold at in a saleable condition. 

I am none the wiser, what value to put on the tax form, bearing in mind I really don't want to overpay tax @40%! Obviously, I want to secure as much money as possible for the beneficiaries.

I have read that HMRC prefer a RICS Surveyor valuation - well yes, they would do if they are valuing more than the potential sale/sold price!  My chances of securing a refund from HMRC for an overpayment of tax seem time consuming and slim...

Will the HMRC accept the estate agents valuations on a property like this, where it is a much lower value than the average house sale price for the area?

Any help or guidance on this matter would be appreciated or if anyone else has found themselves in a similar situation.

doodling

Hi,

A RICS valuation is generally the best approach.

What did you ask the RICS surveyor to do?  It sounds like they valued it in an "after refurbishment" state but that presumably wasn't what you asked for?  Have you gone backl to the surveyor and clarified that you need a valuation applicable to its current state?

Keep_pedalling

If you under or over pay IHT you can submit an amended value and then either pay the additional tax if you are under or get a rebate if you hav3 over estimated it. Hav3 you been back to the surveyor to explain you need a valuation for the state it is currently in?

Bootie2025

Ok, thanks for advising I can submit an amended value to HMRC when property is sold, so I can at some point get a refund, but I would have preferred to be able to give a more accurate. 

I explained to the RICS surveyor I wanted a Survey for Probate.  They advised that the purpose of these surveys is provide the market value if the property were in a saleable condition.  I did not realise they would value it this way, otherwise, I would not have wasted the money on the survey.

WindfallWendy

I used a couple of local estate agents, who did it for free, knowing that we'd need to sell at some point and they'd like to do the job when the time comes. They are all familiar with probate valuations and its free. Just be warned, you often end up on their books and default email lists.

WindfallWendy

Sorry - I was hasty in my reply. I think you should be fine using the estate agent, realistic figure. As an earlier comment notes, it's based on the value of the estate at the time of death and therefore the condition its in. I hadn't even thought about whether HMRC would seek to compare local house prices, but given how busy/slow they are, I doubt they would even consider it. And if they did, you have the valuations from the agents as your evidence. You can't be expected to be a Phil or Kirsty in this kind of situation. 

Hoenir

Bootie2025 said:

I explained to the RICS surveyor I wanted a Survey for Probate.  They advised that the purpose of these surveys is provide the market value if the property were in a saleable condition.  I did not realise they would value it this way, otherwise, I would not have wasted the money on the survey.

Go back to the firm concerned and query this. 

An RICS Red Book valuation will provide an accurate reflection of what the property would sell for on the open market on the date that the owner died.

doodling

Hi,

Hoenir said:

Bootie2025 said:

I explained to the RICS surveyor I wanted a Survey for Probate.  They advised that the purpose of these surveys is provide the market value if the property were in a saleable condition.  I did not realise they would value it this way, otherwise, I would not have wasted the money on the survey.

Go back to the firm concerned and query this. 

An RICS Red Book valuation will provide an accurate reflection of what the property would sell for on the open market on the date that the owner died.

I second this.

I'm also very confused about what the surveyor means by a saleable condition.  All properties are saleable at the right price, no matter what state they are in (though in worst cases the price might be negative!) and you paid him to tell you what that price was.