Valuation Flashcards
Name purposes of a valuation
1) Loan Security
2) Rating
3) Accounts
4) L&T functions
5) Tax
6) Corporate real estate advice
What does VPS stand for?
Valuation practice Statements
What does PS stand for?
Practice Statements
Relevant red book
Red Book 2020
RICS Valuation - Global Standards 2020 (w.e.f 31st jan 2020)
Purpose of Red book
Consistency, objectivity and transparency - COT
Why has the Red Book been updated?
IVS are updated on rolling program every 2 years.
Structure of Red Book - PS - VPS
PS1 - Compliance. PS2 - Ethics and conflicts. VPS 1 - ToE. VPS 2 - Inspections. VPS 3 - Reporting. VPS 4 - Bases of Valuation. VPS 5 - Valuation approach.
Structure of Red Book - VPGA
1 - Financial Statements (asset valuation for accounts).
2 - Loan Security.
3 - Business valuation.
4 - Trade-related valuation (profits method).
5 - Plant and equipment.
6 - Intangible assets.
7 - Personal property (arts & antiques).
8 - Valuation of real property (valuation checklist).
9 - Portfolio valuation.
10 - Uncertainty
What the exceptions to following the red book?
- PS must be followed in written vals.
- VPS not manadatory for:
1) Statutory basis
2) Negotiation or litigation - e.g. rent review.
3) Internal purposes only.
4) Agency - marketing appraisal.
5) Expert witness val
ALIES
New concepts in Red book 2020
PS 1 - AVM - automated valuation model included.
PS 2 - professional scepticism - must have questioning mind.
VPS 3 - reporting - must mention sustainability where relevant.
What is VPS 1
TOE - minimum terms, client may require more.
Include:
a) Valuer ID and status.
b) ID client.
c) ID other users.
d) ID of assets or liabilities.
e) Val currency
f) Purpose of val.
g) Basis(es) of value
h) Val date
i) Nature and extent of valuer’s work
j) Nature and sources used
k) Assumptions and special assumptions
l) Report format
m) use restrictions of report
n) Confirm undertaken to IVS
o) Basis of fee calculation
p) Registered firms provide info on complaints handling procedure.
q) State compliance with standards subject to RICS monitoring and disciplinary regulations
r) Limitations and liabilities
VPS 3 - reporting
a) Valuer ID and status.
b) ID client and others
c) Purpose of val.
d) ID Asset
e) Basis(es) Value
f) Val date
g) Extent of Val
h) Nature and information sources used
i) Assumption and special assump.
j) Restrictions on use
k) Confirm using IVS
l) Val approach and reasoning
m) Amount of valuation
n) Date of report
o) Comments on material uncertainty
p) Limitations and liability
UK Valuation Standards - Jan 2019
Important parts
VPGA 1 - Valuation for financial reporting: general matter (IFRS and GAAP).
VPGA 10 - Valuation for Commercial secured lending purposes
Talk through a Valuation example
1) Property - Location
2) Purpose of valuation
3) Basis of valuation i.e. Market Rent
4) ToE
5) Method of Valuation
6) Technique
7) Advice
What are the 5 valuation methods?
1) Comparable
2) Investment
3) Residual and development appraisal
4) Profits
5) DRC (contractors for rating)
Comparable evidence in real estate valuation - 1st edi Oct 2019
GN :
- Comparable sources.
- Hierarchy of evidence (best is a transaction on the subject property).
- Recording comparable evidences.
- Comparable analysis.