If market value at time of sale is lower than valuation at date of death

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Portia

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My mother in law died earlier this year. Her house was left to all of her children equally. My husband's brothers are all happy for him (us) to buy them out of the property and would indeed be happy to accept a bit less than their share in recognition of the fact that he took care of her and because they value the house remaining in the family. However, the valuation at date of death is very high and it seems unlikely that we will be able to buy them out (we fully understand that any agreement to sell at an undervalue = a gift).

The next step will be to put the house on the market. I have always had some doubts about the valuation, which seemed very high, and wonder if the estate agent will be able to realise the value she put on it, especially given what may happen to the market in the coming months. My question is, if we put it on the market, and if it fails to sell at the valuation given, and we then end up buying it at less than the valuation at date of death, does this have revenue implications? Or does Revenue accept that the value of a house is what the market is willing to pay for it? Any thoughts welcome.
 
But have you got probate yet ? It seems very early and the solicitor will put the value down as whatever sale price it can achieve within a year without arousing any suspicion from revenue. As an example, it is common practice solicitor for probate to wait until the house is sale agreed before applying so that the value of the house is the true sale price.
 
Hi,

When getting the initial valuation done did you discuss with the estate agent that it was for the purposes of a potential family sale and not for sale on the open market? Some agents will place a higher value on the property in order to try and win your business. The prices of some houses can be highly speculative so perhaps a second/third opinion from independent valuers who are aware that you don’t want an inflated price is the logical next step. You may have to pay a small fee for this but should certainly be worth it.

From the tax perspective if you post the value of the house and the amount below the potential value the other parties are willing to sell it for you might get some good feedback. There are available allowances between siblings that will reduce any potential liability.
 
Thanks for the replies. Have spoken to solicitor in the meantime and am clearer on the issues.
 

Unless it was ridiculously over valued, I think you also be prepared that the house may actually achieve its valuation maybe even exceed it.
 
I don't believe this is correct, were it to be so, it would be saying that if a property is advertised on my.home.ie for 300k and I do a deal to purchase it at 280k, I have to pay Stamp Duty of €3,000 and not €2,800.

source: https://www.revenue.ie/en/property/stamp-duty/property/rates.aspx
"When the Stamp Duty rate is not fixed and there is no gift involved, you multiply the consideration by the appropriate Stamp Duty rate."

Consideration in this context meaning purchase price.

It's only where the property is a gift (which means there is no purchase price) that the market value could be used; since it's the only figure you would have to calculate stamp duty.
 
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Bit of confusion here- stamp duty is always paid on market value. Market value is what the property would make on the open market.

In the example above, the asking price is 300K but it sells at 280K- that is the market value.

In the OP's situation, the market value is whatever a willing purchaser will pay. If there is interest in the property, then the estate agent will be able to confirm what the highest offer was.

If there is no interest in the property, and the OP buys at a figure less than the probate valuation, Revenue may want to know why? Is there an element of gift from the estate? They have the Probate valuation in their records.

But the estate agent will be able to confirm by letter if, in their professional opinion, the lower than Probate valuation price paid is actually the market value.

mf
 
Thanks for all the replies. The up to date position is that the house has been professionally valued for probate purposes at 700k. This valuation seems correct to me based on other sales locally. This means that each of the four brother's share is worth 175k.

In order to enable us to buy the other 3 out and extend it I think the other three would be willing to let us pay them 140k each. There is a recognition that my husband did a huge labour of love for the parents before they died, without which they would have had to go into a nursing home, and it also means they would have somewhere to stay when in the country. Am I right in thinking that having regard to the valuation, this would represent a gift of 35x3 = 105k and we would have to pay gift tax on that? Any thoughts welcome.
 
A good financial advisor will probably be able to save you a few bob on tax along the lines of annual gift exemption between family members.

With January being a new year, some quick thinking could save you money.

I'm sure someone here will have more knowledge than me on this.
 
You'll need to look into this, but there is something called a Deed of Assent that may apply and may reduce stamp duty. I'm not a lawyer, not sure of it applies, others on here can probably offer advice. This is just in relation to stamp duty applying or not, I believe.
 
The probate valuation is for a particular purpose and it has served that purpose.

You are now looking at a new transaction at a different point in time; the sale, for consideration, of the property.

In such a case, each of the parties can and should go and get their own current professional valuation. If the consideration agreed falls somewhere in and around the range that those two valuations produce, this would be quite persuasive evidence that the consideration represents market value, regardless of what the probate valuation was (within reason). It wouldn't be unusual for two valuers to arrive at valuations that differ by 10% - 20% especially for one-off, higher end property, as opposed to a standard house in an estate in a city or large town for which there are plenty of highly comparable properties changing hands regularly.
 
I know this is an old thread. What value is used when calculating the amount of inheritance that includes the sale proceed from a house. Is it the probate valuation or the price the house sold for. In particular where the probate valuation is higher than the actually sale price. This question relates to the resulting tax liability.



For example the probate valuation is €450,000. But the house is sold for €425,000. The Statement of Affairs (Probate) has the figure of €450,000. What figure should be included when completing the CAPITAL ACQUISITIONS TAX (CAT) - Form IT38S.
 
What is the valuation date of the inheritance in question?
 
Thanks for the response. Is that the same as the date the deceased died. If so the 25/3/2021.
 
The house is not lived in so is the valuation date the day the probate was issued. If so the 15/1/2022
 
ROS said:
Thanks for the response. Is that the same as the date the deceased died. If so the 25/3/2021.
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ROS said:
The house is not lived in so is the valuation date the day the probate was issued. If so the 15/1/2022
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How the valuation date is determined in practice depends on the precise circumstances of the case. The rules are more subtle than the various Revenue online summaries suggest. If it is likely to make a significant difference, you could consider getting specialist tax advice on it.
 
In my "opinion" Revenue are really only looking for large disparities. Where people attempt to mislead and avoid tax.
Not where the differences are "relatively" minor.

Also if you are inheriting something thats well within your inheritance allowance (due to division between siblings etc.) is very different (probably no liability) to where its well above your allowance that you are the sole beneficiary. Some will there for over estimate and some will underestimate it.

When the market is moving fast there can be 10~15% difference in a year. So its a moving target. Especially if probate and the subsequent sale is delayed.
 
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