Probate property sales: All you need to know

Darren Leggett, Managing Director of Property Ladder Group, provides his views on probate property sales

Property within probate

It is fair to say that over the last 20 years or so, there has been much greater focus on our homes, with television capitalising on our fascination on all thing’s décor, renovation, and auctions in particular.

We have also seen an incredible rise in prices over this time, with the exception of one quite big “dip” which led to the new way lenders had to start qualifying mortgage applications (may I add, thankfully!).

So how can something so many millions of people across the UK be so passionate about, also prove to be the centre of such stress and anxiety?

Well, the short answer is usually because we have either found a property we are desperate to buy and require the equity of our current investment to enable the purchase, or the sale is being made for reasons outside of our control.

Selling property sits quite firmly in the top 5 most stressful things we do as people. So, it goes without saying that when you are required to sell a property following a death, with bereavement also in the aforementioned top 5 list, things can become incredibly unpleasant for the family and friends of the deceased.

When the market is as positive as it has been over recent times, and the economy strong, the housing market thrives. This means that really, the only concern is that the selling representative ensures compliance on behalf of the legal team that introduced them, and that the best buyer at the best price is found.

Now, I say this like it is an easy task, it is not. If it were, I would not have a business. What we do here at PLG ensures service levels go far beyond that of any other agent or service provider out there, but not everyone is aware of us and what we do.

With the recent changes at number 10, the budget issues and interest rates ready to soar, things will be changing in the property market.

What does that mean to those of us working in the Private Client sector though, and equally, what does that mean to the beneficiaries of an estate or someone going into assisted living?

Property prices: Why it is even more important than ever to get it right

With property usually being the largest asset within an estate, there is naturally a great deal of focus on the value – especially when IHT is to be taken into consideration.

At the time of writing this article (October 2022), we are seeing a downturn in the market, with property prices dropping consecutively for the first time in years. But how does that affect someone acting as the executor of an estate?

Date of death valuation

As we know, the valuation of a property for probate is taken at the date of death. In a marketplace that sees a drop in prices, the date of death valuation could actually end up being higher than an end achievable figure.

So where does that leave the estate?

Well, as it stands today, the valuation of an estate includes everything the person owned at the time of their death, minus any debts they had.

If HM Revenue deem a property to be undervalued, they can impose penalties along with an additional tax liability – making the amount payable even greater than if the property is correctly valued. So, there is no leeway or margin for error.

So once again, where does that leave the executor if the date of death valuation is higher than what the property is now valued at?

To obtain the answer to this, we must look at both sides of the same coin.

If a sale price is greater than the figure submitted for probate, HMRC will likely try to substitute the sale price instead of the probate value and recalculate the IHT liability.

On the flipside, a property sold for less than probate value can result in a refund for any Inheritance Tax overpayment that may be made – but this is not guaranteed and if does fit certain criteria, can only be claimed if the property in question is sold within four years of the deceased’s passing.

As IHT forms need to be completed and returned to HMRC within one year, and the payment of tax needs to commence (where applicable) by the end of the six-month period following the date of death, the marketing of the property would usually commence relatively swiftly.

So how is best to proceed?

I am constantly asked the following questions by legal professionals and beneficiaries alike:

• When should we put the property on the market?
• Should I wait until the Grant of Probate has been received?
• Does the fact the property is being sold for probate put buyers off?

Of course, I can only ever give my own recommendations, which may well vary from that of other property experts, however my thoughts are always with the estate in question and looking at its own individual needs.

What is my criteria when reviewing a matter that has a property that will need selling? The list of things to consider are:

• Is the property vacant, or is there a family member residing within it. If there is a resident, what are their plans and timescales?
• Does the property have a tenant residing? If so, is there a formal tenancy agreement? Is there an instructed letting agent managing the property? How long is it before we can get the tenant out?
• What condition is the property in? Are there essential works that need completing for the sake of health and safety, or are the works required simply cosmetic?
• How is the local market performing?
• Most importantly, what are the needs of the estate?

If any of the above suggest to me that there are matters that require addressing prior to marketing, then we simply put a hold on the sale side of things until that matter/s have been addresses in full.

It should be disclosed, that Property Ladder Group can actually assist in resolving these potential roadblocks to a successful sale.

• If the resident is looking to purchase or rent a property, we are able to help by signposting the individual to estate agents who will be able to arrange viewings on suitable properties. We are also able to arrange mortgages and provide conveyancers, ensuring cost effectiveness and convenience.
• If there is a tenant, our PLG Lettings Team are on hand to help relocate the person in situ. We are also able to help advise on matters relating to the legal side of what can be, quite a difficult time.
• PLG have our own Essential Extras department that are able to assist with most renovations that may be required. The best part of this, is subject to approval we can even offer deferred payments!

Being aware of the marketplace, both nationwide and within more specific areas is our job. I personally have almost 30 years in the property sector, so I have a knowledge and the experience one requires to be thorough and ensure the correct research is completed.

The needs of the estate are always the paramount leading factor when giving any advice, and this alone can be judged on any (or all), of the above factors.

In my own professional opinion, the following is how I see best dealing with a probate property that requires selling.

1. Get the valuation completed at the earliest possible time.
2. Once the valuation has been completed, evaluate the situation. Is the property presentable and in a suitable condition? Are there any occupants?
3. Once satisfied, list the property ASAP.
4. Use the time prior to receiving the GOP to ensure the maximum number of viewers are introduced to the property. The fact the Grant has not been issued means the beneficiaries are not placing any pressure on anyone, and there is a decent timescale to market.
5. All viewers should be informed the reason for the sale, and that this is no quick turnaround. If they are in a rush, this is not the property for them.
6. Once the buyer has been identified, conveyancing gets started and hopefully, by the time all parties are ready to exchange the GOP will have been received meaning we can tie it all in.

The reason I like to work this way, is because it helps get the estate administration concluded so much quicker than by going down the route of waiting for the Grant to be issued.

Conveyancing is not the fastest process, so orchestrating the sale to tie in with the probate process is actually quite straight forward if you are working with a team that understand the process (this is probably one of the most important pieces of this puzzle!).

The thing I try to keep in mind at all times when I am assisting with the property side of the estate administration, is how can we ensure those that are going through the grieving process are treated with respect and compassion, whilst ensuring the wishes of the deceased are being fulfilled.

Surely, if we can get the administration concluded quickly, it is in the best interest of the estate, the beneficiaries, and the fee earners.