Depreciated Replacement Cost (DRC Metjod) Flashcards
What is the DRC method also known as?
Contractors method
When should The DRC method be used?
Only when direct market evidence is limited or unavailable for specialist property
What type of properties is DCR generally used for?
Sewage works, lighthouses, oil refineries, docks schools etc
What is the purpose of DCR valuation method?
Owner occupied property
- for accounts purposes for specialised properties
- rating valuations of specialist properties
Simple methodology of DCR
1- valua of the land in its existing use (assume planning permission exists)
2 - add current cost of replacing the building plus fees less a discount for depreciation and deterioration (use BCIS and judge the level of obsolescence
What are the different types of obsolescence taken into account within DRC?
Physical - result of deterioration/ west and tear
Functional - design or specification of asset no longer fulfils its function
Economic - due to changing market conditions
Is the DRC method of valuation compliant with the Red Book 2021?
No it is not red book compliant and should not be used for secured lending purposes
It can only be used for financial statements for specialised properties
What should be attached to a DRC valuation for use in private sector?
Statement that the valuation is subject to the adequate profitability of the business paying regard to the total assets of employed.
What should accompany a DRC for use in the public sector?
Statement that it is subject to the prospect and viability of the continued occupation and use
When reporting a DRC what should a valuer also include?
Market value for any readily identifiable alternative use.
What is the RICS guidance on DRC
RICS guidance note: DRC method of valuation for financial reporting, 2018
Range of advice and guidance
