Vals 2

Question 1

Name the 5 conventional methods of valuation

Answer 1

Comparable
Investment
Residual
Profits
Depreciated replacement cost (contractors methods)

Question 2

What are contemporary valuation techniques?

Answer 2

When discounted cash flow techniques are used

Question 3

What makes a property transaction comparable to the property being valued?

Answer 3

Similarities in terms of the physical characteristics, location, use, tenure, time scale

Question 4

How many comparable are needed to produce a valuation?

Answer 4

Enough to establish a trend (as many as possible)

Question 5

What is the longest time period before a valuation date that a transaction could be accepted as being comparable?

Answer 5

No defined period, depends on market stability

Question 6

What do you understand by the expression weighting of comparable evidence?

Answer 6

After assembling comparable evidence
- a valuer must weight and rank each piece
- some may be disregarded

Rank based on hierarchy of evidence

Question 7

What is interpolation of comparable evidence?

Answer 7

Between point of your comparable

Question 8

What is extrapolation of comparable evidence?

Answer 8

When working outside known data

Question 9

What is the purpose of zoning?

Answer 9

Zoning of retail property is used to value units which gave different frontage to depth ratios

Question 10

What is the standard zone depth?

Answer 10

6.1 m / 20ft

30ft / 9.1 m

Question 11

How would you determine the market value of an investment property let on internal repairing terms?

Answer 11

Get rent, deduct all outgoings to get net rent which you would then capitalise at ARY

Question 12

What factors make up the all risks yield?

Answer 12

Construction, tenants covenant, rent, unexpired lease terms, other lease terms, anticipated rental growth

Question 13

What is the market capitalisation rate?

Answer 13

Rate of which market capitalises income

Question 14

How would you value a green field site with planning permission for residential development?

Answer 14

Use residual method for developments
(GDV - DC - DP = Land Value)

Question 15

Describe how you carry out a residual valuation?

Answer 15

GDV - development costs - development profits = land value

Question 16

What costs did you deduct in your residual valuation?

Answer 16

Demolition
Building costs
Professional fees
Cost of financing
Contingency
Agents/legal fees
Acquisition costs

Question 17

How did you calculate developers profits in residual?

Answer 17

15% of GDV

Question 18

What are the usual acquisition costs of a development site?

Answer 18

Stamp duty land tax, agent & legal fees, VAT

Question 19

What is a ransom strip?

Answer 19

Part of land which enables development.

You require the strip to develop (the strip can be costly)

Question 20

How would you value a ransom strip?

Answer 20

% of uplifting value

Question 21

What does the case stokes v Cambridge mean to you?

Answer 21

Compulsory purchase case - Random strip

Question 22

What is the profits method as known as?

Answer 22

Accounts method

Question 23

Name three property types that would be valued by the profits method

Answer 23

Cinema, hotels, themed parks

Question 24

Why are certain properties valued by the profits method?

Answer 24

Profitability of the business is intrinsic to the value of the property

Question 25

Explain approach to the profits method

Answer 25

Turnover net of VAT, deduct costs generated in turnover to get net profit then capitalise at yield

Question 26

When is the contractors method used in practice?

Answer 26

Last report used for specialised properties

Question 27

What is another name for the contractors method?

Answer 27

Depreciated replacement cost method

Question 28

How would you value a property for which there are no comparables?

Answer 28

Take closed activity and then interpolate or extrapolate and then cross check with contractors methods