Residential Valuation Quiz Flashcards
What RICS guidance relates to valuing individual new-build homes?
- Guidance Note - Valuation of New Build Homes (3rd Edition)
What key factors might affext the impact on the market of a large release of new build property?
- Appearance
- Density
- Popularity
- Price
- Tenure mix
When was the Red Book last updated?
- With effect from 14 January 2019
What guidance does the UK Red Book (2019 UK Red Book) give on mortgage valuations of residential property?
- Market value as per VPS 4 of the Global Red book.
What basis of valuation shhould be used for new build residential property?
- Market value as per VPS 4 of the Global Red Book
If market Value is assessed prior to or during construction, should the valuation reflect the evidence and market at the date of valaution or an assumed completion date?
- Date of valuation
What is the general meaning of a new build premium?
- An allowance to replact the newness and any improved building standards.
Is there a set discount for a newbuild premium?
- No - it depends on local market conditions.
What do RICS say about sales incentives?
- Incentives do not add value to the property itself, but facilitate the transaction for the buyer.
Should you reflect sales incentives in your valuation?
- On the CML ‘disclosure of Incentives’ form provided by the seller/builder etc
Where would you find details of incentives?
- On the CML ‘disclosure of Incentive’ form provided by hte seller/builder etc.
What are examples of Incenives?
- Payment of legal/surveyors fees.
- Reimbursement of deposit.
- Guaranteed rent for a specified period.
- Discount/reduction on more than one property.
- Part exchange.
- Payment of mortgage for a period.
- High level material gifts.
- Ground rent and service charge paid for a period.
Which of these are ways to offer a home at a reduced price?
- Combination of tenure - Shared ownership
- Part ownership
For houses with restrictions on occupancy by say income or job type, what is a typical discount used in the market?
- 33%
What is a new build warranty?
- Insurance policy for new build homes - NHBC etc
How long will a typical warranty last for?
- 10 years.
If a property was built in the last 10 years and does not have a professional certificate or guarantee/warranty, would this affect value?
- Yes - it may not be considered to be suitable for mortgage purposes and the value would have to reflect a cash buyer
In the UK Red Book, whjat is the basis of value for the purpose of possible repossession proceedings or the proposed sale of a repossessed property?
- Projected Market Value
What are the two special assumptions relating to Projected Market Value
- During the marketing period the property has been occupied and all furnishings and fittings have been removed.
- The vendor(mortgagee) has to sell the property within a reasonable period to recover the secured debt.
What are types of home finance products?
- Regulated Mortgage Contracts including lifetime mortgages.
- Sale and rent back (SRB)
Who regulats valuations for home finance products?
- FCA (Financial Conduct Authority)
What are the key differences between a lifetime mortgage and a conventional mortgage?
- Redemption date is not fixed but comprises the date of death of the mortgagor.
- No repayments of capital are made, and the interest is ‘rolled up’ and compounded over the length of the mortgage term.
Would the amount of mortgage debt to be redeemed at the end of a lifetime mortgage term be less or more than that of a conventional mortgage?
- More
What s home reversion?
- Occupant sells all or part of home to a reversion company or an individual. The occupant no longer owns the home but continues to live there rent-free for the remainder of their life.
What is sale and rent back?
- Occupent sells property at a discount in return to rent property at a discount for a minimum term of five years on an AST.
What is a home purchase plan?
- Same as a regular mortgage but is structured in a way that is acceptable under Islamic Law.
What are the bases of value for a registered social landlords hhousing stock for secured lending purposes.
- Market Value
- Existing Use Value for Social Housing
Which of these are the right Survey Levels?
- RICS Level 1 - RICS Conddition Report - Focusses on conditon using a traffic light system and without a valuation.
- RICS Level 2 - Homebuyer Report Survey or Survey and Valuation.
- RICS Level 3 - RICS Building Survey - gives a more detailed information about the building structure and fabric, but does not provide a valuation.
What does a Homebuyer Service HBS) comprise?
- Inspection
- Report based on inspection
- Valuation (if requested)
Do RICS provide any guidance on the HBS?
- RICS Professional Statement Home Survey Standard (1st Edition)
- Red Book Global and UK Supplement
Do you need a Copyright licence to use the RICS Homebuyer reprot forms?
- Yes.
Whatt pe of properties can a HBS be used for?
- Conventional properties which are in a reasonable condition.
- Wider range of properties if you have sufficient knowledge and experienced.
How does a HBS differ from a Building Survey?
- Not as comprehensive.
- No tests undertaken.
What should you ddo if you suspect a defect exists when undertaking a HBS inspection?
- Follow the trail and recommend further testing/investigation, if required.
What is the correct wording the three condition ratings?
- 1 - No repair currently needed. The property must be maintained in the normal way.
- 2 - Defects that need repairing or replacing, but are not serious or urgent. The poroperty must be maintained in the normal way.
- 3 - Defects that are serious or need to be repaired, repalced or investigated urgently, e.g. structural defects, dry rot, defective retaining wall or a safety matter.
What is the impact of a condition rating 1 on value?
- None.
What is the impact of a condition rating 2 on value?
- Generally none unless there is an accumulatiion of items with this rating that would increase costs to a point where there would be an impact.
What is the impact of a condition rating 3 on value?
- This would be reflected in the market value.
What should you include in your overall opinion in your HBS Report?
- Agreed/Suggested Price.
- Advice to client on whether it is reasonalbe to prceed with purchase or not.
- Key features.
- Resale.
- Elements with condition rating 3.
What is a statutory valuation?
- Where the valuation is o a basis defined in law or required for a specific legal purpose.
What are examples of statutory valuations?
- Capital Gains Tax.
- Inheritance Tax.
- Bankruptcy.
- Divorce or other legal proceedings.
- Council tax.
- Right to buy.
Who is responsible for Council Tax valuations?
- VOA (Valuation Office Agency)
What are the council tax bands in England?
- A to H
What is the basis of value for Council Tax valuations?
- Market Value subject to assumptions set by VOA.
What are assumptionss made in Council Tax Valuation?
- Sale was with vacant possession.
- Size, layout and character of the dwelling as well as its locality must be considdered as the actually existed at 1 April 1993.
- Interest sold was freehold except for flats when a lease for 99 yearss at a nominal rent has to be assumed.
- Dwelling had no potential for any building work or development requiring planning.
- Dwelling and common parts was in a reasonable state of repair.
What is the Right to Buy?
- Where occupiers of Local Authority or Housing Association Properties exercise their right to buy the property.
What legislation related to Right to Buy?
- Housing and Regeneration Act 2008
Whhat is an AVM?
- Automated Valuation Model
What does an AVM do?
- Provide a property valuation with human input.
What will an AVM provide as well as a valuation?
- Confidence level.
When might a lender instruct a drive-by valuation?
- When customer is experiencing financial difficulty and the lender ddoes not want the occupier to be aware of the inspection.
What is the impact of the Rentcharges Act 1977.
- Existing rentcharges will be extinguished on 22 August 2037.
Until 22 August 2037 how should rentcharges be dealt with?
- As an outgoing when valuing a freehold althhough they are generally not sufficient to have a significant effect on value.
Is there any RICS guidance on comparable evidence?
- Yes - A guidance Note.
How many comparagbles should you ideally provide for each valuation?
- At least 3 but as many as it takes.
What are the requirements for a House in Multiple Occupation (HMO)?
- At least 3 tenants live there forming more thann one household.
- There are shared toilet, bathroom or kitchen facilities.
What are the requirements for a large HMO?
- At least three stories high.
- At least five tenants live there forming more than one household.
- There are shared toilet, bathroom or kitchen facilities.
From 1st October 2018, when does a HMO need to be licensed?
IIf it is occupied by five or more people forming two or more seperate households.
What is the impact of a HMO licence?
- Landlords have to meet nationally prescribed standards.
Whhat is thhe impact of an Article-4 Direction?
- Planning permissionm is needed to change a house Class C3 to a HMO class C4.
Within what general distance of a dwelling migh Japanese Knotweed have a material impact on value?
- 7m.
What is a flying freehhold?
- One part of the property extends over or under a neighbouring building.
