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Valuation > Red Book > Flashcards

Red Book Flashcards

1
Q

What is the Red Book Global?

A
  • Red book is used to build consistency, transparency, confidence so that users of valuation services are confident with the valuation of an RICS member
  • Red Book comprises of Global addition and UK National Supplement
  • Includes the international valuation standards in the second part of the Red Book
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2
Q

Key changes to Red Book Global?

A
  • Written valuation now includes electronic format and automated valuation models
  • Professional scepticism must be applied when considering evidence
  • Importance of discussing sustainability and environmental matters when valuing interests in real estate
  • VPGA 8 sustainability should only be reflected in value where market evidence indicates
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3
Q

What is a registered Valuer:

A

A registered valuer is a regulated and qualified professional can conduct a Red Book valuation

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4
Q

What does the Red Book say constitutes a written valuation?

A

All forms of communication other than purely oral. This includes automated valuation models

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5
Q

What does the Red Book say about oral valuations?

A

Oral advice is still liable to negligence claims therefore it is stated that the Red Book should still be adhered to

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6
Q

What does the Red Book say about professional scepticism?

A

You should exercise scepticism. This is applying a questioning mind and critically assessing evidence relied upon

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7
Q

What is meant by valuation approach and by valuation method?

A

Valuation method refers to the procedure or technique used to calculate the value. Valuation approach is the overall manner in which a valuation task is undertaken

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8
Q

Material uncertainty?

A

Material change in circumstance causing uncertainty which means less weight is attached to evidence. VPGA 10. This must be excluded from the market commentary

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9
Q

Inherent material uncertainty?

A

This is general market risk which is assumed to always be present

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10
Q

Material uncertainty forum?

A

Meeting of members to discuss the need for material uncertainty in valuation. This is judgement and not mandatory for valuers

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11
Q

When is it appropriate to include material uncertainty?

A

Down to valuers discretion

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12
Q

What is a working group?

A

Panel of RICS expert who discuss valuation matters in certain subject e.g. development appraisal

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13
Q

What does Red Book state about sustainability?

A

Must reflect in valuation if evidence shows. If not must be recorded regardless. This is included in VPGA 8

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14
Q

What is sustainability?

A

Meeting the needs of today without compromising future generations

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15
Q

Natural environmental constraints?

A

Subsoils, rivers, radon

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16
Q

Non-natural environmental constraints?

A

Contamination

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17
Q

What does PS1 say about VPS 1-5?

A

That they are mandatory

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18
Q

What is basis of value?

A

Market value, market rent, existing use value, investment value, fair value

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19
Q

What is special value?

A

Value over and above what the market would pay to reflect a special purchaser

20
Q

Marriage value?

A

Value which can be achieved by the combination of 2 or more assets or interests

21
Q

What are assumptions?

A

Something reasonable to assume without the verification of facts

22
Q

What are special assumptions?

A

Something that would not particularly be assumed by a market participant

23
Q

What is a projected value?

A

Assumed value likely to be achieved in the future

24
Q

What is investment value?

A

Worth to an individual person

25
Q

Do you need a terms of engagement if there is an SLA?

A

There is still a requirement for terms of engagement even if there is an SLA e.g. DRRS

26
Q

When must terms of engagement be issued?

A

Prior to taking on work, should not be sent on the same day as sending out the valuation report

27
Q

What sections contain inspection in the Red Book?

A

VPS2 and VPGA8

28
Q

What should be captured on inspection?

A

Age, construction, dimensions, locality, environment, state of repair, fixtures and fittings, environmental and sustainability conditions, date, weather, eligible notes

29
Q

Does a Red Book valuation require an inspection?

A

Depends on the necessity and proportionality of your instruction

30
Q

Should the client share the report with a third party?

A

Must be redacted by us to see if any information is confidential or might compromise a client

31
Q

Who must sign the report?

A

The person responsible for the valuation

32
Q

What part of measurement guidance applies to all properties?

A

Part 1 of Property Measurement 2nd edition which outlines the need for a scale, date of measurement, method used, annotations etc to be noted on the document

33
Q

What must be contained in a valuation report?

A

Must cover all matter discussed in the terms of engagement e.g. identification of site, purpose, method used, and information relied on

34
Q

What does a signing signatory need to demonstrate?

A

Taking accountability and responsibility for the valuation and being able to defend the figure if challenged

35
Q

What should happen if market change has occurred since valuation date?

A

Valuer should draw attention to this

36
Q

What must you do when writing a draft report?

A

Prior agreed with client, state opinion is provisional and subject to change, use draft watermark

37
Q

What is valuation reasoning?

A

Process at how the figure was arrived at. All key inputs must be recorded and evidence to support them

38
Q

What is the structure of the National Supplement?

A

PS1 Compliance
VPS 1-3 terms of engagement
VPGA 1-18

39
Q

What does the 2020 Red Book say about valuing development property for secured lending?

A

Valuer must apply a minimum of 2 valuation methods

40
Q

What are the 4 bases of value for Red Book global

A

Market Value
Market Rent
Investment value
Fair value

41
Q

What is investment value

A

The worth of an asset to a particular owner

42
Q

What is fair value

A

The price to be received in order to sell an asset in an orderly fashion

43
Q

Name the key terms included in a terms of engagement form and where you would find these

A

VPS1 and includes:

o	Identification of valuer 
o	Identification of client 
o	Identification of asset 
o	Identifying users 
o	Reason for instruction 
o	Basis of valuation 
o	Date of valuation 
o	Assumptions or special assumptions made 
o	Material uncertainty?
o	Basis on which fee is agreed
44
Q

Where is it stated that members must have regard to IPMS?

A

VPS2

45
Q

What preliminary checks will need to be undertaken before undertaking work for a client

A
  • Are you competent enough to take on the work
  • Is there a conflict of interest
  • Will PII cover any potential claim for damages
  • Identify the site and purpose of valuation
  • Identify any special assumptions with the client
  • Agree on extent of inspection
  • Will this be a written valuation
46
Q

What desktop due diligence checks would you undertake when conducting a valuation?

A

Past records, planning, flood map, coal map, google street view and a remote risk assessment

Valuation (6 decks)

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