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APC Revision ---- > red book > Flashcards

red book Flashcards

1
Q

What is the Red Book’s stated purpose?

A

The stated purpose of the Red Book is: ‘To provide an effective framework within the Rules of Conduct so that the users of valuation services can have confidence that the valuation of a RICS Member is consistent with IVSC internationally recognised standards.’

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2
Q

What does the Red Book say constitutes a written valuation?

A

According to PS 1 paragraph 1.3 of the 2020 Global Edition, a written valuation encompasses all forms of communication except those that are purely oral.

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3
Q

What does the Red Book say about oral valuations?

A

PS 1 paragraph 1.6: Where valuation advice is provided wholly orally, the principles outlined in the Red Book should still be observed as much as possible. Oral valuations do not negate the valuer’s responsibility or liability.

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4
Q

What does the Red Book say about the use of automated valuation models (AVMs)?

A

PS 1 paragraph 1.4 (amended from 2020 onwards): The provision of an AVM-derived output is regarded as the provision of a written valuation.

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5
Q

What does it say about quasi-Red Book valuations?

A

PS 1 para 5.7 clarifies: Valuations are either Red Book compliant or they are not.

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6
Q

What does the 2020 Red Book say about professional scepticism?

A

PS 2 Section 1 paragraph 1.5 states that: Members must apply professional scepticism by maintaining independence and objectivity and critically assessing information relied upon during the valuation process.

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7
Q

What do we mean by ‘valuation approach’ and by ‘valuation method’?

A

A valuation approach refers to the overall manner in which a valuation is undertaken. A valuation method refers to the specific procedure or model used to calculate the value.

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8
Q

What do we mean by ‘material valuation uncertainty’? Does it differ from inherent uncertainty?

A

Material valuation uncertainty arises when the level of uncertainty in a valuation exceeds normal expectations and must be disclosed. Inherent uncertainty is normal market risk and does not need specific mention unless it becomes material.

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9
Q

What was the RICS Leadership Forum?

A

The RICS Leadership Forum provides guidance on valuation issues, including communication of material valuation uncertainty to ensure transparency.

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10
Q

What does the Red Book state about sustainability and environmental matters?

A

Valuers are expected to consider sustainability factors such as climate change, energy efficiency, and corporate responsibility when valuing assets.

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11
Q

What is ESG?

A

ESG stands for Environmental, Social, and Governance. It assesses the sustainability and ethical practices of a company.

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12
Q

What are natural environmental constraints?

A

Natural environmental constraints include factors such as flooding, wildfires, and severe storms, which impact property values.

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13
Q

What are non-natural environmental constraints?

A

Non-natural environmental constraints include energy efficiency standards and carbon emission regulations.

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14
Q

What does PS 1 address?

A

PS 1 addresses compliance with standards when providing a valuation and ensures adherence to both the Red Book and IVS standards.

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15
Q

What does PS 1 say about VPS 1 to 5?

A

VPS 1 to 5 outline specific technical and performance standards required for valuations, such as inspection, reporting, and assumptions.

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16
Q

What does PS 2 cover and when does it apply?

A

PS 2 focuses on ethics, competency, and disclosures and applies to all RICS members providing valuation services.

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17
Q

What do each of VPS 1 to VPS 5 address?

A

VPS 1: Minimum Terms of Engagement; VPS 2: Inspections and Investigations; VPS 3: Valuation Reports; VPS 4: Bases of Value; VPS 5: Valuation Approaches.

18
Q

What is a basis of value?

A

A basis of value is the fundamental assumption about the nature of the transaction. Examples include Market Value and Fair Value.

19
Q

What is Special Value?

A

Special Value is an amount reflecting attributes uniquely valuable to a specific purchaser.

20
Q

What is Marriage Value?

A

Marriage Value is the additional value created by combining two or more assets where the combined value exceeds the individual values.

21
Q

What are Assumptions?

A

Assumptions are matters accepted as fact for a valuation assignment without further investigation.

22
Q

What are Special Assumptions?

A

Special Assumptions differ from actual facts and illustrate how changes in circumstances could affect the value of an asset.

23
Q

What do we mean by a ‘Projected Value’?

A

A Projected Value is an estimated future value of an asset based on assumptions about market conditions or development progress.

24
Q

At a lease rent review, what Basis of Value do you use, and where do you find that basis?

A

The appropriate Basis of Value for a lease rent review is Market Rent, as defined in VPS 4 para. 5.

25
Q

What is investment value or worth, and when would you apply it?

A

Investment Value (or Worth) is the value of an asset to the owner or prospective owner for individual investment objectives.

26
Q

What is Fair Value?

A

Fair Value is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date.

27
Q

What is the difference between Existing Use Value and Market Value for Existing Use?

A

Existing Use Value is based on an asset’s current use, while Market Value for Existing Use considers potential highest and best use.

28
Q

What is the EUV (SH) basis of value?

A

EUV-SH is used for valuing social housing for financial statements, assuming it will continue for social housing purposes.

29
Q

What do Terms of Engagement (ToE) require to cover?

A

The ToE must cover key elements such as the basis of value, assumptions, special assumptions, and compliance with IVS.

30
Q

What does the Red Book say should be captured during an inspection?

A

Valuers must capture details such as locality, dimensions, and environmental matters during an inspection.

31
Q

Can I do a Red Book valuation without inspecting?

A

A valuation without inspection is possible if the valuer is confident that no material changes have occurred since the last inspection.

32
Q

What RICS guidance is available regarding measurement standards?

A

RICS provides guidance documents such as the RICS Property Measurement (2nd edition) which applies the International Property Measurement Standards (IPMS).

33
Q

What should be in the report?

A

The report must include identification of the valuer, client, property, basis of value, valuation approach, and other necessary details.

34
Q

Who signs a report?

A

The report must be signed by a RICS member who takes responsibility for the valuation.

35
Q

Who needs to be named in a report?

A

All valuers contributing to the valuation should be named in the working papers, and the signing signatory must oversee the process.

36
Q

What steps are required if a draft report is issued?

A

If a draft report is issued, it must be agreed in advance, comply with PS 2, and clearly marked as provisional.

37
Q

What is meant by Valuation reasoning?

A

Valuation reasoning refers to the explanation and rationale linking evidence to the final opinion of value.

38
Q

What is the purpose of VPGAs?

A

VPGAs provide best practice guidance for specific valuation tasks or property types. VPGA 8 and VPGA 10 apply to a wide range of valuations.

39
Q

What are the different types of conflict of interest?

A

Conflicts of interest include own interest conflict, party conflict, and confidential information conflict.

40
Q

How can conflicts of interest be addressed?

A

Conflicts can be addressed through avoidance, informed consent, or full disclosure.

41
Q

What is informed consent?

A

Informed consent means all parties have been fully informed of a conflict of interest and agree to proceed.

APC Revision ---- (17 decks)

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