Valuation Flashcards

Question

Please define market rent

Answer 1

The estimated amount in which an interest in a property should lease for between A- a willing lessee or lessor B- On appropriate lease terms C- In an arms length transaction D- After proper marketing E- Both parties have acted knowledgeably, prudently and without compulsion.

Answer 2

a Identification and status of the valuer b Identification of the client and any other intended users c Purpose of the valuation d Identification of the asset(s) or liability(ies) valued e Basis(es) of value adopted f Valuation date g Extent of investigation h Nature and source(s) of the information relied upon i Assumptions and special assumptions j Restrictions on use, distribution and publication of the report k Confirmation that the valuation has been undertaken in accordance with the IVS l Valuation approach and reasoning m Amount of the valuation or valuations n Date of the valuation report o Commentary on any material uncertainty in relation to the valuation where it is es-sential to ensure clarity on the part of the valuation user. A statement setting out any limitations on liability that have been agreed.

Answer 3

Using a discounted cashflow factoring rental value, a discount rate and management costs

Answer 4

The risk profile

Answer 5

Average weighted yield when a reversionary property is valued using an initial and reversionary yield.

Answer 6

The resulting yield adjusted for purchaser costs

Answer 7

The yield not adjusted for purchasers cost (Such as an auction result)

Answer 8

Simple income yield for current income and current price

Answer 9

Reversionary yield is a term used in the property market to describe the yield that should be achieved if the passing rent adjusts to the level of the estimated rental value.

Answer 10

Receive Instructions Check Competence Check that there are no conflicts of interest Issue terms of engagement Receive signed terms of engagement Gather information Undertake due diligence Inspect and measure Research market and assemble, verify and analyse information. Undertake valuation Draft report Check by another surveyor Finalise and sign report Report to client Issue invoice Archive file.

Answer 11

Comparable

Answer 12

A Residual Investment Depreciated replacement costs Profits Comparison

Answer 13

Is a method of valuation used to establish a market value of a site based on market inputs at a particular moment in time and on a valuation date. GDV-TDC-Profit = Site value

Answer 14

Method used to value public and specialist buildings. i.e. school, churches, town halls, airports, oil refinery, town centers etc. Modern equivalent - obsolescence + value of site = value. DO not guess the percentage on Obsolescence and this comes with experience.

Answer 15

Not competent etc Profits method is based on the profit produced by the business operating in a premises. Gross earnings- Expenses = profit Profit @ 50% = Annual rental value Annual rental value x yield = Capital value Stand back and look. Need to have knowledge of particular property.

Answer 16

a. Income (Investment, profits and DCF) b. Cost approach (DRC and residual) c. Market approach (Comparable)

Answer 17

Used for income-producing properties that, due to location or some other factor, enjoy a monopoly. It is used when the physical buildings are normally only sold as part of a business. Examples would be: * hotels; * golf courses and other purpose-built sport and leisure centers; * petrol stations; and * some restaurants.

Answer 18

Gross profit less indirect costs Indirect costs such as marketing, utilities, maintenance & property taxation

Answer 19

An additional element of value created by the combination of two or more assets or interests where the combined value is more than the sum of the separate values.

Answer 20

An assumption that either assumes facts that differ from the actual facts existing at the valuation date or that would not be made by a typical market participant in a transaction on the valuation date.

Answer 21

Term- use discounted cashflow to work out term Reversion Deffered Yp % x years perpetuity = new yp New YP x market rent = capital value Used for under rented property

Answer 22

Standard calculation of investment method for the under rented part at yield low yield Deffered yield calculation with higher cap rate due to uncertainty to calculate new YP. Then times the new YP by the difference between the under rented and market rent. Used for overented

Answer 23

Providing an agency or brokerage service Acting it preparing to act as an expert witness Performing statutory functions Valuations for internal purposes Valuation for negotiation

Answer 24

Using the comparable method after I sought advice from local agents

Answer 25

circa 825 psf

Answer 26

PS (Professional Standards) and VPS (Valuation Technical and Performance Standards) are mandatory VPGA (Valuation Practice Guidance Applications) are advisory

Answer 27

RICS Valuation -Global Standards 2017: UK National Supplement

Answer 28

UK VPGA 6 Local authority and central government accounting: existing use value (EUV) basis of value UK VPGA 7 Valuation of registered social housing providers’ assets for financial statements UK VPGA 14 Valuation of registered social housing for loan security purposes UK VPGA 18 Affordable rent and market rent under the Housing Acts in a regulatory context

Answer 29

Reflect changes to the International Valuation Standards 2022 Updated to reflect latest Rules of Conduct * Emphasising the need to agree clear and unambiguous terms of engagement, even when valuations are undertaken for excepted purposes (i.e., VPS 1-5 do not apply) under PS 1 Section 5. * The terms quasi, partial or non Red Book should not be used in terms of engagement or reporting. Instead, the exception should be specifically stated and explained in the terms of engagement and valuation report. * More detailed commentary on sustainability/resilience and environmental, social and governance (ESG)matters in VPGA 8 Valuation of Real Property Interests. These terms are defined in Part 2: Glossary. There is also a reference to the proposed RICS Guidance Note Sustainability and ESG in Commercial Property Valuation and Strategic Advice 3rd Edition, also due to be published in 2022. * Various amendments are made to the VPGAs, in particular VPGA 4 Individual Trade Related Properties and the reference to IVS 230 Inventory. * Valuers must refer to the latest RICS valuation guidance, as well as being aware of the changes and how they affect their valuation work -amending any valuation templates or proformas used, including reports and terms of engagement.

Answer 30

Initial Yield -The relation between current income and price (usually allowing for the cost of Purchase) = Current Income / Price Reversionary Yield -The relation between the rent receivable at a future date, such as when re-letting takes place, and the price of property = Market rent / price Equivalent Yield -Is the weighted average between initial and reversionary yield. Equated Yield -Is the internal rate of return given certain growth assumptions. All Risk Yield -Is a yield figure which reflects within it the future benefits and risks to which the investment is subject.

Answer 31

1. Input current market value as a negative cash flow 2. Input projected rents over holding period as a positive value 3. Input projected exit value at the end of the term assumed as a positive value 4. Discount rate (IRR) is the rate chosen which provides a NPV of Zero

Answer 32

NPV is the summation of the discounted cashflows of the project

Answer 33

Outlines the Hierarchy of Comparable Evidence: Category A Evidence - Direct Comparables: Completed transactions of near-identical properties for which full and accurate information is available; may include information from the subject property itself. Completed transactions of near-identical properties for which some information is available. Where offers have been made but there is no binding contract. Asking Prices Category B Evidence - General Market Data that can provide evidence: Historic evidence/ demand and supply data from renta, owner occupier or investment data, Category C evidence - Transactional evidence from other real estate types and locations other background data, i.e. interest rates

Answer 34

Yes - RICS Guidance Note Comparable Evidence in Property Valuation, 2019

Answer 35

The number of years it will take for a property to repay its purchase price

Answer 36

Statutory Agency Internal Negotiation/Litigation Expert Witness

Answer 37

VPS 1 - Terms of Engagement (scope of work) VPS 2 - Inspections, investigations and records VPS 3 - Valuation reports VPS 4 - Bases of value, assumptions and special assumptions VPS 5 - Valuation approaches and methods.

Answer 38

In accordance with VPS 1: 1. ID & Status of Valuer 2. ID of Client 3. ID of other users 4. The property 5. Currency 6. Purpose of valuation 7. Basis of Valuation 8. Valuation date 9. Nature and source of information to be relied upon 10. All assumption and special assumptions 11. Format of the report 12. Restrictions on use 13. Confirmation that it will be undertaken in accordance with IVS. 14. Fee 15. Firm registration and CHP 16. Compliance 17. PII Caps

Answer 39

VPS 4 - Basis of value, assumption and special assumptions.

Answer 40

Market Value Market Rent Fair Value Investment Value Equitable Value Liquidation Value

Answer 41

Not using the terms 'quasi red book' if a valuation is to deviate from the red book it should be explicitly stated and explained why Reiterating the importance of clarity in terms of engagement Need to comment on ESG factors VPGA8

Answer 42

RICS Valuation Global Standards: UK national supplement: - published 2018, effective January 2019 - augments the Red Book Global, not a supplement - contains 18 VPGAs, - most advice is advisory guidance

Answer 43

- To make it easier to read and more user-friendly. - Clear advice on what is and isn't mandatory. - New UK VPGAs included for the valuation of central government assets, local authority assets and registered social housing provider's assets.

Answer 44

1. Valuation for financial reporting 7. Valuation for registered social housing providers' assets for financial statements 8. Valuation for charity assets 10. Valuation for commercial secured lending purposes 11. Valuation for residential mortgage purposes 15. Valuation of CGT, IT, SDLT and ATED

Answer 45

Leasehold Reform (Ground Rent) Act 2022 puts to an end ground rents for new, qualifying long residential leasehold properties in England and Wales.

Answer 46

Town Centre, Camberley – I was asked to appraise the site following an off market introduction. As this site was a regeneration schemes the initial designs included Student Accommodation, Retail and Office space. To value this I reviewed various rental comparables for all three uses and seeked advice from local commercial agents regarding expected yields and rental levels in the area. Using the information gathered I utilised the investment valuation to determine capital values for the various uses and included these within my overall residual valuation for the scheme.

Answer 47

St Olav’s Court, Rotherhithe – I prepared a residual valuation to advise Clarion’s bid for the site. To attain sales values I utilised the comparable method using Molior, Rightmove, Zoopla and Land Insight to identify comparables in the area, which I then utilised in the residual valuation for the site. I then reviewed the comparables in further detail to understand the variation in the comparables I had selected and decided on the correct sales value per sq. ft. This included at looking at the age of the development they belonged to, specification, whether the scheme was Permitted Development and the proximity to nearby infrastructure and amenities. I am aware that these comparables are limited and that each individual property has variables that affect its value such as condition and property type.