Valuation Flashcards
What is the full title of the Red Book?
RICS Valuation - Global Standards
What is the current edition of the Red Book / when did it come into force?
2022
It came into force from 31st January 2022
Who are the Internationa lValuation Standards Council?
Not for profit organisation
Global standard setter for valuation profession
What editions of the Red Book have been in effect during your APC training period?
- RICS Valuation - Global Standards (2017)
- RICS Valuation - Global Standards 2017 UK National Supplement
- RICS Valuation - Global Standards 2020
- RICS Valuation - Global Standards 2022
What is the purpose of the Red Book?
To promote and support high standrds and ensure transparency and consistency
Establish a framework for best practice
What is the purpose of the UK National Supplement?
Assists with the application of Global Standards in a more local context
To what valuations does the Red Book apply?
All written valuations carried out by regulated firms and RICS members
What valuations are exceptions to the Red Book?
- Agency or brokerage work
- Expert witness
- Performing statutory functions
- During negotiation or litigation
- Purely for internal purposes
Can you name some valuations that are carried out for a statutory function?
Valuations for the purposes of stamp duty, property gains tax, compensation and rating
What is VPS?
Valuation Technical Performance Standards
What is VPGA?
Valuation Practical Guidance - Applications
What is the difference between VPS and VPGA?
VPS is Mandatory
VPGA is Advisory
Describe how departure from the Red Book madatory requirements may be possible?
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
What information would you require from a telephone enquirer who asked: can you do me a valuation?
- Identification of teh Client(s)
- Iedentifaction of the asset or liability
- Purpose of the valuation
What do your valuation files contain?
- Terms of Engagement and report templates
- Conflict of interest checks
- Inspection notes
- Comparables info
- Quality assurances processes
- Valuation calculation and methodology
What are the main contents of the Terms of Engagement for a valuer?
- 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
How would you respond to a request to value a property from a drive-by only?
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)
Please name the Red Book Global Bases of Value
- Market Rent
- Market Value
- Investment Worth (Value)
- Fair Value
Please name teh UK-Specfic Bases of Value
- Existing Use Value (EUV)
- Existing Use Value for Social Housing (EUV-SH)
- Projected Market Value (PMV)
WHat is the difference between Bases of Value and Method of Valuation?
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
What is an assumption?
An assumption is made where it is reasonable for thevaluaer to accept that something is true without the need for specific investigation or verification
Descibe 3 assumptions that are usually made in producing a valuation
- Title
- Condition of building
- Services
- Environmental matters
- PLanning (zoning)
- Contamination & hazardous subtances
What is a special assumption?
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
Give 3 situations where it would be appropriate to make a special assumption
- 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
Define market value in your own words
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
What do you consider ‘proper marketing’ to be in the Market Value definition?
Exposure to the market in the most appropriate manner
What is an arms length transaction?
The parties do not have any relationship
What is Synergistic Value?
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
What is marriage value?
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
What is a special purchaser?
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
When is market rent not appropriate as a Bases of Value in providing a report on the rental value of a property? Why not?
Market Rent is not suitable for rent reviews as the actual definitions and assumptions have to be used
When is fair value the appropriate valuation bases?
In valuation for financial reporting (asset valuations)
What is a regulated purpose valuation?
- 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
What is an asset valuation?
Valuation for financial reporting
When is Existing Use Value the valuation bases?
For valuation of operational property.
i.e owner-occupied
What is the fundemental difference between Market Value and Exisitng Use Value?
Market Value is disregarding any alternative use
What is the DRC method?
The Depreciated Replacement Cost method
What does depreciated replacment cost mean?
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
When is DRC used in Asset Valuations?
Used to value specialised properties
What is a specialised property?
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
