val 2 contractors and DRC Flashcards
How do you do a contractors valuation?
Five steps: Estimate replacement cost (ERC), adjust for anything not in build costs (ARC), add land value, decapitalise at appropriate rate, and stand back.
What are the two types of obsolescence - explain?
Physical obsolescence reflects deterioration from age and wear; Functional obsolescence reflects a property no longer being fit for purpose.
When have you done a DRC? Talk me through the process?
Valued a surgery in Stoke-on-Trent using VOA cost guide, adjusted for age (9%) and location (10%), added external works, fees, land, and decapitalised at 3.33%.
Where did your build costs come from?
VOA Building Surveyors analyze costs, or sources like BCIS or Spons.
Why did you adjust for location?
Costs vary by location; higher costs in areas like Manchester than Stoke-on-Trent.
Where did your figure for fees come from, is this typical?
From actual build cost analysis, typically 10-15% depending on project scale.
How did you decide on the age and obsolescence adjustment?
Based on Monsanto case, older buildings cost more to repair and maintain.
When would you undertake a contractors valuation?
Used for properties not typically rented, where comparison or account-based valuation isn’t appropriate.
What is the estimated replacement cost?
The cost of constructing all buildings on a cleared site, using actual or estimated costs.
What adjustments need to be made to this?
Adjustments are made to account for building deficiencies from an occupational point of view.
Where does evidence come from for the land?
Market transactions for land used in the same mode or category.
Why is the land value added as a percentage?
Land value is part of a scheme agreed upon by all parties, based on evidence and analysis.
What does the decapitalisation rate take into account?
Interest rate, tenant’s financial ability, and borrowing costs.
What do you consider in stage 5?
Ensure no double counting from earlier stages, consider factors like layout.
What types of property would you use the DRC for?
Used for properties like sewage works, schools, and health centres.
