Loan Security Valuation

Question 1

What is MARKET VALUE?

Answer 1

The estimated amount at 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 with proper marketing where each party had acted knowledgeably, prudently and without compulsion.

Question 2

Is the property MARKETABLE?

Answer 2

Can lender recover debt.

Question 3

RICS Guidance Note: Valuation of Properties Purpose Built for Renting 2018 – reissued May 2023 as Professional Standard

Answer 3

• Should be valued on an income driven basis.
• Primary drivers are value of existing and potential net income.

Question 4

What is debt finance?

Question 5

What financing options are available to the property market?

Answer 5

• Senior debt finance (first level of debt – takes precedent)
• Mezzanine funding (additional funding over normal LTV)

Bridging finance - short-term finance solution, favoured by investors and developers to quickly purchase a property seek exit at loan term
Mezzanine finance – hybrid version of finance that combines elements of debt and equity investment, secured against the property. Helps developers reduce their cash flow requirement so they can finance projects normally requiring a larger capital share.