Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

APC Revision ---- > Red Book Workshop > Flashcards

Red Book Workshop Flashcards

1
Q

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

A

The 2022 Global Red Book emphasizes sustainability and ESG (Environmental, Social, and Governance) issues in VPS 2, VPS 3, VPGA 2, and VPGA 8. Valuers must consider how environmental risks, health impacts, and corporate responsibility affect the asset’s long-term value.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is ESG?

A

ESG stands for Environmental, Social, and Governance, three pillars for assessing sustainability and ethical practices in organizations, covering environmental impact, social responsibility, and governance practices.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What are natural environmental constraints?

A

Natural environmental constraints are physical factors like flooding, heat waves, wildfires, and storms that influence property values due to climate or land use.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What are non-natural environmental constraints?

A

Non-natural environmental constraints include regulatory factors such as energy efficiency standards, carbon emission regulations, and environmental policies affecting property values.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What does PS 1 address?

A

PS 1 addresses the compliance framework for valuations, ensuring they adhere to the Red Book and International Valuation Standards (IVS) for global consistency.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What does PS 1 say about VPS 1 to 5?

A

PS 1 establishes the framework, while VPS 1-5 outline the technical and performance standards for valuations. Exceptions apply in specific cases, such as statutory functions or expert testimony.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What does PS 2 cover and when does it apply?

A

PS 2 covers ethics, competency, objectivity, and disclosures for valuers, applying to all valuation services and ensuring independence, transparency, and disclosure of conflicts of interest.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
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, Assumptions, and Special Assumptions, VPS 5: Valuation Approaches and Methods.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is a basis of value?

A

A basis of value defines the fundamental assumptions about a transaction’s nature, the relationship between the parties, and the asset’s market exposure.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Examples in the Red Book?

A

Recognized bases include Market Value, Market Rent, Investment Value, Fair Value, Existing Use Value, and EUV (SH) for social housing.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Are any non-Red Book bases of value permissible?

A

Yes, statutory or regulatory authorities may require non-Red Book bases, such as Tenanted Market Value or Current Value for public sector assets.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is a basis of value often coupled with?

A

A basis of value is typically coupled with assumptions or special assumptions that define the asset’s condition or status for valuation purposes.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is Special Value?

A

Special Value is the additional value an asset holds for a special purchaser due to unique attributes unavailable to other buyers.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is Marriage Value?

A

Marriage Value arises from combining two or more assets, creating a combined value greater than the sum of the individual parts.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Are they the same thing?

A

No, Special Value is unique to a buyer, while Marriage Value results from asset combination. Marriage Value may include Special Value if beneficial only to one buyer.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What are Assumptions?

A

Assumptions are factors reasonably accepted as fact in a valuation, limiting further investigation by the valuer.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Where do we state them?

A

Assumptions are stated in the Terms of Engagement and the valuation report.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

When do we state them?

A

Assumptions must be agreed upon with the client in advance of the valuation report issuance.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What are Special Assumptions?

A

Special Assumptions differ from actual facts at the valuation date and may show how value changes under different circumstances.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Where do we state them?

A

Special Assumptions are expressly agreed upon in writing with the client and included in the valuation report.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

When do we state them?

A

They are stated in the Terms of Engagement and the valuation report, used only when realistic, relevant, and valid for the valuation.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What do we mean by a ‘Projected Value’?

A

Projected Value refers to an asset’s estimated future value based on changing market conditions or development progress.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

What steps are necessary if providing a Projected Value?

A

Steps include using realistic Special Assumptions, reporting separately from current valuations, highlighting uncertainty, and clearly stating that the value is speculative.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

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

A

Market Rent is the basis used, defined as the estimated lease amount based on current market conditions and agreed lease terms.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

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

A

Investment Value is specific to the owner, reflecting the asset’s value based on its utility for individual investment or operational purposes.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

What is Fair Value?

A

Fair Value is defined as the price to sell an asset or transfer a liability between market participants at the measurement date.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

When would you use Fair Value as your basis of valuation?

A

Fair Value is used for financial reporting purposes, especially under IFRS 13, rather than transactional purposes.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

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

A

Existing Use Value reflects the asset’s value in its current operational state, while Market Value for Existing Use includes potential alternative uses but is limited to current use.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

When would you use each?

A

EUV is used for financial reporting for owner-occupied assets, while Market Value for Existing Use is applied in cases outside financial reporting.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

What is the EUV (SH) basis of value?

A

EUV-SH (Existing Use Value for Social Housing) is used to value social housing based on the assumption that it will remain subject to social housing regulations.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

When is it used?

A

EUV-SH is used when valuing social housing properties for financial statements, assuming they remain subject to regulatory constraints.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
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.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
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.
• Both oral and written advice are subject to the same criteria, particularly if the valuer is acting as an expert witness.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
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.
• VPS 5 paragraph 4 notes that valuation methods may include various analytical tools and models, including advanced numerical and statistical practices.
IVS 105 para 90 adds:
• A valuation model includes quantitative methods, systems, techniques, and qualitative judgments used to estimate and document value.

35
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.
• Terms such as ‘quasi-Red Book,’ ‘partial Red Book,’ or ‘non-Red Book’ must not be used in terms of engagement or reports.

36
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 in their work by maintaining independence and objectivity and critically assessing information relied upon during the valuation process.
• Professional scepticism involves a questioning mindset and alertness to conditions that could make the provided information misleading.

37
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 to determine the value of an asset or liability. VPS 5 identifies three approaches: Market approach, Income approach, Cost approach.
• A valuation method refers to the specific procedure, technique, or model used to calculate the value. Examples include: Discounted Cash Flow (DCF), Depreciated Replacement Cost (DRC), All Risks Yield (ARY), Comparable method.
• VPS 3 Section 2.2 (l) states that the distinction between approach and method should be proportionately explained in the report.

38
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 clearly disclosed to the client.
• Inherent uncertainty (or general market risk) is a normal feature of valuations and does not require specific mention unless it escalates into material uncertainty.

39
Q

When is it appropriate to declare material valuation uncertainty, and how do you do this?

A

• Material valuation uncertainty should be declared when the degree of uncertainty falls outside normal parameters.
• This must be explicitly stated in the report (but not in terms of engagement), and it must remain distinct from general market commentary (VPS 3 Section 2.2(o), VPGA 10).

40
Q

What was the RICS Leadership Forum?

A

• The RICS Leadership Forum provides guidance on various valuation issues, including the appropriate communication of material valuation uncertainty to ensure transparency and confidence in valuations, especially under extraordinary circumstances.

41
Q

What are VPS 5: Valuation Approaches and Methods?

A

VPS 5 identifies three main valuation approaches: Market, Income, and Cost. Valuers must justify their selected approach and method for each valuation. No method is inherently superior unless mandated by statute.

42
Q

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

A

According to VPS 1, ToE must include: valuer’s identification, client identification, property identification, purpose, basis of value, valuation date, assumptions, special assumptions, compliance with IVS, fee basis, and more.

43
Q

Is a ToE required for a case where a Service Level Agreement (SLA) exists?

A

Yes, a ToE is still required, but if the SLA covers most ToE requirements, a brief ToE referencing the SLA is sufficient. Any uncovered terms must still be included in the ToE.

44
Q

What if multiple similar but separately instructed cases are to be undertaken for a client?

A

An overarching ToE can be agreed upon for multiple similar cases, and the client should be reminded in writing that it applies to each report.

45
Q

At what time should a ToE be issued?

A

The ToE should be issued before the valuation report. If all details are not available, an initial ToE can be issued and supplemented later.

46
Q

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

A

VPS 2 and VPGA 8 require valuers to capture property details such as locality, external areas, internal details, and environmental matters during inspections.

47
Q

How do I record the details?

A

Legible notes, photos, and key findings should be recorded during the inspection. Use templates like the VOA Inspection Template and RICS Contamination Observation Checklists for thorough documentation.

48
Q

Can I do a Red Book valuation without inspecting?

A

Yes, but only if there have been no material changes since the last inspection. Client agreement is required, and the departure from normal practice must be documented in the ToE.

49
Q

What RICS guidance is available regarding measurement standards?

A

RICS provides measurement guidance such as the RICS Property Measurement (2nd edition), RICS Code of Measuring Premises, and IPMS for all Buildings.

50
Q

What part of the RICS measurement guidance applies to all types of property?

A

The IPMS standards in the RICS Property Measurement (2nd edition) apply to all property types.

51
Q

What RICS guidance is available regarding reports?

A

VPS 3 sets out requirements for valuation reports, covering matters outlined in the ToE, including basis of value, valuation date, assumptions, approach, and more.

52
Q

What should be in the report?

A

Reports must include identification of the valuer, client, purpose, basis of value, valuation date, investigations, assumptions, compliance with IVS, and more.

53
Q

Should a client be allowed to share the report with a third party?

A

The report must include restrictions on distribution. Sharing with third parties is only allowed if specified in the ToE and the report.

54
Q

Who signs a report?

A

The report must be signed by a RICS member responsible for the valuation, even if they did not carry out the valuation directly.

55
Q

Who needs to be named in a report?

A

All valuers involved in the valuation should be named in the working papers, and the report must identify the individual responsible for signing it.

56
Q

What does a signing signatory need to be able to demonstrate?

A

The signatory must demonstrate supervision, take responsibility for the valuation, and ensure compliance with RICS standards.

57
Q

Can the use of a client proforma be Red Book compliant?

A

Yes, as long as the proforma complies with VPS 3 requirements, and the ToE or SLA clarifies its use within the wider set of documents.

58
Q

What steps are required if a draft report is issued?

A

Draft reports must be agreed upon in advance with the client, marked as provisional, and comply with PS 2 para 3.12. They should not be published or disclosed.

59
Q

What if the market has changed after the valuation date but before the report date?

A

The valuer must note any material changes in market conditions or the property between the valuation and report date, as per VPS 3.2.2(f).

60
Q

What is meant by Valuation reasoning?

A

Valuation reasoning explains how the evidence gathered informs the final opinion of value, documenting the thought process and key inputs.

61
Q

Where do I capture my valuation reasoning?

A

Valuation reasoning should be recorded in both the case file and valuation report. The case file must contain all inputs, calculations, and analyses.

62
Q

Why is this important?

A

Reasoning is important for transparency, compliance with RICS standards, and providing legal protection by demonstrating a rigorous valuation process.

63
Q

What is the purpose of VPGAs?

A

VPGAs are advisory and provide best practice guidance for valuing specific property types or for particular purposes, helping valuers understand key issues during valuations.

64
Q

Which VPGAs may apply to any valuation as opposed to a specific property type or purpose?

A

VPGA 8 (Valuation of real property interests) and VPGA 10 (Matters that may give rise to material valuation uncertainty) may apply to a wide range of valuations.

65
Q

What is the structure of the UK National Supplement?

A

The UK National Supplement has three parts: Introduction, UK Professional and Valuation Standards (mandatory), and UK Valuation Applications – Guidance (advisory).

66
Q

Which ones are you aware of?

A

UK VPGA 1 (Valuation for financial reporting), UK VPGA 4 (Valuation of local authority assets), UK VPGA 11 (Valuation of residential property), UK VPGA 15 (Tax valuations), UK VPGA 17 (Local authority land disposal).

67
Q

What does the 2022 Red Book say about valuing development property for secured lending?

A

The 2022 Red Book recommends applying at least two valuation methods for development property due to risks and complexities, and requires justification for methods used.

68
Q

What are the different types of conflict of interest?

A

Types include: Own Interest Conflict, Party Conflict (professional), Party Conflict (statutory/regulatory), Confidential Information Conflict, Perception of Bias.

69
Q

How can they be addressed?

A

Conflicts can be addressed by avoidance, informed consent, or disclosure to maintain transparency.

70
Q

What is informed consent?

A

Informed consent is when all parties agree to proceed despite a conflict after being fully informed of it. It must be documented.

71
Q

What is the Red Book?

A

The Red Book refers to RICS Global Standards, International Valuation Standards (IVS), and the National Supplement.

72
Q

What are its component parts?

A

Key components: Global Professional Standards, Global Valuation Technical Standards (VPS), Valuation Practice Guidance Applications (VPGA), IVSC Standards.

73
Q

What is its stated purpose?

A

Its purpose is to provide a framework for valuations, ensuring consistency and alignment with international standards (IVS).

74
Q

What is the RICS Valuer Registration Scheme?

A

The RICS Valuer Registration Scheme offers independent quality assurance and is mandatory for RICS members in the UK performing Red Book valuations.

75
Q

Red Book - UK National Supplement?

A

The UK National Supplement aligns international standards with statutory and regulatory requirements specific to the UK. Effective May 2024.

76
Q

Historical Background to the Red Book?

A

Introduced in 1976 after the 1974 property crash, the Red Book has evolved through multiple editions, integrating global and local standards.

77
Q

RICS Independent Review of Real Estate Valuations for Investment Purposes

A

RICS accepted 13 recommendations from the 2022 review, including separating valuation and advisory activities, rotation of firms, and DCF framework updates.

78
Q

Recent and Current Consultations

A

Recent consultations include updates on DCF, Whole Life Carbon Assessment, and public sector financial statements. The Red Book evolves with ongoing consultations.

79
Q

Updates in IVS Section of 2022 Global Red Book

A

IVS clarifications emphasize that market, income, and cost approaches are not mutually exclusive and can be combined to determine value.

80
Q

Capturing and Reflecting Environmental Issues

A

The Red Book emphasizes incorporating environmental factors such as Whole Life Carbon Assessment into valuation processes.

81
Q

Setting Out Evidence and Analysis for Opinion of Value

A

Valuers must set out evidence and analysis in their reports to link their findings and reasoning to their final Opinion of Value.

82
Q

What is the Red Book’s stated purpose?

A

The Red Book ensures users of valuation services can trust that valuations meet internationally recognized standards and maintain consistency.

83
Q

Does the Red Book apply to Rating?

A

The Red Book does not apply specifically to rating valuations, though its principles are relevant to any valuation task.

APC Revision ---- (17 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions