What is the difference between market value and probate value?

If you’ve recently lost a loved one, you may be dealing with confusing legal processes in order to sell their possessions, such as their property. To complete this you’ll need two different valuations: a probate valuation, and a market valuation. They both deal with similar aspects, but are in fact completely different surveys acquired for different reasons.

So, what exactly is the difference between market value and probate value? A probate valuation is a survey completed by a chartered surveyor that determines the total worth of a property and accompanying assets used for inheritance tax reasons. A market valuation is conducted by an estate agent to determine the value of the property in comparison to similar properties that have recently been sold within the same region. 

To help you learn more about what each survey is, and when you’ll need them, our trained experts have written this short guide. We understand that dealing with probate can be a difficult time, with many overwhelming aspects. To make this process smoother, it’s a good idea to learn more about what proceedings you’ll be going through. 

Simply keep reading to learn more. 

What is market value and how is it different from probate value?

Despite these two surveys having similar purposes, they are, in fact, very different. A probate valuation is a housing valuation that’s completed if the owner(s) of the property has died, and a thorough valuation is required for inheritance tax purposes by HMRC. A market valuation is completed by an estate agent when someone is simply looking to sell a property. In the instance where you’ve inherited a property after probate, to list the property on the market you will then need a market valuation from an estate agent. In other words, the difference between these two valuations is their purpose, and who completes them. 

Is probate value usually less than market value?

As RICS chartered surveyors, the team at Crest often get asked if probate value is less than market value. The answer is no. 

Probate value simply means the value of the property at the time of the owner’s death. As the housing market continually changes, these prices can rise or fall between the probate valuation, and the market valuation conducted by estate agents. This depends on a variety of external factors, such as inflation rates, any damages to the property, any changes within the local market, and more. In other words, differences between probate and market value will usually be minimal if they aren’t very similar. 

Can you sell a property for less or more than probate value?

While probate and marketing valuations often provide you with an accurate price for how much a property is worth, the market itself can be unpredictable, meaning that the end result may be that you will sell it for more or less than the probate value. If this is the case, you will simply need to declare the actual selling price to HMRC to ensure that you’re provided with the correct inheritance tax bill. 

Why do you need a probate valuation?

When a property goes into probate, it’s essential that the person responsible for the estate and all the belongings provides HMRC with a thorough valuation from a trusted professional to accurately calculate the value of inheritance tax that will be charged. If the valuation is incorrect, or completed by a non-professional in this field, then you may be charged more inheritance tax than is due. 

Even if you decide to keep the inherited property, a probate valuation is still essential as you will still need to pay tax when you decide to sell the property. For example, if you inherit a house that’s worth £200,000, you will not pay inheritance tax on this straight away. If you lived in the property for a couple of years and then decided to sell it, you would need to pay capital gains tax on any profit you make. So, if you sold that £200,000 house 2 years later for £250,000, you will pay tax on the £50,000 profit. 

Get help with your surveys from Crest Surveyors

If you’re in a position where you need a probate valuation, or you’re simply seeking advice, our expert team at Crest Surveyors are here to help. 

Explore our Inheritance Tax Survey page for more information regarding how we can help if you live in London or the surrounding areas. 

Leave a Reply

Your email address will not be published. Required fields are marked *