General Valuation Questions - Mark Hoffman Potential Questions Flashcards
The RICS Valuation – Professional Standards (Global and UK) or the Red Book was originally produced in January 2014 – what has this been subsequently split into in 2017?
- RICS Valuation – Global Standards (2017)
- RICS Valuation – Global Standards: UK National Supplement (2019)
The RICS Valuation – Global Standards & RICS Valuation – Global Standards: UK National Supplement have been updated several times, what is the most current edition of both documents published?
- RICS Valuation – Global Standards (2017) was most recently updated in December 2024, to be effective for valuation dates from 31st January 2025 and thereafter .
- RICS Valuation – Global Standards: UK National Supplement (2019) was most recently updated in October 2023, effective from 1st May 2024 and thereafter.
When were and what were the reasons to the most recent updates in The RICS Valuation – Global Standards & RICS Valuation – Global Standards: UK National Supplement?
- RICS Valuation - Global Standards was updated in December 2024 to align with the new International Valuation Standards (IVS) effective from January 2025. There has been extensive editing of the text but the essence has not changed.
- RICS Valuation - Global Standards: UK National Supplement was updated in October 2023, effective from May 2024 to align with global 2022 update.
What is the purpose of the Red Book?
- “To establish a framework for uniformity and best practice in valuation”
- To assure users that a valuation provided anywhere in the world is in accordance with the highest professional standards
- Consistency, objectivity and transparency.
What Valuations are exemptions from the Red Book?
- Agency or brokerage work in anticipation of disposal or acquisition instructions
- Acting or preparing to act as an expert witness
- Performing statutory functions
- Purely for internal Purposes
- Preparation for or during negotiations or litigation
What is included in a valuation report?
The report must:
- clearly and accurately set out the conclusions of the valuation in a manner that is neither ambiguous nor misleading, and which does not create a false impression. If appropriate, the valuer should draw attention to, and comment on, any issues affecting the degree of certainty, or uncertainty, of the valuation under item (o) below
- deal with all the matters agreed between the client and the valuer in the terms of engagement (scope of work) - (see VPS 1).
What are the 9 most important terms of engagement that should be agreed on before any valuation work goes ahead?
(a) Identification and status of the valuer
(b) Identification of the client(s)
(d) Identification of the asset(s) or liability(ies) being valued
(f) Purpose of the valuation
(g) Basis(es) of value adopted
(h) Valuation date
(i) Nature and extent of the valuer’s work - including investigations - and any limitations thereon
(k) All assumptions and special assumptions to be made
(o) The basis on which the fee will be calculated
What are examples of (i) Nature and extent of the valuer’s work - including investigations - and any limitations thereon?
- A short time timescale for reporting may result in not all of the facts being established, or valuation based on an automated valuation model (AVM) may be required.
- A client may require a drive-by, desk-top or pavement valuation.
- Instructions may be accepted if the restriction is considered reasonable.
- The instruction should be declined if the valuer considers that it is not possible to provide a valuation on the basis of restricted information.
- It must be made clear when confirming instructions that the restriction, any resulting assumptions and the impact on the accuracy of the valuation will be referred to in the Report.
What is a bases of value?
- In simple terms a definition of value,
- “A basis of value is a statement of the fundamental measurement assumptions of a value”
What are the bases of value?
- Market Value
- Market Rent
- Investment Value (or worth)
- Fair Value (under international financial reporting standards)
What are the two Valuation Bases in the UK National Supplement?
- Existing Use Value (EUV) - UK VPGA 6
- Existing Use Value for Social Housing (EUV-SH) - UK VPGA 7
What is the definition of Market Value?
- The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.
What is the definition of Market Rent?
- The estimated amount for which an interest in real property should be leased on the valuation date between a willing lessor and a willing lessee on appropriate lease terms in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.
What is Investment Value?
- The value of an asset to the owner or a prospective owner for individual investment or operational objectives.
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.
What is the definition of Special Value?
- An amount that reflects particular attributes of an asset that are only of value to a special purchaser
What is the definition of a special purchaser?
- A particular buyer for whom a particular asset has a special value because of advantages arising from its ownership that would not be available to other buyers in a market.
What is the definition of Synergistic Value?
- Synergistic Value is the result of a combination of two or more assets or interests where the combined value is more than the sum of the separate values.
What is the definition of marriage value?
- An additional element of value created by the combination of two or more assets or interests where the combined value is more than the sum of the separate values.
