Red Book Flashcards
IVS
International valuation standards
Or a fundamental part of the financial system, along with the highest levels of professionalism in applying them
IVSC
International valuation standards Council:
Is an independent, not for profit organisation committed to advance in quality in the valuation profession
Global financial Standards
RICS Red Book - purpose
“To provide an effective framework within the rules of conduct so that the uses of valuation services can have confidence that the valuation of an RICS member is consistent with the IVSC internationally recognised standards”
What is the Red Book
Hierarchy of standards
The purpose of the Red Book
Red Book Professional standards PS1 and PS2
Mandatory provision around ethics and conduct underpinned by knowledge and competence
Valuation technical and performance standards (VPS1 to VPS5) - Mandatory
Valuation practice guidance applications (VPGAs) – Advisory
2 VPGA areas to be familiar with:
VPGA2 - Valuation for secured lending
VPGA10 - matters that may give rise to material valuation uncertainty
PS1
Compliance with standards were a written valuation is provided
PS2
Ethics, competency, objectivity and disclosures
RICS five ethical standards
1) act with integrity
2) always provide a high standard of service
3) act in a way that promotes trust in the profession
4) treat others with respect
5) take responsibility
Global valuation technical and performance standards - VPS
VPS1 to VPS5 are mandatory:
- VPS1, 4 and 5 focus on technical standards
- VPS 2 and 3 focus on performance and delivery standards
Terms of engagement
Conflicts of interest
Mandatory need for an audit trail - VPS2
VPS 1 – terms of engagement (scope of work)
VPS 1 – terms of engagement (scope of work) continued
VPS2 inspections, investigations and records
VPS3 valuation reports
VPS4 Basis of value, Assumptions and Special Assumptions
Definition of Market Value
‘The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and willing seller in an arms length transaction, after proper marketing and where the parties had each active knowledgeably, prudently and without compulsion’
Definition of Market Rent
‘The estimated amount for which an interest in real property should be leased on the valuation date between a willing lessor and a willing lessee appropriate lease terms in an arms length transaction, after proper marketing and where the parties at each active knowledgeably, prudently and without compulsion.’
Definition of Investment Value (Worth)
‘The value of an asset to a particular owner or prospective owner for individual investment or operational objectives.’
Definition of Fair Value
‘The price that would be received to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date.’
Definition of Assumptions
An assumption is made where it is reasonable for the valuer to accept that something is true without the need for specific investigation or verification.
Assumption is often linked to a limitation on the extent of the investigations or enquiries that could be undertaken by the valuer.
Eg - An assumption is something that is likely to be true but you can’t check it
Definition of special assumption
A special assumption is made by the value at where an assumption either assumes facts differ from those existing at the valuation date although would not be made by a typical market participant in a transaction on that valuation date.
Examples include –
1) The prospect of a planning consent
2) anticipation of a new letting
3) situation where a bid from the special purchaser has been made, or can be reasonably anticipated
VPS5 valuation approaches and methods
VPS5 valuation approaches and methods
Valuation practice guidance application – VPGA
There are three standards that relate to residential valuation:
VPGA2 - valuation of interest for secured lending
VPGA8 - valuation of real property interests
VPGA 10 - matters that may give rise to material valuation uncertainty
The UK National Supplement.
There are four parts to the UK national supplement:
1 – Introduction
2 – UK professional valuation standards (UK PS) and (UK VPS)
3 - UK valuation practice guidance application (UK VPGA)
4 - Commentary of changes from previous version
UK national supplement has four sections
UK VPGA 11
RICS guidance notes to be familiar with:
1) comparable evidence in real estate valuation
2) valuation of individual new build homes
3)  risk, liability and insurance in valuation work
4) The mundic problem (if valuing in the south-west)
5) Japanese knotweed and residential property
6) valuation of properties in multi story, multi occupancy residential buildings with cladding
7)  surveys of residential property
8) The valuation of buy to let and HMO properties
9) leasehold reform in England and Wales
