Case Study Flashcards
How did you determine the fee?
Assessed the resource and time needed.
Together with value.
What section of the Red Book is for loan security valuations?
VPGA 2
What were the loan terms?
The Client did not provide them.
Why did you complete COI checks?
To assess my impartiality and objectivity on the instruction.
How far back did you look for COI checkes?
24 months, in line with VPGA 2.
What would you do if your company did not have a database for COI checks?
Send a company wide email.
Check files/records
What was included in your fee quote?
Identification of property Brief overview of property Valuer The timescales we are currently working to Confirmation of no prior involvement The fee
What is the definition of Market Value?
The price paid at the date of valuation between a willing buyer and a willing seller, at an arm’s length transaction, after proper marketing, where both parties have acted knowledgably, prudently and without compulsion.
Where is GDV defined?
Not within the Red Book.
RICS Guidance note: Valuation of Development Property 2019
What is the definition of GDV?
The aggregate market value of the proposed development, assessed on the special assumption that the development is complete on the date of valuation in the market conditions prevailing on that date.
What is an assumption?
Something which is reasonable for the valuer to assume is true, without investigation.
What are some examples of assumptions?
Condition if not inspecting
Asbestos removal can be covered within the build costs.
What is a special assumption?
Something which the valuer has taken to be true, even though it isn’t.
What are some examples of special assumptions?
Planning has been granted
Scheme has been satisfactorily completed.
Vacant possession
What did you include in your terms of engagement?
- Valuer
- Valuer experience
- Identification of borrower, property and client
- Purpose of valuation
- Date of valuation
- Basis of valuation
- Assumption / Special assumptions
- CHP
- PII
Why did you wait until ToE were signed?
So I could fully understand the scope of work and PII cap was in place.
What is PII?
Professional indemnity insurance - protects myself, my firm and my client against negligent claims.
What is your PII cap?
Lower of 33% or £10m
What is the Red Book?
Provides mandatory rules and best practice guidance for valuers
Describe Great Baddow?
Great Baddow is situated to the south east of Chelmsford city centre.
Predominantly residential in nature.
Describe the area surrounding the subject?
Predominantly residential in nature.
Royal British Legion directly to the north. Beyond that allotments.
Baddow Road, which a main road leading in and out of Chelmsford, located to the south. Have a few commercial properties along it including two petrol stations.
Describe Chelmsford?
City of Essex - it has:
Open Space
High Street with shops and restaurants
Good road and rail links
Good schools and Universities
What PPE was needed?
Just Covid-19 related PPE.
As it was garden land and construction had not yet commenced, did not perceive any major hazards.
What due-dilligence did you do?
Planning
Environmental / flooding
Access
Land Registry
What is the Land Registry?
Her Majesty’s Land Registry is a non-ministerial department of the Government of the United Kingdom, created in 1862 to register the ownership of land and property in England and Wales.
What is included on a Title Register?
Title Number
Property Registry - describes the land
Proprietorship Register - identity of owner
Charges Register - matters which affect the land
What is included on a Title Plan?
Title Number North Point Red Line Boundary Administrative Area Scale
What was included on the Title Plans for the subject?
Rights of way over Chelwater Road to allow for cars to access the dropped curb on the eastern property.
Right of way over the Royal British Legion Land.
What is full planning permission?
sds
When had planning been granted?
About 10 days prior to inspection.
What is Promap?
Ordinance Survey Mapping Software which uses OS data.
How did you measure the site?
Using Promap - drew a boundary around the site following the development site plan.
What scale is typically used for Land Registry Title Plans?
1:1250
Why is it important to inspect properties?
To ensure there are no issues which would have a material impact on your valuation.
To note factors which would impact the value.
What were you looking for on the inspection?
Consistency with the development plan
Contamination - oils/decaying plants
Asbestos
What was on the site?
Predominantly laid to lawn
Some garages/sheds to the north of the plots (Concrete/timber with asbestos sheet roofing)
Patios/paths
What do you mean assembled into a single freehold title?
The Borrower was intending to purchase the garden plots of the 5 terraced houses and assemble into one parcel.
What were the details of the sale?
The sale was not yet complete, was going through the legal process.
Had agreed with the owners to purchase for a combined £440k.
Did you consider the sale details as evidence?
No, because it was an off market transaction based on garden land, it was not reflective of the MV.
What did the site have planning for?
6 residential units with associated infrastructure and landscaping.
4 3B Terraced & 2 x semi-detached.
Where there any planning conditions?
16 conditions.
What were the planning conditions?
- Development must occur within 3 years
- Materials to be provided
- Electric vehicle charging points (1 per house)
- Constructed to increase water efficiency
- Restriction on windows in order to ensure privacy of neighbours
How did you account for the electric vehicle charging points?
From speaking with developers, aware that they cost around £500 per one.
This was included within the QS’s costs.
How did you account for the increased water efficiency?
From speaking with developers, aware that this usually involves including control valves on showers to limit peak water flor and also eco efficient toilet flushes.
Typically around £500 per house.
Why did you adopt the comparable method?
Best method for formulating GDV
Looks at recent market evidence
Enough evidence in the locality to be able to do so.
What would you expect high specification to include?
Modern kitchen and bathrooms
Integrated appliances
Granite worktops
Why did you analyse on a rate psf basis?
Allowed me to adjust for quantum
Also looked at sales price basis as well to see if they were in line.
Tell me about Parva Green?
- Located to the northwest of the Subject.
- Comprised 30 no. 1 - 4 bedroom apartments and houses.
- The units were generally larger in size, so would - expect a higher rate psf due to quantum.
- However, despite being slightly further out, it is nicer than Great Baddow, so only a marginal increase.
- Provided good comparables for the semi-detached units, although the units are the subject were smaller.
Tell be about Coval Lane?
- Located to the northwest of the subject.
- Comprises 30 no. 1 - 4 bedroom apartments and houses.
- Good comparable as the terraced units were generally of a similar size, some larger and some smaller.
- However, Coval Lane is situated closer to the city centre and the station, so would see a higher price.
- So although the units are smaller at Coval Lane, would expect a similar sales price to be achieved to balance out.
Tell me about the adjacent new builds?
Comprise 2 x 3 no. semi-detached units
Sold 2018
Had been completed to a high specification.
Of a similar size, but slightly larger.
Will offer buyers a similar product.
But due to quantum and house price growth, believed higher.
What is quantum?
It means amount.
The larger something is. the less you pay. It’s about scalling and reflecting that in pricing.
How do you adjust for dated transactions?
Treat with caution.
Speak with local agents
Look at Land Registry house price growth.
What do you consider a dated transaction?
Market and property dependent
Typically want it to be withing 2 years
Because of Covid, you’d ideally now want sales after the first lockdown.
Did you consider house price growth for the 2019 comps?
Yes I did factor this in as a consideration.
However, there was little growth over this period, together with Covid.
Factored this into my analysis.
What growth has Chelmsford witnessed since valuation?
sds
Why look for comps within a two mile radius from the city centre?
Wanted it to be close by city centre, as prices outside are very different. It’s a different market.
Firstly considered 1 mile, but not enough evidence.
Why look for comps within the last two years?
Ideally wanted them to be as
Why do new build properties command a premium?
NHBC Warranty
Appliance Warranty
Less wear and tear
No work needed to move in
Why are resale properties not directly comparable?
Don’t have a premium
More wear and tear
No warranty
Potentially lower specification.
What does the RICS specifically identify as benefits to new build properties?
1st owner:
- new property prestige
- access to government initiative to HTB
- certainty of completion and date
- full 10 year warranty
2nd owner:
- modern spec
- high energy rating
Give some examples of financial and non-financial benefits to new builds?
Financial:
- stamp duty paid
- legal fees paid
Non-financial:
- customisation
- benefit of modern specification
Why did you consider resale evidence?
As a way of sense-checking and getting a better picture of the market.
How did you adjust the resales?
From experience, new builds are typically around 10-15% higher than resales.
How did the resale evidence compare?
Depending on location, some were better specification - more bespoke - in better locations etc.
For the majority of parts, it came out lower.
Did the Borrower’s GDV schedule impact your valuation?
No it didn’t, I formulated my view prior to looking at the schedule.
The schedule was actually quite a bit below what I had perceived. But the agent said he conducted the appraisal during the first lockdown and was very cautious. Said my appraisal was more reflective of actual market.
How does land registry record new build prices?
They don’t include financial incentives - will be the net sales price.
However, won’t discount customisation incentives.
Why dd you not make an MV adjustment for SD and EOT?
The SD was situated adjacent to the small shared car park for residents and also had a slightly more obscure garden layout, which was not as large as the terraced.
What is a right of way?
sds
What is ‘all in’ build costs?
sds
What is the role of a chartered quantity surveyor?
sds
Who prepared the costings?
sd
What did the costings include?
ds
How much did the build costs come to?
sds
Were your costings not a bit light?
asa
What are you witnessing with build costs atm?
sd
What’s enabling and external works?
sd
What does BCIS stand for?
sd
Why median costs?
sds
What was the BCIS sample size?
50
What is the basis of measurement for BCIS costings?
sds
How does the BCIS obtain information?
sds
What are the weaknesses of BCIS?
sd
what construction costs would you anticipate at the moment?
sds
Was £20 psf difference between borrower’s costings and BCIS appropriate?
sds
What infrastructure was needed for the site?
sds
If BCIS was limited, how else could you have approached this?
Rebased to Essex, instead of Chelmsford.
Looked at the previous quarter.
Why did you include 10% contingency?
as
What risk did you account for in the contingency?
sds
What is Chelmsford’s affordable housing policy?
Council seeks AH on developments above 11 units.
35%
70%/30%
What did the Borrower’s GDV look like?
sd
How did you calculate CIL?
sds
How did you account for CIL in your appraisal?
sds
Are there any issues with Argus developer?
sds
How would you value the scheme if it was located in a flood zone?
sds
What finance rate did you use and why?
sds
Why do you look at a price per plot?
sd
Why did you sense check RLV with comparable method?
Recommended within RICS guidance note: Valuation of Development Property 2018.
Why would brownfield sites not make good comparables?
sds
What is the difference between outline and full planning permission?
sds
How would the comparable being outline impact the value?
sd
Why did you expect the subject property to command a higher price per plot?
sda
What is happening currently in your local land market?
sds
How did you record the conversations with the local agents?
Noted the salient points down and saved electronically.
Why do you need to apply caution to on the market transactions?
Hasn’t actually been purchased yet.
Market dictates what something is actually worth, so could change from that price.
What is Surveying Safely?
sds
What are the salient points of surveying safely?
sd
How did you conduct your risk assessment?
sds
Why did you advise the site was suitable for loan security?
sds
What is a SWOT analysis?
sds
Why did you include a SWOT analysis?
sds
What were some of the factors of the SWOT analysis?
sds
How did you communicate with the client and borrower?
sds
What skills and competencies did you expand upon?
sds
How else did you collaborate on this instruction?
sds
What do you mean by traditional ppe?
ssd
What is a sensitivity analysis?
sd
Why didn’t you include a sensitivity analysis?
sds
How did you select your map scales?
sd
What scale were the floor plans prepared on?
sds
What scale were the building plans prepared on?
sds
What was going to be the design of the proposed units?
sds
How did you determine the specification of the resale properties?
I used professional skeptism and analysed them objectively.
How did you determine the professional fees?
sds
How did you determine the finance rate?
sd
Why did you use profit on cost?
sds
What is IRR?
sds
What does IRR show you?
sds
Why did you not include an agents fee?
dd
Why did you not include Stamp Duty?
sds
