Thu 14 Jan 2021
A family member or family friend bestowed the role of executor of a deceased's will more often, perhaps rightly, deem it an honour. The role of executor, with its power, comes great responsibility, especially to HM Revenue and Customs (HMRC) and Beneficiaries of the estate.
In times past it was entirely normal that those drafting Wills, typically solicitors, would encourage the person or persons they were drafting the Last Will & Testament, to put a lawyer within the Will writers firm down in the Will as the sole executor or joint executor with a family member. Today we see greaters awareness around cost, typically solicitors will charge around 5% of the estate value as their fee, this coupled with independent Will Writing businesses, who have a significant and growing share of Will writing business, happily steer owners of straightforward uncomplicated estates to self-serve the handling of probate.
In instances whereby the Executors role is to oversee the sale of property, be it the deceased home or residential or commercial investments, the Executor is required to obtain a valuation. In past times the go-to was to engage the services of an RICS Surveyor, who would typically charge around £800 to provide the valuation for probate purposes. Today Executors self-serving via the Government's website https://www.gov.uk/applying-for-probate/apply-for-probate and following the handling notes will know that HMRC suggests the applicant obtains three estate agent valuations (generally provide free of charge) and takes the ‘mean’. The estate agent sales valuations should be reported at a fair open market value, not forced sales price. This is important to avoid any recourse on the Executor(s) and HMRC revising probate if it transpires that the property sells for a figure significantly above the figure recorded for probate purposes, remembering that in these days of digital transparency sale prices are recorded at HMRC Land Registry.
The Executor(s) need to agree on the approach to selling property and often they find themselves facing Beneficiaries eager to maximise their inheritance offering their opinions on what they consider the property will sell for. The pressure created by Beneficiaries often results in the missetting of asking prices and overly optimistic prices being asked, conversely setting the price to low and this presents a potential relationship risk with Beneficiaries that are family or friends. This leaves the Executor often on the ‘back-foot’ trying to placate Beneficiaries. The fact is that the Executor has the power and control and their core duty to the estate and Beneficiaries is to get the property sold at a fair market price.
So what are the options open to Executors tasked with selling property? Two options, sell by traditional private treaty which is the ‘discount down’ approach or auction, which is the ‘bid up’ approach. Private Treaty does not provide the transactional transparency afforded by the auction process and sales by private treaty are subject to contract, as such, are not certain until contract exchange. The success of a sale by private treaty is also often at the mercy of a sales chain leading sometime to many months of delay in a sale getting to legal completion. Retail auction I would suggest provides a sales process that delivers on transactional speed, transparency and certainty. Even if a Beneficiary of the estate wished to buy the property they are at liberty to bid in the auction and the competitive bidding process ensures that the very best price is achieved from a ‘ready, willing and able’ purchaser. The winning bidder of the auction will also be under legal agreement to buy within a short timescale, meaning Beneficiaries get their inheritance faster.
To dispel the myth that auctions are only for cheap poor quality property. Auctions are no longer the reserve of the property trader, regional auctioneers operate ‘retail’ auctions, selling mortgageable condition property. Retail auctioneers promote property lots in the same way and same places estate agents do, such as, Rightmove, Zoopla and across social media, such as Facebook, Instagram, Twitter and Google. By ‘trawling’ for buyers in the market in this way ensures auction lots receive maximum market exposure and find buyers ‘eyeballs’.
In summary, if you are an Executor of a Will and need to sell residential or commercial property then auction as the process to sell is absolutely worthy of consideration.
Director - Living Property Sales & Auctions
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