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APC > Valuation > Flashcards

Valuation Flashcards

1
Q

What are the five methods

A
  • Comparable
  • Investment
  • Receipts and Expenditure (Profits)
  • DRC (Contractors)
  • Residual
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2
Q

Why was your valuation for DWP not a Red Book valuation?

A
  • An agreement with the client to adhere to RB standards
  • A full report not required by the client
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3
Q

What is the all risk yield ?

A
  • Incorpates the risk associate with the asset above the base rate
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4
Q

How do you analyze rents?

A
  • Make adjustments for FRI
  • Premiums
  • Incentives
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5
Q

Tell me about a valuation instruction end to end

A
  • Confirm ToE with client, PII, standards, Special Assumption, property details and basis of value, fee
  • Assess CoI and Competency check
  • Confirm PII
  • Retrieve any data from the client required for the valuation
  • Undertake inspection, noting value significant features including locality, physical features
  • Depending on method for search comparables & adjust and analyse
  • Form an opinion of value
  • Write the report
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6
Q

What are the steps in DRC?

A
  • Build costs
  • Adjustment for age and absolence
  • Add land value
  • Stand back and look
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7
Q

How do you value an over rented property ?

A

Typically, I would use the hard core and top slice method of valuation.

I would value the current term of the property using YP for the remainder of the term. I would value the bottom slice by capitalizing market rent using YP into
Perp and add them both together

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8
Q

What basis of valuation would you use when valuing for accounts purposes for accounts prepared on the basis of IFRS

A
  • Basis of value is defined in ToE by the client.
  • Fair value is used for accounts
  • EUV as per the UK supplement 2017 for public accounting.
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9
Q

What is a special Assumption

A
  • Assumes facts that differ from those existing at the valuation date
  • Would not be made by a typical market participant
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10
Q

What is the definition of MV?

A
  • Estimated Amount an asset would exchange
  • on a valuation date
  • Willing buyer and seller
  • At an Arms length transaction
  • After Proper Marketing
  • Where the Parties acted prudently and knowledgeably with compulsion
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11
Q

What was your advise for the car park valuation

A
  • I looked for Car Park sales but evidence was limited
  • Evidence was commercial and sales value reflected income and not comparable to the subject,
  • To establish EUV I considered the deprival value and some else stepping to provide the same service as the occupier,
  • Therefore LA would need to acquire an alternative rural site
  • I found comparables of Rural Land sales and analysed them £/ha
  • I applied the appropriate rate/ha
  • I added for picnic tables and surfacing
  • I made adjustments for age and quality to arrive at my final value.
  • I wrote a report to the client proving my opinion of value.
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12
Q

What advise did you give for the residential property valuation in Leeds

A
  • 3 Bed semi, 1983- 1992 Build value on 31st Oct 2021 is £190,000
  • I found 4 comparables within the locality including the subject that was sold on 1st October 2021
  • I verified the transactions, date and value, property condition at the time of the sale and sale conditions,
  • Made adjustments to consider, quality, size, market movements
  • I weighted the evidence and stood back and made a judgement on value
  • Advised the client on MV value in the form of report which I sent my client.
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13
Q

Talk me through the Adventure Golf

A
  • I only had 1 years of trading turnover data and the operator has since vacated the site
  • I read market reports explaining the sector can be divided to adventure, mini golf, themed golf in rural locations and commentary discussed main operators within each subsector which provided me with comparables
  • I produced to a table to I analysed their lease detail in from FOR information, alongside their rating information.
  • I made a judge of 8% of turn over is reasonable. This was supported by rating guidance which states 8% of turn should be applied to turnover for an average operator.
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14
Q

Talk me through the Fire Station

A
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15
Q

Describe the purpose of valuations

A
  1. Loan Security
  2. Rating
  3. Accounts
  4. Landlord and Tenant Functions
  5. Tax - Inheritance tax
  6. Corporate real estate advice
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16
Q

What is the difference between a Valuation Practice Statement and a Professional Standard

A

VPS = A process to follow
PS = Things to think about

17
Q

What is a the Red Book ?

A

The Red Book is a set of Global Standards which set out procedural rules and guidance for written valuations

18
Q

Can the RB be used as a valuation manual

A

No. It sets out procedural rules and guidance for written valuations.

It does not

1- Instruct Member on how to value individual cases

  1. Prescribe a particular format for a report
  2. Override standards specific to and mandatory within individual jurisdictions
19
Q

Can you talk about the updates in 2022 edition

A

ESG is the driver behind the updates. The language is clearer and more robust throughout.
- Incorporates updates by IVS

20
Q

What is the difference between the Equivalent Yield & Equated Yield

A

Equated Yield is the same as IRR

Equivalent Yield is the weighted average between the term and reversion

21
Q

What is the All Risk Yield

A

The ARY incorporates:
Growth
Return - Above the risk free rate
Risk

22
Q

What is the nominal yield

A

The initial yield assumes annually in arears payment

23
Q

What is the Valuer Registration Scheme

A

A self funding scheme £160 as a sole trader

Requirement to be Registered Valuer to do Red Book Valuations. - Top up schemes available if already chartered

Monitoring of Red Book compliance

24
Q

What are should be include in the ToE

A

Identification of the valuer
Identification of the clients
Indemnification of any other intended users
Identification of the assets / liabilities being valued
Valuation currency
Basis of value adopted
Nature and extent of valuers work
Nature and sources of of information upon which the valuer will rely on
All assumption or special assumption s
Format of the report
Restrictions of use, distribution
Confirmation that the valuation will be undertaken in accordance with IVS
Basis in which the fee is calculated

25
Q

What is the definition of fair value

A

The definition adopted by the International Accounting Standards Board

The price that would be received to sell an asset paid or to transfer a liability in an orderly transaction between market participants

26
Q

What is the difference between fair value and market value ?

A

Market Value assumes the willing buyer and seller after proper marketing after where participants acted without compulsion.

MV assumes negotiation where the participants can walk away

27
Q

What report was commissioned by the Standards and Regulations board

A

Peter Grey: Commissioned a valuation review & gave 13 recommendations

28
Q

What where some of the recommendations in the Peter Grey Report

A

1- DCF should be the primary mechanism for investment valuation
2- On regular valuations valuers should be moved rotates
3- Improvement in communication between the valuer and the client

29
Q

What steps do you take when undertaking an comparable valuation

A

1- Search comparables
2 - Confirm & verify details & analyze
3- Assemble comparables in a schedule
4- Adjust comparable in a schedule
5- Analyse comps to form an opinion of value
6- Report Value

30
Q

What are the important factors when considering comparable evidence ?

A

1- Comphrensive ( Quantity of evidence)
2- similar
3 - Recent
4 - Arms length transaction
5 - Verifiable
6 - Consistent with local market practice
7 - A result of underlying demand

31
Q

What is the definition of Market Rent

A
  • The estimated amount for which an asset or liability should exchange
  • On a valuation date
  • Between a willing lessor or lesser
  • In an arms length transaction
  • After proper marketing
  • Where the parties had acted knowledgeable, prudently and without compulsion
32
Q

What are the three steps you should take before undertaking a valuation

A
  1. COMPETENCE - Do I have the skills, knowledge, understanding
  2. INDEPENDENCE - Are there any CoI and personal interests
  3. ToE - Set out full instructions to client and receive written confirmation and competence of valuer and extent and limitations of inspection
33
Q

What IVS updates were incorporated in to the Rd Book

A
  • IVS 101 Scope of Internal Valuers are referred to as “Employed Valuers” and External Valuers - “Engaged Valuers”
  • IVS 105 Wording has been reinstated to clarify that market, income and cost approach are not exclusive
  • IVS 104 Additional section of allocation of value, which is separate apportionment of a value of an asset on a component basis eg. EUV
34
Q

What is the difference between MV and Fair Value

A

Fair Value is used for asset valuations

35
Q

What is EUV

A
  • Market Value but disregards
  • Alternative use
  • Contamination - if been used
  • Oversize building
    -Age
  • Ignore development

EUV Captures
- Service potential
- Value the asset to its remaining value

36
Q

Why did you use the profits method to value the Adventure Golf Course

A
  • The property was designed for a specific purposes
  • Adaptations would be needed if an alternative business was to occupy the property
37
Q

For the adventure Golf Course why didn’t you calculate you use the divisible balance to establish the rent

A
  • In rating value it is accepted in the market that a % of turnover can be used for RV:
  • Below average 6%, Average 8%, Above 10%
38
Q

Do you know any updated Guidance the RICS has produced on Valuation?

A
  • Peter Pierra Grey- A report into investment valuations concluded. DCF should be the preferred approach
  • A guidance note on Valuation Approach for properties in multi storey, multi Occupancy residential buildings - for consultation 31st Oct

APC (13 decks)

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