Definitions Red Book Flashcards
MARKET VALUE
the estimated amount for which an asset or liability would be expected to exchange on the valuation date between a willing buyer and a willing seller in an arms length transaction where both parties have acted prudently, knowledgeably and without compulsion
Market Rent
the estimated amount for which an interest in real property would be expected to let on the valuation date between a willing lessor and a willing lessee in an arms length transaction where both parties have acted prudently, knowledgeably and without compulsion
Equitable Value
The estimated price for the transfer of an asset or liability between willing and knowledgeable parties which reflects the respective interests of those parties. Special purchaser
Investment Value
The value of an asset to an owner for an individual investment.
Marriage / Synergy Value
An additional element of value created by the combination of 2 or more assets where the combined value is worth more than the sum of their individual parts.
Assumption
Fact taken to be true without the need for further investigation. Eg planning, title
Special Assumption
An assumption that assumes facts which differ from actual facts at the valuation date.
Terms of engagement
Written confirmation of conditions that should be applied to the undertaking and reporting of the valuation. These should be agreed with the client prior to any valuation being conducted.
What is the red book?
Set of global standards which all members and firms must follow, it is a way for the RICS to enforce and regulate conduct.
PURPOSE / PRINCIPLES OF RED BOOK
Provides confidence in clients and users that all valuation undertaken by an RICS member is to the highest professional standard.
Bases of Value
Market Value
Market Rent
Equitable Value
Investment Value or Worth
What must you ensure before undertaking any valuation work?
C I T
I have the Competence - SKILLS, understanding knowledge
I have carried out a C.O.I check
Signed T.O.E
Methods of Valuation
PRICC
Profits, Residual, Investment, Comparable, Contractors
Profits or r&e method
Income producing properties in a Monopoly Position - based on turnover eg pubs, hotels, cinemas.
Comparable
Most widely used method & involves comparing similar transactions to give indication of value typically used to assess MV & MR.
