Vendor won't Lodge Probate

Frilly Knickers

Hi
I viewed a house im interested on making an offer on. It's a probate sale but the EA has said not only has probate not been lodged but that the family won't even submit the probate application until they are sale agreed.

Can anyone shed any light on why someone might want to do that? I'd have thought lodging it early would mean a quick sale and a more attractive venture for potential buyers.

By deliberately waiting until the last minute to submit it, the sale agreed period could drag on for 6 months. My fear would be house prices will rise in that period and they'll pull out at the end to try to get more money.

It's putting me off bidding on the house because I feel like they might not be serious about selling.

Just wondering is there a less cynical reason for selling a house and deliberately not starting probate before being sale agreed?

TIA

Squatter

Frilly Knickers wrote: »

Hi
I viewed a house im interested on making an offer on. It's a probate sale but the EA has said not only has probate not been lodged but that the family won't even submit the probate application until they are sale agreed.

Can anyone shed any light on why someone might want to do that? I'd have thought lodging it early would mean a quick sale and a more attractive venture for potential buyers.

By deliberately waiting until the last minute to submit it, the sale agreed period could drag on for 6 months. My fear would be house prices will rise in that period and they'll pull out at the end to try to get more money.

It's putting me off bidding on the house because I feel like they might not be serious about selling.

Just wondering is there a less cynical reason for selling a house and deliberately not starting probate before being sale agreed?

TIA

Might it be because they won't know what property value to put on the Probate Form until the house is sale agreed?

Seems a bit far fetched though!

Frilly Knickers

Squatter wrote: »

Might it be because they won't know what property value to put on the Probate Form until the house is sale agreed?

Seems a bit far fetched though!

I thought that but I've viewed other probate sales where probate is lodged and the probate process is a few months down the road while they try to agree a sale concurrently, so presumably they can lodge probate with a valuation done rather than needing an agreed sale price.

I don't get stating so categorically that they won't be lodging it at all until sale agreed. Why waste so much time for nó reason?

godtabh

If you lodge probate and get a higher offer than the probate valuation you pay capital gains tax. When the offer is accepted and probate is applied for there is no capital gains. Was told this by a family member acting as a executor of an estate.

MAJJ

Also, if probate being done by the vendor rather than their solicitor it is cheaper for vendor but takes longer, I was in your position 2 years ago.
If you are willing to walk away I would use this as a negotiation tactic, as you will not be able to close as quickly and perhaps you have rent or other costs plus it's a woeful way to treat a purchaser. For me I went through bids back and forth, offer accepted and there was no one else bidding, then they told me about probate. I told them we were not proceeding at that level and reduced my bid immediately to cover extra payments etc. Eventually came to a deal.

Frilly Knickers

Looking online they need to use the Date of Death or the Date probate was granted for their tax return. That wouldn't mean a cgt saving by not filing at all?

godtabh

Frilly Knickers wrote: »

Looking online they need to use the Date of Death or the Date probate was granted for their tax return. That wouldn't mean a cgt saving by not filing at all?

My understanding is that you lodge probate with a valuation. If the valuation is lower than the sold price you pay CGT. If not you are fine. It would appear that the vendor hasn't lodged probate to minimize their CGT.

Claw Hammer

godtabh wrote: »

My understanding is that you lodge probate with a valuation. If the valuation is lower than the sold price you pay CGT. If not you are fine. It would appear that the vendor hasn't lodged probate to minimize their CGT.

The key date is the date of distribution.The capital gain is the rise from the date of distribution to the date of sale. Most often this is the date of death but if there are complications it might be another, later, date. The date of the lodgement of probate itself is immaterial. Thre may be some complication they are planning to use to bring back the date of distribution or they might just be ignoramuses.

uck51js9zml2yt

Squatter wrote: »

Might it be because they won't know what property value to put on the Probate Form until the house is sale agreed?

Seems a bit far fetched though!

That's simple. An estate agent can do a valuation for probate.
It's gets lodged with the documents.
Probate can take 9 months in Dublin.
OP give this one a miss. It's not worth it.

Frilly Knickers

Felicity Rotten Trampoline wrote: »

That's simple. An estate agent can do a valuation for probate.
It's gets lodged with the documents.
Probate can take 9 months in Dublin.
OP give this one a miss. It's not worth it.

That's what I'm going to do, thanks for the replies

davo10

Frilly Knickers wrote: »

That's what I'm going to do, thanks for the replies

This depends on the price and how much you want the house. Apart from a delay for probate, what they are doing is completely understandable, why wouldn't you want to minimise CGT?

Op, until contracts are signed, you can still pull out and get your deposit back. Bid away, keep an eye on the market and if there is too much of a delay or another property you like comes up, then you can walk away.

This situation wouldn't put me off at all provided everything else is ok, the owners know the sale is not ideal so the price they will accept may reflect that.

Thestart

Frilly Knickers wrote: »

Hi
I viewed a house im interested on making an offer on. It's a probate sale but the EA has said not only has probate not been lodged but that the family won't even submit the probate application until they are sale agreed.

Can anyone shed any light on why someone might want to do that? I'd have thought lodging it early would mean a quick sale and a more attractive venture for potential buyers.

By deliberately waiting until the last minute to submit it, the sale agreed period could drag on for 6 months. My fear would be house prices will rise in that period and they'll pull out at the end to try to get more money.

It's putting me off bidding on the house because I feel like they might not be serious about selling.


Just wondering is there a less cynical reason for selling a house and deliberately not starting probate before being sale agreed?

TIA

Hi,
we were in the same situation. We went sale agreed and the vendor put in for the probate once the sale price was agreed. Our biggest problem was that they did probate without a solicitor. The issue with that is it takes much longer and getting info on the date the probate comes out is impossible, very stressful. Only advice is ask if they are using a solicitor. If they are its 4-6 weeks otherwise it can take several months. Our sale took 3 months longer than it should have.
Best of luck.

uck51js9zml2yt

Thestart wrote: »

Hi,
we were in the same situation. We went sale agreed and the vendor put in for the probate once the sale price was agreed. Our biggest problem was that they did probate without a solicitor. The issue with that is it takes much longer and getting info on the date the probate comes out is impossible, very stressful. Only advice is ask if they are using a solicitor. If they are its 4-6 weeks otherwise it can take several months. Our sale took 3 months longer than it should have.
Best of luck.

It depends on what part of the country your in.
We had a solicitor. It took 9 months in Dublin.

Peregrinus

davo10 wrote: »

This depends on the price and how much you want the house. Apart from a delay for probate, what they are doing is completely understandable, why wouldn't you want to minimise CGT?

Because reducing CGT by minimising the price your property will fetch in the market is kind of stupid. It's a bit like giving up work in order to reduce your income tax bill.

Basically, a lot of purchasers are going to be turned off by the prospect of a sale that will take many months to complete. By not even applying for probate before a sale is agreed you're reducing the number of people interested in buying the house, and reducing competition for the house will tend to reduce the sale price - you have less competition to bid the price up.

So, while this may reduce your capital gains tax, it may also be effective to reduce your capital gain.

nompere

This piece, written by a firm of tax consultants a few years ago, sets out the problem - and proposes just the solution outlined in the original post.

http://www.ohanlontax.ie/downloads/CGTforEstatesinaRisingPropertyMarket.pdf

Were Revenue to be open to allowing executors to revise the probate value upwards to sale proceeds then there wouldn't be an issue.

davo10

Peregrinus wrote: »

Because reducing CGT by minimising the price your property will fetch in the market is kind of stupid. It's a bit like giving up work in order to reduce your income tax bill.

Basically, a lot of purchasers are going to be turned off by the prospect of a sale that will take many months to complete. By not even applying for probate before a sale is agreed you're reducing the number of people interested in buying the house, and reducing competition for the house will tend to reduce the sale price - you have less competition to bid the price up.

So, while this may reduce your capital gains tax, it may also be effective to reduce your capital gain.

It has nothing to do with minimising the price.

If you assign a price to a house when entering probate, CGT is due on any increase in the house value which occurs during the probate process. So, if house is valued at €100k and rises to €150k during probate, there is a nice whack of CGT.
However, if the market value is assigned before probate, then no CGT. You can then see the benefit of the beneficiaries wanting to find out what market value is before probate, what's the best way of doing that? Yip, put it on the market.

As for delay, that really depends on how badly the bidder wants the house, some cash sales may be quick, others take many months anyway.

Peregrinus

davo10 wrote: »

It has nothing to do with minimising the price.

If you assign a price to a house when entering probate, CGT is due on any increase in the house value which occurs during the probate process. So, if house is valued at €100k and rises to €150k during probate, there is a nice whack of CGT.
However, if the market value is assigned before probate, then no CGT. You can then see the benefit of the beneficiaries wanting to find out what market value is before probate, what's the best way of doing that? Yip, put it on the market.

As for delay, that really depends on how badly the bidder wants the house, some cash sales may be quick, others take many months anyway.

Yes, I get that, but the downside of putting it on the market before applying for probate is that potential buyers who want a quick sale will not be interested. Which means fewer buyers competing for the property, which may mean that it fetches a lower price. So you avoid CGT, but at the cost of selling the house for less than it might otherwise fetch. So you should only consider this if you are satisfied that this is a house for which there will be strong demand, even in a sale which is guaranteed to be long-drawn out.

davo10

Peregrinus wrote: »

Yes, I get that, but the downside of putting it on the market before applying for probate is that potential buyers who want a quick sale will not be interested. Which means fewer buyers competing for the property, which may mean that it fetches a lower price. So you avoid CGT, but at the cost of selling the house for less than it might otherwise fetch. So you should only consider this if you are satisfied that this is a house for which there will be strong demand, even in a sale which is guaranteed to be long-drawn out.

There is no doubt it would put off many buyers. But CGT of 33% is a good incentive not to place a value on the property before probate, unless you know what it would fetch when sold.

Properties are in short supply and prices are rising, so I'd be pretty sore if I had to pay a substantial tax liability by misjudging the value of the property.

I'm not saying that would appeal to every person who inherited a property, but if this is in Dublin, the beneficiaries approach is understandable.

Peregrinus

davo10 wrote: »

There is no doubt it would put off many buyers. But CGT of 33% is a good incentive not to place a value on the property before probate, unless you know what it would fetch when sold.

But it's not 33% of the sale proceeds; just 33% of the amount by which the sale proceeds exceed the probate value. You can minimise this problem by valuing the house optimistically for probate. Sure, you'll pay probate fees on the extra value, but they're a lot less than 33%.

davo10 wrote: »

Properties are in short supply and prices are rising, so I'd be pretty sore if I had to pay a substantial tax liability by misjudging the value of the property.

If prices are rising, and you end up selling the house for more than you valuied it as at the date of inheritance, that's not because you undervalued it. It's because prices rose between the date of the inheritance and the date of sale. That's a genuine gain; why shouldn't you pay tax on it?

davo10 wrote: »

I'm not saying that would appeal to every person who inherited a property, but if this is in Dublin, the beneficiaries approach is understandable.

Undersstandable, but not necessarily wise. The loss you suffer through CGT by having a sale price which exceeds the probate valuation is visible and measurable, but the loss you suffer by selling the house for less than it might fetch is not so visible and measurable. That doesn't mean that it may not be greater, though.

The truth is that, whichever course of action you take, you'll never know for sure whether you wouldn't have been better off taking the altenative course. If you don't put in the probate until you have agreed the sale, you don't know what higher price the house had fetched if marketed without this constraint. But if you do put in the probate before a sale, you don't know if you did get a higher price as a result. People tend to choose the course which will avoid the measurable loss, rather than the course which will avoid the cost which is likely to be greater.

4ensic15

It is also the case that the Revenue can query a high date of death valuation. If the sale is a long time after the death, the revenue may not accept the sale price as the date of death value. If the market rises 10% in a year, the revenue will assume that the date of death value of a property deal a year after death was 90% of the sale price.

Frilly Knickers

Frilly Knickers wrote: »

That's what I'm going to do, thanks for the replies

Just to answer my own question, I didn't buy the house I posted about but I did buy another house that was in probate (though probate had been lodged when we went sale agreed). The sale still took an agonising 7 months to complete, only recently getting the keys and costing me a fortune in solicitors.

PurplePoodle

Why did it take so long? Nervous as we're buying in the process of buying a probate house and need to be out of our current house by end January.

Frilly Knickers

It was a double probate and the vendors solicitor was also incompetent. A single probate with a solicitor who knows what they are doing would've been through in maybe 2 months instead of 7 or 8.