Loan Security Valuation Flashcards
What is a typical LTV Ratio?
60-70%
What does UK VPGA 10 relate to?
Valuation for commercial secured lending purposes.
What does UK VPGA 13 relate to?
Residential secured lending guidance for other related purposes including RICS Home Buyer Survey.
State what is within UK VPGA 10?
- Guidance relating to commercial secured lending in the UK.
-DRC method not to be used as primary valuation method.
-Provides more detail for independence, objectivity and conflicts of interest. - States that if panel agreements agreed, TofE must still reflect individual assignment.
-Panel agreements should be under regular review by valuer.
-Important that any loan sec report addressed only to named lender and not borrower.
-As default position, the TOFE should limit reliance only to addressee.
-Any comments by valuer to loan security must be limited only to property and market factors.
-Valuer only expected to provide opinion based on info readily available in market.
-Advises for caution regarding revaluations if required.
-Mentions important of sustainability and ESG factors to value.
What is Freemont (Denbigh) V Knight Frank LLP (2014)?
Knight Frank valued some land for secured lending purposes. The claiment alledged that Knightfrank overvalued the property and upon trying to sell the property they did not achieve any offers close the the valuation figure. They decided to sue Knight Frank for a breach in their duty of care requirements. However, the Courts ruled in favour of Knight Frank as the claimed losses were not within the scope of duties owed by Knight Frank (e.g. they were only required to value for secured lending purposes).
On Wells Place, talk to me about the risk profile of the property and how your advice differs based on the risk profile?
My executive summary includes a SWOT analysis for this property. I identified strengths being that the warehouse was relatively newly built and in close proximity to both the A23 and M25. I identified a weakness to be due to the tree protection order limiting further extensions of the building. However, I advised that an opportunity was to sell parcels of the land off to the houses behind. I capitalised the income at an ARY which reflected both the growth and risk element for the property.
How do you check previous involvement before agreeing to an instruction?
Send out a conflict checker to my company.
If there are files either online or paper, check these to see the last time any work was done and by whom.
What would you do if you found out you were conflicted with a job half way through?
I would immediately inform my client and depending on the type of conflict, I would seek informed consent from all parties and potentially adopt an information barrier. However, I would make the last decision as to whether to continue the instruction or not.
What is Scullion V Bank of Scotland (2011)?
Purchaser bought buy to let flat and sought finance. Lender instructed surveyor to value. Purchaser did not instructed own surveyor and the rent prospects were overstated by the lender’s surveyor. The purchaser sued the surveyor.
The judge felt that the surveyor owed a duty of care to the purchaser as they had relied on the valuation when securing a loan and looking to purchase.
However, court of appeal overturned decision stating that while purchaser may have relied on valuation, it was not reasonablly forseeable to impose duty of care on surveyor. As buy to let was a commercial transaction the first judge’s case law did not apply and generally purchasers of commercial transactions would instruct their own surveyors.
Therefore, unless lender’s valuer agrees to assume responsibility for purchaser as well, the purchaser should instruct their own valuer.
Talk me through your SWOT analysis for Partridge Green?
S - At val date there was strong demand for VH Industrial VP units.
Good parking provision.
W - Poor location, no trunk road nearby
O - Continue to maintain and repair property to maximise MV.
T - Russia/Ukraine war/Cost of living crisis.
In Partridge Green, was your MV based on the SWOT?
I used the investment method to value this property, in adopting ARY I used the SWOT analysis to factor in both future growth and risk.
For Yateley, how did you calculate the costs for the extra work required using BCIS?
I measured each room that required work individually in order to get the sizes in sqm to calculate build costs using BCIS to fully fit out. I then checked my calculated total figures with a building surveyor at my firm for their opinion on if this was a fair reflection of the actual costs.
For Yateley, why did you include developer’s profit for a VP property?
As req to value the property on a VP basis, I added in an element of profit/contingency for added hassle for a potential purchaser as it would be expected that there would be a discount if the property was unfinished.
In Wells Place, how did you find out that there was ancient woodland onsite?
The LPA website listed it as a planning constraint and the client’s customer also mentioned it during my inspection.
What is a Tree Protection Order?
An order to protect specific trees. It means that if an individual wants to undertake management/development, etc onsite they will need to consult LPA. Normally used in urban or semi-rural areas where you would want to conserve nature areas.
