Valuation Flashcards
Definitions of a valuer.
Internal valuer?
- Employed by the company to value the assets of a company
- Valuation for internal use only
- No third-party reliance
External valuer? 
- Has no material links with the asset to be valued or the client
Three important first steps before commencing evaluation instruction
- (C) competence do you have the skills understanding and knowledge SUK
- (I) Independence conflicts
- (T) Terms of engagement - Set out in writing your full confirmation of instruction to the client prior to starting work and receiving confirmation of instruction. Confirm the competence of the value. The extent of limitations of the value is inspections must be stated. 
Statutory due diligence for valuations.
Why is this done and what is included?
This is required to check that there are new material matters which could impact on the valuation.
-Asbestos register
-Business rates/council tax
-Contamination
-Equality act 2010
-Environmental matters
-EPC rating available
-Flooding
-Fire safety compliance
-Health and safety compliance
-Highways
-Legal title and tenure
-Planning history
-Public right of way
What is the timeline of a valuation  instruction
- Receive instructions from the client
- Competent (SUK), Interest, Terms
3. Receive signed terms - Gather information
- Undertake to diligence
- Inspect and measure
- Undertake market research and assemble comps
- Undertake valuation
- Draft report
- Had a valuation report considered by another Surveyor
- Finalise and sign report
- Issue invoice
- Insure file is in good order
What are the five methods of valuation? 
Five methods of valuation
- Comparative method
- Investment method
- Profits method
- Residual method
- Contractors method
IVS 105
1. Income approach
2. Cost approach
3. Market approach
Comparative method of Valuation
Six steps?
What is the guidance note? 
Six steps
1. Search and select comparables
2. Confirm/verify details
3. Assemble a comparable schedule
4. Just comparable is using hierarchy of evidence
5. Analyse compatibles to form opinion of value
6. Report value and prepare file note
RICS guidance note comparable evidence in real state valuation first edition 2019
RICS guidance note comparable evidence in real estate 1st Ed 2019
What’s included?

The principles of comparable evidence
Can you provide advice in dealing with situations where there is limited availability of evidence
Sets out a hierarchy of evidence including Category A Category B and Category C
- Category A - Direct comparables 
Near identical properties/Similar real estate asset - Category B - General market data That provides guidance/ Historic evidence/Indices/
- Category C - Other sources e.g Interest rates stock market movements transactions in other locations. 
How to find relevant comparables?
Inspection of an area e.g. seeking agents boards
Speak to local agents
Auction results
In-house record/databases
Databases EGI CoStar
Auction comparable the sale price is Grace of cost
Market sentiment
What is the investment method of valuation?
- Used when there is an income stream to value
 - The rental income is capitalised to produce a capital value
- Conventional method assumes growth is implicit
- An implied growth rate is derived from the market capitalisation rate (yield) 
Conventional investment method
Rent received or market rent multiplied by the year purchased = market value
Comps needed for rent and yield
Implicit valuation - Term and Reversion
Used for under-rented
Implicit valuation - Hardcore
Over rented
Implicit and explicit
Traditional methods of valuation e.g rack rented, term and reversion and hardcore are often termed ‘implicit’ they use the ARY for everything (all risk and opportunity)
DCF is explicit as factors such as rental growth are calculated separately
Initial yield
Current income / Current price
Reversionary yield
Market rent / Current price of an investment (Let below market rent)
Equivalent yield
The average weight yield when a reversionary property is valued using an initial and reversionary yield
(The yield between the initial yield and reversionary yield)
Net yield
The resulting yield adjusted for purchase costs 
Gross yield
The yield not adjusted for purchase costs (such as an auction results)
True yield and Nominal yield
Traditional valuation practice assumes rent is paid in arrears
True yield - Assumes rent is paid in advance.
Nominal yield - Assumes rent is paid in arrears
Running yield
The yield at one moment in Time
All risks yield
The remunerative rate of interest used in the valuation of fully lit property let at market rent reflecting all the prospects and risks attached to the particular investment. 
Structure of the global red book 2022?
- Introduction
- Glossary
- Professional Standards (PS)
- Valuation technical performance standards (VPS)
- Valuation application (VPGA)
- International valuation standards 
Professional standards
PS1?
PS2?
PS1 - Compliance with standards and practice statements. The five exceptions
PS2 - Ethics - CIT 
Valuation technical performance standards
VPS 1-5? 
VPS1 - Minimum Terms (Scope)
VPS2 - inspection investigation and records
VPS3 - Valuation reports
VPS4 - Basis of value (Assumptions & special assumptions) 
VPS5 - valuation approach methods
Global Redbook
VPGA? 
VPGA1 - valuation for inclusion in financial accounts
VPGA2 - Valuations for secured lending
VPGA10 - matters that may give rise to material valuation on Uncertainty
UK Redbook 2018
Structure? 
1 - introduction
2 - Professional and valuation standards (PS and VPS)
3 - Valuation practice guidance
4 - Summary of changes from 2014
UK Red book
VPGA1
VPGA8
VPGA10
VPGA15
VPGA1 - financial reporting
VPGA8 - charity valuation
VPGA10 - commercial secure lending
VPGA15 - CGT/SDLT & Inheritance tax
VPS2!!!
