Red Book Flashcards
What’s the full name of the Red Book?
RICS Valuation - Global Standards 2021
Why do we have the Red Book
To provide processes & guidance to all valuers & maintain high standards
What is in the Red Book?
Glossary
Professional Standards (PS)
Valuation Technical and Performance Standards (VPS)
Valuation Applications (VPGA)
International Valuation Standards (IVS)
PS1 - compliance with standards and practice statements
When does a valuation not have to be Red Book compliant?
ALIES
Agency
Litigation
Internal functions only
Expert Witness
Statutory (except financial reporting)
PS2 - Ethics, Competency, Objectivity
Must act in accordance with the Rules of Conduct
Valuer and firm must act objectively
Identify and manage conflicts
Must understand client requirements and document in terms of engagement
VPS1 - Terms of Engagement
What do you need to include?
Minimum matters:
status of valuer
identification of client
identification of other intended users
the property
currency
purpose of the valuation
basis of value
valuation date
information to be relied upon
assumptions and special assumptions
fee basis
complaints handling procedure
limitation on liability
VPS 2 - Inspections, Investigations and Records
verify information being relied upon
only don’t inspect if no material changes since previous inspection/valuation
restricted information (desktop) - document restriction and limitations
VPS 3 Valuation reports
minimum requirements:
identification and status of valuer
client and other intended users
purpose of valuation
basis of value
valuation date
information relied upon
assumptions & special assumptions
valuation approach and reasoning
valuation figure
comment on market
VPS 4 - Basis of Value
What are the four bases of value?
Market Value
Market Rent
Fair Value
Investment Value
Market Value/Market Rent?
On the valuation date
Willing buyer and willing seller (lessor/lessee)
Arm’s length transaction
After proper marketing
Each party acting knowledgeably, prudently and without compulsion
VPS 5 - Valuation Approaches and Methods
Choose and justify your approach
VPGA 1 - Valuation for inclusion in financial accounts
Fair value adopted for all IFRS adopted accounts
Prescribed performance standards must be adhered to
Particular care over documentation as lots of reliance upon information provided by the reporting entity’s management
VPGA 2 - Valuation for Secured Lending
Must disclose involvement with borrower or property in previous 2 years (in reality disclose longer)
Manage or decline if conflict
Reporting procedures:
Disclosure of prior involvement
Valuation methodology adopted
investigation of purchase price
Environmental consideration
suitability for loan
Marketability
SWOT/risks
UK VPS 3 Regulated purpose valuations
Valuations to be relied upon by a third party eg. financial reporting, stock exchange listings, takeovers and mergers
Subject to RICS monitoring
Also must declare whether fee from client represents under or over 5% of total fee income (and how much if over)
If a property is purchased or introductory fee accepted for a property, that firm cannot value for regulated purpose valuations for 12 months
New National Supplement May 2024
Mandatory rotation:
max period of 10 years for a firm
max for an individual within a firm
minimum 3 year break after rotating off an engagement
