Red Book

Question 1

Red Book name

Answer 1

RICS Valuation - Global Standards

Question 2

Effective date of Red Book

Answer 2

31st January 2022

Question 3

Purpose of Red Book

Answer 3

Provide consistency, objectivity and transparency of valuation practice globally.

Provides public confidence that valuation undertaken by RICS Registered Valuer is consistent with international standards.

Question 4

Difference between Red Book 2020 and 2022

Answer 4

• Greater focus on sustainability and ESG factors
• Reference to IFRS 13 and IFRS 16 and the need to provide reasonably possible fair value measurements.

Question 5

When is it mandatory?

Answer 5

For ALL valuations.

5 exceptions

Question 6

What are the exceptions?

Answer 6

1. Negotiation and litigation
2. Statutory function
3. Internal vals
4. Agency and brokerage vals
5. Expert witness

Question 7

What is an assumption?

Answer 7

Something that is reasonable to believe to be true without undertaking specific investigations

Question 8

What is a special assumption?

Answer 8

Something that you know not to be true but for the purposes of the valuation you assume to be fact

Question 9

What is a departure?

Answer 9

A special circumstance where you state that application of a mandatory standard may be inappropriate

Question 10

What is a special purchaser?

Answer 10

A particular buyer where that property has a special value because they own the property.

Question 11

Elements of the Red Book

Answer 11

1. Professional standards
2. Valuation technical and performance standards
3. Valuation practice guidance applications

Question 12

VPS 1

Answer 12

Terms of Engagement (IVS 101 Scope of Work)

Question 13

VPS 2

Answer 13

Inspections, Investigations and Records (IVS 102)

Question 14

VPS 3

Answer 14

Valuation reports (IVS 103 Reporting)

Question 15

VPS 4

Answer 15

Bases of Value, Assumptions and Special Assumptions (IVS 104)

Question 16

VPS 5

Answer 16

Valuation Approaches and Methods (IVS 105)

Question 17

VPGA 1

Answer 17

Valuation for inclusion in financial accounts

Question 18

VPGA 2

Answer 18

Valuations for secured lending

Question 19

VPGA 8

Answer 19

Valuation of real estate property interests

Covers inspections and investigations, with particular emphasis on ESG and specific environmental constraints and sustainability issues.

Direct valuation factors (e.g. storm or flood risk)
Indirect valuation factors (e.g. resilience or carbon emissions)
Physical risks (e.g. through heat or wildfire)
Transition risks (regulatory change or carbon emissions)

Question 20

VPGA 10

Answer 20

Matters that may give rise to material valuation uncertainty

Question 21

Market Value definition

Answer 21

The estimated amount for which an asset or liability should exchange
- on the valuation date
- between a willing buyer and a willing seller
- in an arm’s length transaction
- after proper marketing
- where the parties had each acted knowledgeably, prudently and without compulsion

Question 22

Market Rent definition

Answer 22

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
- on appropriate lease terms
- in an arm’s length transaction
- after proper marketing
- when the parties had each acted knowledgeably, prudently and without compulsion

Question 23

Fair Value definition

Answer 23

The price that would be received to sell as asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date
- the RICS view is that this definition is generally consistent with the definition of MV

Question 24

Investment Value definition

Answer 24

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

Question 25

What are three internationally defined valuation approaches recorded in the Red Book?

Answer 25

1. The Market Approach 2. The Income Approach 3. The Cost Approach

Question 26

Minimum requirements for Terms of Engagement under VPS1

Answer 26

- identification and status of valuer - identification of client - identification of any other intended users - the asset to be valued - currency - purpose of valuation - basis of value - valuation date - extent of investigation - nature and source of information to be relied upon - assumptions and special assumptions to be made - format of report - restrictions of use, distribution and publication - confirmation of Redbook/IVS compliance - fee basis - CHP - statement that the valuation may be subject to compliance by RICS - limitation on liability agreed

Question 27

Minimum requirements to be stated in a report under VPS3?

Answer 27

a) identification and status of valuer b) client and any other intended users c) purpose of valuation d) identification of asset to be valued e) basis of valuation f) valuation date g) extent of investigation h) nature of source of info relied upon i) assumptions and special assumptions j) restrictions on use, distribution & publication k) instruction undertaken in accordance with IVS standards l) valuation approach & reasoning m) valuation figure(s) n) date of valuation report o) comment on market uncertainty p) statement setting out any limitations on liability that have been agreed