Red Book

Question 1

IVS

Answer 1

International valuation standards

Or a fundamental part of the financial system, along with the highest levels of professionalism in applying them

Question 2

IVSC

Answer 2

International valuation standards Council:

Is an independent, not for profit organisation committed to advance in quality in the valuation profession

Question 3

Global financial Standards

Answer 3

Question 4

RICS Red Book - purpose

Answer 4

“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”

Question 5

What is the Red Book

Answer 5

Question 6

Hierarchy of standards

Answer 6

Question 7

The purpose of the Red Book

Answer 7

Question 8

Red Book Professional standards PS1 and PS2

Answer 8

Mandatory provision around ethics and conduct underpinned by knowledge and competence

Question 9

Valuation technical and performance standards (VPS1 to VPS5) - Mandatory

Answer 9

Question 10

Valuation practice guidance applications (VPGAs) – Advisory

Answer 10

Question 11

2 VPGA areas to be familiar with:

Answer 11

VPGA2 - Valuation for secured lending

VPGA10 - matters that may give rise to material valuation uncertainty

Question 12

PS1

Answer 12

Compliance with standards were a written valuation is provided

Question 13

PS2

Answer 13

Ethics, competency, objectivity and disclosures

Question 14

RICS five ethical standards

Answer 14

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

Question 15

Global valuation technical and performance standards - VPS

Answer 15

VPS1 to VPS5 are mandatory:

• VPS1, 4 and 5 focus on technical standards
• VPS 2 and 3 focus on performance and delivery standards

Question 16

Terms of engagement

Answer 16

Question 17

Conflicts of interest

Answer 17

Question 18

Mandatory need for an audit trail - VPS2

Answer 18

Question 19

VPS 1 – terms of engagement (scope of work)

Answer 19

Question 20

VPS 1 – terms of engagement (scope of work) continued

Answer 20

Question 21

VPS2 inspections, investigations and records

Answer 21

Question 22

VPS3 valuation reports

Answer 22

Question 23

VPS4 Basis of value, Assumptions and Special Assumptions

Answer 23

Question 24

Definition of Market Value

Answer 24

‘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’

Question 25

Definition of Market Rent

Answer 25

‘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.’

Question 26

Definition of Investment Value (Worth)

Answer 26

‘The value of an asset to a particular owner or prospective owner for individual investment or operational objectives.’

Question 27

Definition of Fair Value

Answer 27

‘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.’

Question 28

Definition of Assumptions

Answer 28

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

Question 29

Definition of special assumption

Answer 29

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

Question 30

VPS5 valuation approaches and methods

Answer 30

Question 31

VPS5 valuation approaches and methods

Answer 31

Question 32

Valuation practice guidance application – VPGA

Answer 32

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

Question 33

The UK National Supplement.

There are four parts to the UK national supplement:

Answer 33

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

Question 34

UK national supplement has four sections

Answer 34

Question 35

UK VPGA 11

Answer 35

Question 36

RICS guidance notes to be familiar with:

Answer 36

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