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APC - Valuation > Redbook Global Standards > Flashcards

Redbook Global Standards Flashcards

1
Q

What does “PS” stand for?

A

Professional Standard

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2
Q

What does “VPS” stand for?

A

Valuation Technical & Performance Standard

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3
Q

What does “VPGA” stand for?

A

Valuation Practice Guidance Application

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4
Q

What is PS1?

A

Compliance with the Redbook and relevant regualtions.

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5
Q

What is PS2?

A

Ethics, Competency, Objectivity, and Disclosures.

i.e.: A valuer must be competent and suitably qualified with appropriate experience.

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6
Q

What is VPS1 (Global Redbook)?

A

Minimum Terms of Engagement

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7
Q

What are the Minimum Terms of Engagement?

A
  1. Identify Valuer & Client
  2. Identify indended users
  3. Purpose: extent of investigation
  4. Basis of valuation and valuation date
  5. Assumptions and special assumptions
  6. Fees, complaints procedure
  7. Compliance statement
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8
Q

What is VPS2 (Global Redbook)?

A

Inspections and Investigations

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9
Q

What must RICS Redbook valuations consider during inspections and investigations?

A
  1. Situation and character of property
  2. Dimensions and area
  3. Easements and covenants
  4. Construction, age, and state of repair
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10
Q

What is VPS3 (Global Redbook)?

A

Minimum Contents of Valuation Reports

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11
Q

What must go into an RICS Redbook Valuation Report?

A
  1. Identification of parties and users (VPS1)
  2. Purpose of valuation
  3. Identity of asset or liability being valued
  4. Basis of value
  5. Method of valuation
  6. Valuation date
  7. Assumptions and Special Assumptions
  8. Date of Report
  9. Extent of investigation
  10. Valuation approach and reasoning
  11. Nature and sources of information relied upon
  12. Amount of the valuation
  13. Date of report
  14. Commentary on any material uncertainty
  15. Limitations of liability agreed
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12
Q

What is VPS4 (Global Redbook)?

A

Bases of Value, Assumptions and Special Assumptions

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13
Q

What are the Bases of Value?

A
  1. Market Value
  2. Market Rent
  3. Investment Worth
  4. Equitable Value
  5. Synergistic Value
  6. Liquidation Value
  7. Fair Value
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14
Q

What is the definition of Market Value?

A

The estimated amount for which an asset or liability should exchange for on the valuation date between a willing buyer and a willing purchaser in an arm’s length transaction after proper marketing, where both parties have acted knowledgeably, prudently, and without compulsion.

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15
Q

What is the definition of Market Rent?

A

The estimated amount for which an interest in real property should be leased for on the valuation date between a willing lessor and a willing lessee on appropriate lease terms in an arm’s length transaction, after proper marketing where each party had acted knowledgably, prudently, and without compulsion.

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16
Q

What is the definition of Investment Worth?

A

The value of an asset to a particular owner or prospective owner for individual or operational objectives.

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17
Q

What is the definition of Fair Value? (IFRS)

A

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market sector participants at the measurement date.

18
Q

What is the definition of Equitable Value?

A

The estimate price for the transfer of an asset or liability between identified, knowledgeable, and willing parties that reflects the respective interests of those parties.

19
Q

What is the definition of Synergistic Value?

A

The result of the combination of two or more assets where the combined value is more than the sum of the separate values.

20
Q

What is the value of Liquidation Value?

A

The amount that would be realised when an asset or group of assets are sold on a piecemeal basis, taking into account the costs of disposing of those assets.

21
Q

What is an Assumption?

A

A supposition that is taken to be true, based on reasonable facts that are evident at the date of valuation and where the valuer does not have to undertake specific investigation in order to prove that it is true.

22
Q

What is a Special Assumption?

A

An assumption which assumes facts that differ from those actual facts existing at the valuation date or that would not typically be made by a market participant in a transaction at the valuation date.

23
Q

What is an example of a Special Assumption?

A

E.g. a plot of land with will have a 4-bedroom dwelling built on it and that the construction will be to an exceptional standard.

24
Q

What is an example of an Assumption?

A

e.g. that a property is serviced by a mains water supply where the valuer is not aware of any private water supply.

25
Q

What is VPS 5 (Global Redbook)?

A

Valuation Approaches and Methods

26
Q

What are the Valuation Approaches?

A
  1. Market
  2. Income
  3. Cost
27
Q

What is the ‘Market’ approach?

A

The comparison of an asset with similar assets.

28
Q

What is the ‘Income’ approach?

A

The capitalisation or conversion of present and predicted income to produce a single current capital value.

29
Q

What is the ‘Cost’ approach?

A

Whereby the value is based on the economic principle that a purchaser will pay no more for an asset than the cost to obtain one of the same utility by purchase or construction.

30
Q

What are the Methods of Valuation?

A
  1. Comparable Method
  2. Investment Method
  3. Profits Method
  4. Residual Method
  5. Depreciated Replacement Costs Method
31
Q

What is the Comparable Method?

A

Where appropriate market evidence is used to compare the asset being valued against similar assets.

32
Q

What is the Investment Method?

A

Where the value of the asset is dependent on the income potential.

33
Q

What is the Residual Method?

A

The valuation of a potential development which determines the residual sum after a development budget.

i.e. How much would someone be willing to pay for the development opportunity?

34
Q

What is the Depreciated Replacement Costs Method?

A

Where the cost to replace the asset with a contemporary construction used for the same purpose is calculated before deductions are made for obsolescences (physical, functional, economic).

i.e. Used to find the value for an asset for which there is no market or comparable evidence.

35
Q

What is the Profits Method?

A

Where the rental value is determined based on the profit made by the tenant’s occupation of the premises.

i.e. used where there is a lack of comparable evidence, often where there is an element of monopoly.

36
Q

What is Category A comparable evidence?

A

Direct Comparables / Direct Transactional Evidence

37
Q

What is Category B comparable evidence?

A

General Market Data
i.e. provides guidance rather than a direct indication of value from a published source or historic evidnece.

38
Q

What is Category C comparable evidence?

A

Other Sources
e.g. transaction evidence from other property types and locations or other data.

39
Q

What makes a good comparable?

A
  • Comprehensive information
  • Recent transaction
  • Identifiable
  • Arm’s length transaction
  • Consistent with local market practices
  • Very similar or identical to property being valued
40
Q

What details should a Valuer record from comparable evidence?

A
  • Address
  • Type of property
  • Tenure and Occupation
  • Brief description
  • Lease terms if applicable
  • Floor areas
  • Source of information
  • Date and method of verification
  • Transaction type and date
  • Parties involved
  • Value and any additional incentives
41
Q

Can you outline the Comparable Method process?

A
  1. Search & Select
  2. Confirm & Verify
  3. Analyse
  4. Assemble
  5. Analyse and form value
  6. Report

APC - Valuation (5 decks)

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