Red Book Flashcards
Red Book name
RICS Valuation - Global Standards
Purpose of Red Book
Provide consistency, objectivity and transparency of valuation practice globally
Provides public confidence that valuation undertaken by RICS Registered Valuer is consistent with international valuation standards
Difference between Red Book 2017 and 2020
Includes changes to IVS
Allowed improvements and clarifications to be made to sections of Red Book
PS1- ‘written’ valuations
PS2 - ‘professional scepticism’
VPS 3 - reinforces that valuation reports must clearly state approach and reasoning to valuation
Effective date of Red Book
31 Jan 2020
When is it mandatory?
For all valuations!
5 exceptions
What are the exceptions?
- Negotiation and litigation
- Statutory function
- Internal vals
- Agency and brokerage vals
- Expert witness
What is an assumption?
Something that is reasonable to believe to be true without undertaking specific investigations
What is a special assumption?
Something that you know not to be true but for the purposes of the valuation you assume to be fact
What is a departure?
A special circumstance where you state that application of a mandatory standard may be inappropriate
What is a special purchaser?
A particular buyer where that property has a special value because they own the property
Elements of the Red book
Professional standards
Valuation technical and performance standards
Valuation practice guidance applications
Professional standards
PS1 – compliance with Redbook
PS2 – acting ethically, being competent, and acting objectively and independently
VPS
1 – terms of engagement
2 – investigations inspections and records
3 – valuation reports
4 – bases of value
5 – valuation approaches and methods
Desktop valuations
Still Red book compliant however value a must consider for factors:
Must be agreed in terms of engagement that not inspecting
Must be confirmed in writing
Consider if restriction of inspection is reasonable
Restriction must be referred to in report
Market value
The amount for which an asset can be exchanged between a willing buyer and a willing seller in an arm’s-length transaction at the valuation date following it being openly marketed
Market rent
The amount for which a property can be exchanged/least between a willing lessor or lessee in an arm’s-length transaction at the valuation date and after being openly marketed
Fair value
Definition taken from IFRS 13
Price that would be received for an asset in an orderly transaction at the measurement date
Use the financial reporting
Investment value
Value of an asset to a particular owner or prospective owner for an investment
Similar to worth
International valuation standards
International guidance for valuation professionals and underpins consistency transparency and confidence in valuations
Red book is the RICS document that supports the delivery of IVS by RICS members
VPGA
VPGA 1 - financial reporting
VPGA 2 - secured lending valuations
VPGA 10 - material valuation uncertainty
VPGA 10
Valuer must clearly draw attention to and comment on any issues relating to valuation uncertainty at the valuation date relating to the risk surrounding the valuation
Eg Covid
Covid 19 valuation uncertainty clause
March 2020 – RICS guidance on material valuation uncertainty in reports
November 2020 – RICS advise no longer need material uncertainty clause unless very limited transactional data
RICS RB UK National Supplement
Augments the Redbook setting out specific requirements for valuations undertaken in the UK
UK VPS 3
Regulated purpose valuations
Valuations relied on by third parties
E.g. financial statements/stock exchange listings/takeovers and mergers
NOT SECURED LENDING
UK VPGAs
VPGA 1 - financial reporting
VPGA 10 - secured lending
VPGA 15 - CGT/ Inheritance Tax/ SDLT etc
RICS Valuer Registration Scheme effective date
October 2011
Aims of VRS
- Improve the quality valuations and ensure the highest possible professional standards
- Meet RICS’ requirement self regulate effectively
- Protect and raise the status of valuation professional as the leading expert in valuation
Requirements to register as a Registered Valuer
Level 3 Vals competency
Number of vals and types of vals undertaken
Firms total fee income for Red book vals over last year
Don’t need to be registered if don’t do red book vals
