Case Study Questions Flashcards
Can you briefly explain the content of a fee quote?
Conflict of interest check confirmation.
My fee + VAT.
Basis of valuation.
Information about the property and address.
Expected date of work to be completed by.
Client details.
Can you tell me what the loan terms of the instruction were?
55% loan to GDV for a proposed term of 18 months.
What loan-to-value ratio would you tend to expect?
50-70%
Can you name any other common basis of value?
Fair Value
Investment Value
Market Rent
What is Fair Value?
The price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date.
Used for accounting purposes.
What is contained in your confirmation of instruction letter?
Client’s agreement to the proposed fee basis.
Payment of expenses and how they’re calculated.
Details of the Property.
Basis of Value.
Identification of Valuer.
Terms of Business attached which contains information on my company’s PII and CHP.
What is the impact (if any) of the private single-lane track on the development and what condition was it in?
The existing driveway is a tar and chip surface in good condition.
Additional lay byes will be added to the existing single land track to facilitate the increased volume of cars in accordance with Condition 12 of the planning permission.
Were you aware of any obligations on the future purchasers for them to look after the road?
I was aware of an existing management company which wa set up for the existing dwellings. The developer had informed me that they were going to set up a seperate management company which would coincide with the existing and that service charges would not exceed £500 per annum per dwelling which I believed not to be particulary onerous. I stated this within my report and that more significant service charges had the potential for negative impacts on GDV and the GDV is based upon the max. £500.
Did you confirm with the vendor as well as the borrower what the agreed parcel of land being bought was?
I confirmed with the borrower who forwarded me confirmation from their solicitor in regards to the agreed site plan being purchased. I confirmed with my client afterwards to ensure we were of the same understanding, which we were.
How important was the level of specification to determine GDV and can you explain elements of the specification?
Yes, that is very important because it is a significant element in regards to the characteristics of the proposed units and an element which I look for and consider in direct comparables.
Specification comprised of high-quality appliances in the kitchens, integrated kitchen units, quartz worktops, underfloor heating systems, high-quality kitchen and bathroom units.
What is the hierarchy of comparable evidence?
Category A (Direct Comparables)
- completed transactions of similar properties with full details
- completed transactions of similar properties with enough data present
- asking prices
Category B (General Market Data)
- historic evidence
- indices
Category C (Other Sources)
- evidence from other locations and types
What is a typical IRR rate for a developer?
30% roughly.
The larger the site, the lower the IRR as far away from getting the money and being in a positive position.
What makes up your 7.5% of professional fees and how was this split?
Architect (usually a highest proportion of fees - approx 30% in this instance)
Quantity Surveyor
Engineer
C.D. Manager
H&S Consultant
Building Control
What typical % of professional fees would you expect?
8-10%
What changes would you make if you were to revalue the property today?
Increase the finance costs and reassess the build costs and sales values.
What was the most salient comparable new build scheme and why?
I believe they were all very important when considering different aspects and units of the scheme but Ambassador Square, Cheshunt for the smaller 2-bedroom units and The Grove, Goffs Oak for the larger units were very salient.
Their private and exclusive nature of development and the specification as I have mentioned were large factors in considering the evidence as this was a unique nature of the subject scheme.
Where there any onerous conditions in the planning permission that could affect the value?
There was nothing significantly onerous within the conditions.
What does the bird nesting compensation refer to in condition 15 of the decision notice?
Two Ecological Appraisals had been undertaken in August 2019 and July 2020 which found a single roost of two common pipistrelle bats located in gaps where the mortar was missing from one of the ridge tiles on the western elevation of the proposed units 8&9.
This was of low conservation significance because the presence at this time of year suggests that it was a non-breeding day roost.
However, mitigation measures are necessary but this simply comprised of pre-erecting a bat box in close proximity to the subject roost prior to the soft strip of roof tiles. The soft strip would need to occur under the supervision of a licenced ecologist to ensure no harm is done. If any bats are found the Ecologist will carefully remove them and place them in the bat box.
The compensation for the loss of this low conservation status day roost will include the installation of four modified ridge tiles designed to allow access into the ridge.
What would have been the impact if Great Crested Newts had been found within the ‘Ecological Appraisal, Bat & Great Crested Newt survey’?
I understand that they can only be moved at a certain time within the year and therfore it could have had an impact upon the timescale of the development.
What impact could a delayed or prolonged developemnt period have on the MV?
It would have a negative impact due to the extended length of finance costs and would have reduced the IRR.
What is IRR?
Internal rate of return is a time weighted measure of return.
Internal rate of return is the annual rate of growth an investment is expected to generate.
The higher the IRR the better. Reduce timescales to improve.
What is profit erosion?
The period within which the profit from the development is eroded after completion due to holding charges (i.e. interest charges, building insurance, security and utility charges).
If you didn’t have Argus Developer Software how would you have valued this site?
I could have set up a cashflow using an excel spreadsheet.
The basis of an appraisal is GDV - (costs +profit)
In relation to condition 17 in the decision notice what could be the expected cost of an electric car charging point, do you know what price the developer accounted for/ if they accounted for this and where was it included in your appraisal?
Yes, this was accounted for within the developer’s costings. It was approximately £500 per car charging point.
How did you factor in the risk of property not being safe for use in your inspection?
Within my risk assessment prior to inspecting, I identified potential hazards such as falling materials and trip hazards which was the reasoning for my safety helmet and steel toe capped boots.
Why did you recommend an asbestos survey?
in reference to the RICS Guidance Note of Surveying Safely (2918), it states that members have a legal duty to provide advice on asbestos if we have a reason for concern - in this case I did.
How did you identify the asbestos?
It is difficult to conclusively determine whether a material contains asbestos from visual inspection but I had concerns due to the colour and texture of the roof sheeting and taking into consideration when the buildings were likely to have been constructed.
What would you expect to see in an asbestos demolition survey?
Identification of the specific areas with asbestos.
The date of inspection and samples were taken.
recommended action points.
Approximate cost of remediation.
What type of asbestos could it have been?
I wouldn’t be able to say for certain but it is likely to have been white asbestos (chrysotile) due to it being the most common.
Is there any specific legislation in regards to Asbestos which you are aware of?
Yes, ‘Control of Asbestos (2012)’ which is policed by the Health and Safety Executive. All works must be undertaken by a licensed contractor.
Plot 5 – lower MV than Plot 2 even though it is bigger – what is your reasoning?
The reasoning for this was the positioning of Plot 5. It sits centrally among the nine units and has therefore a less private nature in comparison to Plot 2.
In reference to planning condition 22 about the need for a desk-top ground contamination investigation - how did this impact your valuation?
I did not have site of any Ground Investigation or Contamination Surveys and at the time of our inspection, there were no obvious signs that the Property was affected by adverse ground conditions and I made the assumption that this was the case.
However, I caveated within my report saying that I reserve the right to amend my valuation accordingly if this does not transpire to be the case.
What was the purchase price? Did it differ from the value and why?
It was around £3,000,000 which was slightly lower than the MV which was justified from my understanding that the vendor was looking for a quick sale which the developer had agreed to.
In reference to BNG in condition 14 of the decision notice, what is BNG?
Biodiversity net gain delivers measurable improvements for biodiversity by creating or enhancing habitats in association with development.
It is an approach to development with the intention to leave the natural environment in a measurably better state than it was beforehand.
In this case, it will be more straightforward due to the brownfield nature of the site. It will be done through landscaping, planting and the remediation of the existing pond.
How is BNG measured?
It is measured by looking at four areas:
area of habitat;
the distinctiveness of habitat;
condition of habitat and;
strategic location.
Why did you apply the higher BCIS rate?
Because I felt this was a reflection of the high standard and specification of the product to be expected from the information I had been provided with.
Did you get permission to state your client’s name? Why would you need permission?
Yes, because it’s confidential information.
What is a special assumption?
A supposition that is taken to be true and accepted as FACT.
Can you have as many special assumptions as the client would like?
Special assumptions may only be made if they can reasonably be regarded as REALISTIC, RELEVANT and VALID for the particular circumstances of the valutation.
If a client requests a valuation on the basis of a special assumptionthat the valuer considers unrealistic, the instruction should be declined.
Can you tell me about the location and surrounding area of the subject Property?
The Property is located in the Hertfordshire countryside to the north of the market town of Ware. Approximately 20 miles north of London and 45 minutes into Liverpool Street.
How was the subject superior to the new build comparable - The Grove?
The four-bed units are larger in size in comparison and The Grove
Why did you use a 10-mile radius for your re-sale comparable evidence search?
I initially searched for a three miles radius for 2 year period but this didn’t throw up any comparable evidence. Therefore, I widened my search radius to 10 miles and limited my search to a 1 year period.
According to the RICS, why do new-builds have a premium?
Due to being brand new and never lived in.
Apply 10 - 15%.
New builds typically have a warranty of 10 years:
NHBC is the UK’s leading independent standard-setting body and provider of warranty and insurance for new homes.
Offers:
- First 2 years = defects insurance period i..e any faulty products
- Years 3- 10 = structural insurance period
Did you try any other ways of verifying your appraisal due to the absence of land comparables?
I undertook an extensive search across various websites and spoke with local agents which had no luck. After speaking with senior experienced members of the team I felt happy with my appraisal.
What was your reasoning for Unit 5 being £30,000 higher in value compared to Unit 6?
Unit 5 is nearly 300 sqft larger than unit 6 and it has 3 ensuite bedrooms, one of which is a master bedroom with a dressing room too.
Can you give me another example of a special assumption you could value a property on the basis of this?
- Planning consent has been granted for the development when in reality / at the date of valuation it is still pending approval.
- the property is vacant when in reality / at the date of valuation it is occupied.
What was the size of the Ambassador Square development?
There were seven new build terraced courtyard garden units and 4 further apartments.
What aspect of the Red Book did you refer to when preparing the Loan Security Valuation?
In Part 5: Valuation Application section, VPGA 2.
What is the definition of MV?
The estimated value for which an asset or liability should exchange on the valuation date between a willing buyer and willing seller after proper marketing and at an arms-length transaction.
What is a special assumption?
An assumption that assumes facts that differ from the actual facts existing at the valuation date.
