MA Flashcards
How is Market Appraisal different from Red Book Valuation?
Market Appraisal includes an element of hope value and some forecasting, whereas valuations rely more on detailed analysis of comparable evidence.
MA is a professional opinion or estimate of a property’s value based on current market conditions, trends, and comparable property data. It is not a formal valuation but indicative.
- A market appraisal is an informal estimate provided by property agents and is generally not used for legal or financial purposes.
- A valuation is a formal assessment carried out by a qualified RICS valuer and follows specific standards (such as the RICS Valuation – Global Standards, also known as the “Red Book”). It is used for secured lending, financial reporting, and legal matters
What is a Market Appraisal (MA)?
A Market Appraisal is a professional opinion or estimate of a property’s value based on current market conditions, trends, and comparable property data. It is not a formal valuation but indicative.
What is the nature of a market appraisal?
A market appraisal is an informal estimate provided by property agents and is generally not used for legal or financial purposes.
What is a valuation?
A valuation is a formal assessment carried out by a qualified RICS valuer and follows specific standards, such as the RICS Valuation – Global Standards (Red Book). It is used for secured lending, financial reporting, and legal matters.
What are the reasons for undertaking a Market Appraisal?
To provide a guide price or when acquiring an asset for a client.
What must you include when providing an MA?
You must include appropriate caveats. eg. not relied upon
How do you ensure it is not a valuation?
By stressing that it is not a valuation and highlighting that it can’t be relied upon.
What are the main factors to consider in a Market Appraisal?
The primary purpose is to provide the property owner with an estimate of what their property could realistically sell for in the current market. Factors include: 1. Location 2. Condition and Features of the Property 3. Comparable Properties 4. Current Market Trends 5. Economic Factors.
Is advice on the property’s value classified as a formal valuation?
No, it is not classified as a formal valuation.
Why do you need to understand both micro and macroeconomic market conditions?
Micro refers to location and active buyers in the market, while macro refers to global affairs, SONIA, swap rates, and debt.
What are the current loan to value ratios?
The loan-to-value (LTV) ratio is the percentage of a property’s value that is being borrowed. Typical region is 60%, but in difficult markets, lenders may adopt a loan to cost ratio (60%). Higher LTC = more debt = higher risk.
Who are the most active buyers at the moment?
Buyers are typically looking for lot sizes below £15m. For secondary assets, likely alternative use or value-add investors.
Does your firm charge for an MA?
Do you have regard to any RICS regulation?
Yes, RICS Professional Statement: UK commercial real estate agency 2016 and RICS rules of conduct.
Can you explain the office acquisition?
Tower wharf, 70k, 6 years income, passing rent £2m, fully let, by the train station.
Can you explain the reading market and the favourable supply and demand?
Take up has been at its highest since 2018. Some pre-let this is the site next door, otherwise, mainly refurbished and CAT A space.
Can you explain what headline rent is and also what they are in reading?
The agreed gross rent that a tenant pays, eg. this does not factor in any incentives or rent free periods. Rents have significantly increased over the years now reading c. £57.50 psf.
What do you mean by your client requirements?
Office c. 9.00%, prime location, potential for asset management regears, good income length.
What are the benefits and drawbacks of an off-market acquisition?
Pros – less compeition, potentially able to secure a better price, confidentiality, flexbility in deal structuring.
Negatives – due dilgence may be harder due to lack of information, increased risk due to less transparency.
Why did you think it was a good investment for your client?
Growing headline rents
Good building, some asset management initiatives to increase the reversionary rent which is attractive to investors.
Demand for grade a space.
How did you factor the significant interest into your pricing?
sharper yield
What is an IC paper?
Document prepared to present the investment opportunity offer the client.
Can you explain the property?
44,000 sq ft, income 3 years left c. £1m, sam pines bought
How much below guide price was it?
Guide £9.0m (10.00%) – sold for £6.2m (14%). Income reduced, had been under offer previously and the client wanted to sell the asset quickly.
Why was it the optimal time to sell?
Good buyer interested; outlook wasn’t looking great.
Was it sold for alternative use?
It was not in an article 4 direction and since the relaxation of rules, a buyer came forward who was going to either refurbish or potentially turn into residential.
Why would this impact full cash buyers?
Because with the cost of borrowing, they know bids will be lower so won’t over pay and pay market value.
explain thr article 4 direction rules?
However, local councils have powers to restrict or remove permitted development rights from sites or areas within their authority. These powers are described at Article 4 of the permitted development rights legislation. Because of this, we call the restrictions “Article 4 directions”.
no afforable element
