Valuation 1 Flashcards
When did the current edition of the Reds Book come into force?
31st Jan 2022
What were the changes to the Red Book
- emphasises needs and clear terms of engagement
- the terms partial on non-red book should not be used in terms of engagement.
- include sections on how sustainability should impact valuations
What is the name of the red book?
RICS Valuation Global Standards 2022
UK National Supplement 2023
Who are the International Valuation Standards Council?
A Non-For-Profit organisation the uphold the valuation standards globally in the public interest.
What editions of the Red Book have been in effect during your APC training
31st Jan 2022
November 2019
What is the purpose of the red book
To provide transparency, objectivity and consistency to valuations globally and ensure all valuation are conducted to the highest professional standard
what is the purpose of the UK National Supplement
The UK national supplement extends the Global Red Book for valuations that are subject to UK jurisdiction
To what valuations does the Red Book apply
To all valuations unless expressed as an exception or deviation from the red book.
What valuations are exceptions to the Red Book?
- Agency advice
- Internal purposes
- Statutory function
- Litigation/Negotiation
- Expert witness
Name some valuations that are carried out for statutory function
- Ratings
- compulsory purchase order
what is the difference between Valuation Technical and performance Standards (VPS) and Valuation Practice guidance - applications (VPGA)
VPS - compliance is mandatory
VPGA - is best practise / guidance
What are the possible consequences if a valuer does not comply with a VPS
- Fine
- RICS May take Disciplinary action
What are the possible consequences if a valuer does not comply with a VPGA
- Could be a contributory factor to a professional negligence case
What information would you require from a telephone enquirer who asked: can you do me a valuation
- Who is the valuation for (conflict of interest)
- What type of property (competence)
- Where is the property (competence)
- what is the purpose/base of the valuation
- When will the property need to be valued
- Are you ok with the professional fees
Describe how departure from the red book mandatory requirements may be possible
- agreed with the client
- expressed in the terms of engagement
You should ask why would you want to deviate from the valuation.
what do your valuation files contain
- conflicts of interest check
- Terms of engagement
- Planning, rating and environmental searches
- comparables
- inspection Notes
- valuation calcs
- valuation report
- invoice
What are the main contents of the Terms of Engagement for a Valuation
- Identification of the Valuer, property and client
- date of valuation
- extent of inspection
- The basis and purpose of the valuation
- Any deviations / exceptions from the red book
- Any Assumptions / special Assumptions
- Fee agreement
- Complaints procedure
Please name the Red book global bases of value
- Market Rent
- Market Value
- Investment Value
- Fair Value
How would you respond to a request to value a property by a drive-by only?
Why is only drive-by site visit required?
If this were to impact the standard of the valuation, the valuer would need to determine if to proceed.
Include in the terms of engagement
What is the difference between a basis of Value and a Method of Valuation?
- A bases of valuation is the fundamental measurement of a valuation.
- A method of valuation is the technique employed and calculations to get to the valuation figure
Please name the UK Specific Bases of Value
- Existing Use Value,
- Existing Use Value for Social Housing,
- Projected market value of residential
Describe three Assumptions that are usually made in producing a valuation?
- good title
- Free of contamination
- full planning permission for existing use
What is a special assumption
Including something as fact in an valuation, which is not true on the valuation date.
Give three situations when it would be appropriate to make a Special Assumption?
- Planning permission
- vacant / let
- development complete
- free from contamination
Define market value?
- The price and asset or liability
- would exchange on the valuation date
- between willing buyer and willing seller in an arm’s length transaction
- after proper marketing
- with the parties acting knowledgeably and without compulsion.
What do consider Proper Marketing to be in the Market Value definition?
- exposed to potential buyers in the most appropriate manner.
- selling it by the most appropriate method of sale
What is an Arm’s length Transaction?
Where there is no prior relationship between the two parties
What is synergic value
Where the combined value of two properties is greater than the individual values.
What is marriage value
Is the additional value created as a result of synergetic value
What is a special purchaser
A person who by owning a particular asset has a special value as owning it would give them advantages in the market over regular users
when is market rent not appropriate as a basis of value in providing a report on the rental value of a property and why not?
When undertaking a rent review.
Why? – Because the rent review clause determines how the rent should be reviewed
When is Fair Value the appropriate valuation basis
For inclusion in company accounts
What is a regulated purpose valuation?
Valuations where third parties may rely (public may have interest) = takeovers/mergers
What is an asset valuation?
A valuation undertaken for financial reporting
When is Existing use Value the valuations basis?
When valuing owner occupied assets for government or council
What is the fundamental difference between market Value and Existing use Value
existing Use Value does not take into account any additional value that could be created through additional use
when is DRC (contractors method) used in asset valuations?
Used to value specialized assets that rarely sell on the market except through the sale of the business itself. = Football stadium
Specialised property - when you would only sell a property as part of business
Name three situations that can adversely affect the certainty of valuations
- Limited information
- Disrupted markets
- unusual/unique characteristics
Name the three types of property exchange
- Private treaty
- Tender
- Auction
