Market Appraisal - L2 Flashcards
When does a valuation not have to be in line with the Redbook?
Negotiating purposes
Agency and Brokerage purposes
Others include expert witness and legal services, however these would not be merely a MA
How do the Property Ombudsman Codes of Practice for letting and estate agents relate to Market Appraisals?
Advise must be in the consumers best interests
The benefits and disadvantages of a recommended method of letting and managing the property should be explained in clear terms
The figures advised must be done so in good faith and in line with market conditions. Never misrepresent value to gain or retain instruction.
Values should be supported by comparables
Advise the landlord of the legal requirements of letting a property (EPC, EICR, smoke and carbon monoxide alarms)
Advise of any repairs that need doing before letting
Advise on any tax deduction from rental income if the landlord is over-seas
Advise on obtaining a third party inventory
What is the difference between an assumption and a special assumption?
A special assumption is something that differs from the actual facts (is untrue at the time of valuation), where an assumption is something that is likely to be true, but does not need further investigation
What factors affect MV?
Character, age, condition, location, size, construction, ownership structure, planning permissions, PRoW etc
What factors affect MR?
Character, age, condition, location, size, lease terms, use class / planning permission, business rates etc
What is an institutional client?
Any educational, religious or social organisation (school, hospital, church etc)
If the farm buildings held development value, did you still value on the basis of MV?
Yes, in conjunction with hope value (an element of market value in excess of the existing use value, reflecting the prospect of some more valuable future use).
Used comparables to establish this.
How did you value the CV of the barn that was let on an FRI lease?
I used both the comparable method and investment method to establish CV.
The investment method included a term and reversion as the premises was slightly underlet. The lease allowed for a rent review in 2 years time, therefore the remaining term was valued at MR.
What did you include in your Terms of Engagement prior to a market appraisal?
Usual things like client, property, fee etc, but also limitation of liability and authorised use.
Why did would the pasture and woodland attract a higher value if sold to neighbouring properties?
Neighbours are usually deemed as special purchasers (a particular asset has a special value because of advantages arising from its ownership that would not be available to others on the market).
Also, may hold 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)
What considerations do you need to make prior to proceeding with a valuation based on a special assumption?
In this case, I ensured that the terms of business were explicit in stating that the valuation was based on a special assumption. I also requested specification of works prior to accepting the instruction to ensure that it was reasonable for me to value the property based on that hypothetical situation.
What affect does listing have on a property?
In this case, it has a small impact on value due to the properties need for refurbishment / improvement, which meant that the listing would impose restrictions and requirements on the methods of work and materials used. It would also be likely that listing building consent would be required. All of this has a financial impact on any potential purchaser.
Listed comparable were available.
Where there any extra considerations that you had to make prior to acting on behalf of an institutional client?
In this case, it was a regular client of the firms therefore I checked that all DD had been carried out. If this had been a new client, to ensure that instructing person had adequate authority to do so, I may have requested multiple signatures from other persons within the organisation.
If the valuation was for an institutional client, did it not need to be a Charities Act valuation?
In this instance, the purpose of the valuation was to inform decision making on which refurbishment specification / expenditure should be chosen, rather than a valuation for the disposal of the property. Therefore it was for internal purposes only.
How did you advise your client that some neighbouring properties may show an interest in the land, and what was your advise around that?
I outlined that some special purchasers may arise. This is where an asset has a special value to because of advantages arising from its ownership that would not be available to other buyers in the market.
I outlined that from off-market data, this premium can be in the region of 5-15%, however this would be difficult to quantify until approaching neighbours to gauge interest.
