Red Book

Question 1

What does PS and VPS mean?

Answer 1

PS- The professional standard (Things you must think)

VPS- Valuation technical and performance standards

Question 2

Name PS 1 and 2

Answer 2

PS1 Compliance with standards where a written valuation is provided

PS2 Ethics, competency, objectivity and disclosures

Question 3

Name the 5 VPS

Answer 3

VPS 1,4 and 5 - Technical in nature

VPS 2 &3 focus on performance and delivery

VPS1- Terms of engagement (scope of work)

VPS 2- Inspection, investigations, and records

VPS 3- Valuation reports

VPS4- Bases of value, assumptions and special assumptions

VPS 5- Valuation approaches and methods

Question 4

What does VPGA stand for

Answer 4

Valuation Practise and guidance applications

Question 5

What is the aim of the red book?

Answer 5

To engender confidence and assurance to clients that valuation provided by RICS qualified valuer anywhere in the world is undertaken to the highest professional standards

Question 6

Outline the hierarchy if RICS published information papers

Answer 6

1.) RICS professional statements
2.) RICS Guidance notes
3.) RICS Insights

Question 7

What is the basis of value

Answer 7

Statement of fundamental measurement assumptions of a valuation

Question 8

What is the definition of market value

Answer 8

Asset exchange on valuation date between a willing buyer/seller- arms length transaction, after proper marketing and each party acting knowingly and without compulsion

Question 9

What is the definition of Investment Value?

Answer 9

-Value of an asset to a particular owner or prospective owner for individual investment or operational objectives

Question 10

What are valuation assumptions?

Answer 10

Assuming matter that are reasonable without specific investigation or verification

Question 11

What are special assumptions

Answer 11

Assumption that either assumes facts that differ from the actual facts existing at the valuation date that would not typically be made by a market participant

Question 12

What is fair value?

Answer 12

Price received to sell an asset, or paid to transfer a liability in an orderly transaction between participants (derives from international financial reporting standards)

Question 13

Name and explain the 5 different valuation methods

Answer 13

Comparable method

Investment method-capitalising income

Profits method- income properties usually more specialist like golf courses- FMOP- Fair Maintainable Operating Profit

Depreciated replacement cost- cost to build the subject property deducting costs for dilapidations- Airports

Residual method (output value of land) Dev appraisal-output of profitability/viability, Dev potential- highest value use

Question 14

What are the 5 different valuation methods?

Answer 14

1. Comparable Method
2. Investment Method- uses the income stream to value the property. Assess rental values and apply a market based yield
3. Profits Method- Used for income producing properties. Hotels, golf courses
4. Depreciated replacement cost- used for specialist properties. Is the cost to buy the equivalent site/construct the equivalent building deducting the depreciation costs
5. Residual method- used for properties or land with development potential

Question 15

What is the definition of “Fair market Value”?

Answer 15

The price that would be received, to sell an asset or paid to transfer a liability, in an orderly transaction between participants. -Derives from International Financial reporting standards

Question 16

What are the different types of documents/ hierarchy of documents for RICS

Answer 16

1.) Rules of Conduct
2.) international standard- High level standard developed in collaboration with other relevant bodies
3.) RICSS Professional Statement (PS)- mandatory requirements for RICS members and firms
4.) Guidance note (GN) -A document that provides users with recommendations for professional advise and areas of good practise
5.) RICS code of practise (CoP)-document in colab with other relevant bodies that have the status of a professional statement or guidance note