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Property Management APC 2.0 > Valuation > Flashcards

Valuation Flashcards

1
Q

What is the full title of the Red Book?

A

RICS Valuation - Global Standards

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2
Q

What is the current edition of the Red Book / when did it come into force?

A

2022

It came into force from 31st January 2022

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3
Q

Who are the Internationa lValuation Standards Council?

A

Not for profit organisation

Global standard setter for valuation profession

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4
Q

What editions of the Red Book have been in effect during your APC training period?

A
  • RICS Valuation - Global Standards (2017)
  • RICS Valuation - Global Standards 2017 UK National Supplement
  • RICS Valuation - Global Standards 2020
  • RICS Valuation - Global Standards 2022
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5
Q

What is the purpose of the Red Book?

A

To promote and support high standrds and ensure transparency and consistency

Establish a framework for best practice

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6
Q

What is the purpose of the UK National Supplement?

A

Assists with the application of Global Standards in a more local context

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7
Q

To what valuations does the Red Book apply?

A

All written valuations carried out by regulated firms and RICS members

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8
Q

What valuations are exceptions to the Red Book?

A
  • Agency or brokerage work
  • Expert witness
  • Performing statutory functions
  • During negotiation or litigation
  • Purely for internal purposes
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9
Q

Can you name some valuations that are carried out for a statutory function?

A

Valuations for the purposes of stamp duty, property gains tax, compensation and rating

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10
Q

What is VPS?

A

Valuation Technical Performance Standards

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11
Q

What is VPGA?

A

Valuation Practical Guidance - Applications

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12
Q

What is the difference between VPS and VPGA?

A

VPS is Mandatory

VPGA is Advisory

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13
Q

Describe how departure from the Red Book madatory requirements may be possible?

A

No departure from PS1 or PS2 is permitted

Under special circumstances where inappropriate to comply with VPS1-5, these must be confiemd and agreed with client in ToE, the report and any published reference to the report

  • Agency or brokerage work
  • Acting as expert witness
  • During negotiation or litigation
  • Purely for internal purposes
  • Performing statutory fucntions
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14
Q

What information would you require from a telephone enquirer who asked: can you do me a valuation?

A
  • Identification of teh Client(s)
  • Iedentifaction of the asset or liability
  • Purpose of the valuation
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15
Q

What do your valuation files contain?

A
  • Terms of Engagement and report templates
  • Conflict of interest checks
  • Inspection notes
  • Comparables info
  • Quality assurances processes
  • Valuation calculation and methodology
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16
Q

What are the main contents of the Terms of Engagement for a valuer?

A
  • Identification of valuaer
  • Identifcation of Client
  • Identifcation of Building
  • Currency
  • Method of valuation
  • Limitations of inspection
  • Basis of value
  • Special assumptions
  • Complaints handling procedure
  • Purpose of valuation
  • Valuation date
  • Fee
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17
Q

How would you respond to a request to value a property from a drive-by only?

A

Discuss the requirements and needs of the Client:

If restriction is reasonable with regard to which the valuation is requried, i would consider accepting, subject to certain conditions (valuation not to be published or shared)

18
Q

Please name the Red Book Global Bases of Value

A
  • Market Rent
  • Market Value
  • Investment Worth (Value)
  • Fair Value
19
Q

Please name teh UK-Specfic Bases of Value

A
  • Existing Use Value (EUV)
  • Existing Use Value for Social Housing (EUV-SH)
  • Projected Market Value (PMV)
20
Q

WHat is the difference between Bases of Value and Method of Valuation?

A

Bases of value is a statement of the fundemental measurement assumptions of a valuation

Method of valuation is a procedure or technique used to arrive at the value described by a bases of value

21
Q

What is an assumption?

A

An assumption is made where it is reasonable for thevaluaer to accept that something is true without the need for specific investigation or verification

22
Q

Descibe 3 assumptions that are usually made in producing a valuation

A
  • Title
  • Condition of building
  • Services
  • Environmental matters
  • PLanning (zoning)
  • Contamination & hazardous subtances
23
Q

What is a special assumption?

A

A special assumption is made either when an assumption assumes facts that differ from those made on the valuation date, or would not be made by a typical market participant

24
Q

Give 3 situations where it would be appropriate to make a special assumption

A
  • The property is vacant (when let on the valuation date)
  • The proprety is let on defined terms (when vacant on the valuation date)
  • Planning consent has or will be granted
  • Property has been changed in a defined way
25
Q

Define market value in your own words

A

Estimated amount real property interest should exchange for on the valuation date between a willing buyer and seller in an arms length transaction, after proper marketing

26
Q

What do you consider ‘proper marketing’ to be in the Market Value definition?

A

Exposure to the market in the most appropriate manner

27
Q

What is an arms length transaction?

A

The parties do not have any relationship

28
Q

What is Synergistic Value?

A

Synergistic value is the result of a combination of two or more assets or interest where the combined value is more than the sum of the seperate value

29
Q

What is marriage value?

A

Ad additional element of value created by the combination of two or more assets or interests

→ combined value is more than the sum of the seperate values

30
Q

What is a special purchaser?

A

A particular buyer for whom a particular asset has a special value because of advantage arising from its ownership that would not be available to other buyers in the market

31
Q

When is market rent not appropriate as a Bases of Value in providing a report on the rental value of a property? Why not?

A

Market Rent is not suitable for rent reviews as the actual definitions and assumptions have to be used

32
Q

When is fair value the appropriate valuation bases?

A

In valuation for financial reporting (asset valuations)

33
Q

What is a regulated purpose valuation?

A
  • Disclosures where the public has an interest or upon which third parties may rely
  • Valuation for financial reporting
  • Valuation in connection with mergers and takeovers
  • Valuations for unregulated property unit trusts
  • Valuations for collective investment schemes
34
Q

What is an asset valuation?

A

Valuation for financial reporting

35
Q

When is Existing Use Value the valuation bases?

A

For valuation of operational property.

i.e owner-occupied

36
Q

What is the fundemental difference between Market Value and Exisitng Use Value?

A

Market Value is disregarding any alternative use

37
Q

What is the DRC method?

A

The Depreciated Replacement Cost method

38
Q

What does depreciated replacment cost mean?

A

The current cost of replacing an asset with its modern equivalent asset, less deductions for physical deterioration and all relevant forms of obsolesence and optimisation

39
Q

When is DRC used in Asset Valuations?

A

Used to value specialised properties

40
Q

What is a specialised property?

A

A property that is rarely, if ever, sold in the market, except through a sale of th business entity of which it is a part.

→ Due to the uniqueness arising from its specialised nature and design, its configuration, size, location, or otherwise

Property Management APC 2.0 (15 decks)

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