Red Book Flashcards
What is the main document regarding valuation?
RICS Valuation – Global Standards 2022 (Red Book Global)
What is the purpose of the Red Book?
Global valuation standards for high standards of integrity, clarity and objectivity in adopting valuation best practice – promotes public trust in RICS valuations
What was the Peter Pereira Gray Review’s (December 2021) purpose?
Commissioned by the RICS Standards and Regulation Board to ensure valuations would be trusted and relevant in the future
What are some of Peter Pereira Gray Review’s recommendations?
- Separation of valuation from advisory services within firms
- Developing time-specific rotation for valuers
- Developing Valuation Compliance Officer within firms
- Process to raise issues on ethical conduct in firms
Why was the Red Book updated in 2022?
1) To promote Consistency, Objectivity and Transparency
2) Increased focus on ESG and sustainability:
- Inspections (VPS2) & reporting (VPS3)
- Loan security valuations (VPGA2) – maintainability of future income & likely future costs due to changing regulations
- Valuation of real property assets (VPGA8) – direct and indirect valuation relevance
What is the structure of the Red Book?
1) Intro
2) Glossary
3) Professional Standards (PS)
4) Valuation and Performance Standards (VPS)
5) Valuation Practice Guidance Applications (VPGA)
6) International Valuation Standards (IVS)
What is PS1?
That written valuations should be compliant with the Red Book standards and applications
When is compliance with the Red Book not required?
EASIL
E - Expert witness
A - Agency & brokerage apart from Purchase Report
S - Statutory purposes
I - Internal accounts
L – Litigation or negotiation
What is PS2 and what does it include?
Ethics, competency, objectivity and disclosures
1) Professional and ethical standards act in accordance with the 5 Rules of Conduct.
2) Independence – Apply ‘professional scepticism’ when reviewing information before relying on it
3) Terms of engagement – must understand client’s requirements and comply with agreed terms
What is VPS 1?
Minimum terms of engagement:
1) Name and status of valuer
2) Identification of the Client/other intended users
3) Asset to be valued (if portfolio then lotting of assets considered)
4) Valuation currency (2017)
5) Purpose of valuation
6) Basis of value
7) Valuation date
8) Extent of investigation
9) Nature and source of information to be relied upon
10) Assumptions and special assumptions to be made
11) Format of report
12) Restrictions for use, distribution and publication
13) Confirm RBG/IVS compliance
14) Fee basis
15) Complaints handling procedure to be made available
16) Statement that the valuation may be audited by RICS
17) Limit on PII liability agreed
What is VPS 2?
Inspections, investigations and reports
What must valuers do for inspections as per VPS 2?
Valuers must take steps to verify the necessary information being relied upon for a valuation to ensure professionally adequate
What is a desktop inspection?
A Red Book valuation without a physical inspection
What should valuers consider when undertaking desktop valuation?
- The nature of the restriction must be agreed in writing in ToE
- Possible valuation implications of restriction confirmed in writing before the value is reported.
- Valuer should consider whether the restriction is reasonable about the purpose of the valuation.
- The restriction must be referred to in the report.
When can a revaluation with no inspection be undertaken?
Must not be undertaken unless valuer is satisfied no material changes
