Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

APC > Valuation > Flashcards

Valuation Flashcards

1
Q

What are the 5 methods of Valuation?

A

1) Comparable Method
2) Investment Method
3) Profits Method
4) Depreciated Replacement Cost Method
5) Residual Method

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What guidance is there on the comparable method?

A

The RICS Guidance Note, Comparable Evidence in Real Estate Valuation 2019

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is a comparbale?

A

An item of information used during the valuation process as evidence to support the valuation of another similar item

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is goof comparable evidence?

A

Comprehensive - several examples rather than a singular transaction
Similar - of character & size
Recent - as close to the date of valuation to accurately reflect the market at that time

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is the definition of Market Rent?

A

The estimated amount for which an interest in real property should be leased on the valuation date between a willing lessor and willing lessee on appropriate lease terms in an arms length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is Basis of Value?

A

A statement of the fundamental measurement assumptions of a valuation. Typically market value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is fair value?

A

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

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is the difference between market value and fair value?

A

Fair value is a measure of an assets worth whereas market value if the price of an asset in the marketplace.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is Investment Value?

A

The value of an asset to the owner or a prospective owner for individual investment or operational objectives.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is marriage value?

A

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

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is the difference between an assumption and special assumption?

A

As assumption is something that is believed to be true and therefore is stated so and not checked by the valuer
A special assumption is something that either assumes something that differ from the actual facts at the valuation date

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is a special purchaser?

A

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

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What are the terms of engagement? How do they differ from the terms of Business?

A

The TOE are written confirmation of the conditions that the member and client have agreed, such as fee, scope of work
TOB are matters which apply to all of the members business dealings, unless agreed otherwise, such as complaints handling, force majeure

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What are differing reasons a valuation might be required?

A

Taxation reasons, Insurance reasons, Prior to a sale, Lending,

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is the Red Book?

A

The red book is the RICS Valuation – Global Standards, the current edition is effective from the 31st January 2022. It includes a set of standards for valuers to follow that are both mandatory and advisory

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is the importance of the Red Book?

A

To set out standards to ensure consistency, objectivity and transparency and sustain public confidence in valuation, and in particular red book valuations.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What are the changes to the new Red Book?

A
  • reflects changes to the International Valuation Standards 2022
  • emphasises importance of terms of engagement
  • requires more commentary on ESG matters,
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is an external valuer?

A

Someone with no material links to the asset to be valued or the client

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What is an internal valuer?

A
  • someone employed by a company to value the assets of the company
  • valuation for internal use only
  • no third party reliance
20
Q

What do you need to check prior to accepting a valuation instruction?

A

1) Competence - do I have the level of knowledge for the work required. if not - refer them to RICS find a surveyor
2) Conflicts - are there any conflicts
3) Terms of Engagement - set out in writing the full confirmation of instructions

21
Q

What is due diligence?

A

Checks that need to be undertaken that may have a material affect on the valuation

22
Q

What are the applications of the 5 methods of valuation?

A

Comparable - secured lending
Investment - taxation
Residual - development land
Profits - valuing a business
depreciated replacement cost - insurance

23
Q

Why might a red book valuation not be used?

A

internal purposes and planning - such as tax planning
prior to sale - when a market appraisal might be more appropriate
internal accounting purposes

24
Q

Why is the Red Book important?

A
  • Gold Standard - valuations carried out in accordance with the Red book are carried out in line with a high set of standards,
  • Reliance - because of these high standards the end product should be considered a robust document
  • Similarity - same set of standards so that there is relativity
25
Q

What are appropriate levels of PII cover?

A

this is a case by case basis, this could be £5,000,000 or £10,000,000

26
Q

What are the headings in a set of valuation terms of engagement?

A

letter form
client
property
valuation standards - if Red book
status of the valuer and disclosure of any conflicts of interest
identification of the valuer
purpose of the valuation
valuation limitations
basis of valuation
assumptions
special assumptions
valuation date
fee

27
Q

What is the Hierarchy of Comparable Evidence?

A

Category A Comparable evidence - Direct Comparable - local transactions
Category B Comparable evidence - General Market Data - indices
Category C Comparable evidence - other sources - non local transactions

28
Q

What is the name of the Red Book?

A

RICS Valuation - Global Standards

29
Q

What does the Red Book contain?

A

set of standards to follow when uindertaking valuatinos in line with it, such as:
Professional Statements (PS) - mandatory
Valuation Technical and Performance Standards (VPS) - mandatory
Valuation Practice Guidance Applications (VPGA’s) - mandatory

30
Q

What are the professional statements?

A

PS1 - compliance with standards where a written valuation is required
PS2 - Ethics, competency, objectivity and disclosures

31
Q

What are the Valuation Technical and Performance Standards?

A

VPS1 - Terms of engagement
VPS2 - Inspections
VPS3 - Valuation Reports
VPS4 - Bases of value, assumptions and special assumptions
VPS5 - Valuation approaches and methodology

32
Q

What does IPMS stand for?

A

International Property Measurement Standards

33
Q

What do IPMS do?

A

They provide a consistent way of measuring property

34
Q

What is GEA, GIA and NIA?

A

GEA - Gross External Area - area of a building measured externally at each floor area
GIA - Gross Internal Area - area of a building measured to the internal face of the perimeter walls
NIA - Net Internal Area - useable area within a building

35
Q

The Valuation for the Estate in Hertfordshire - was this in line with the Red Book?

A

Yes it was undertaken in line with the red book. It was for tax planning.

36
Q

The Valuation for secured lending purposes, what did you need to consider here?

A

Valuation Practice Guidance Application 2 (VPGA2) - Valuation for secured lending. specifically:
- comment on maintaining income over the lift of the loan - ESG considerations
- A statement of current rental income and whether leases have been seen
- definition of market value - is it actually different.

37
Q

The valuation was for taxation purposes, what did you need to consider?

A

VPGA 8 - Valuation of real property interests

38
Q

What specifically do you need to consider under VPGA8?

A
  • Title - details of the title if relied upon
  • Condition of the buildings - The inspection doesn’t constitute a building survey
  • Services - assumption that services are provided
39
Q

What do you need to consider if property is entered into financial accounts?

A

VPGA1 - valuations as part of financial accounts, include reference to IFRS

40
Q

For the properties you couldn’t gain access to, what did you need to do?

A

Speak to the managing agent to confirm there were no material changes since the earlier inspection date. We then referenced this within the report

41
Q

How did you use the investment valuation method?

A

This was for commercial buildings, I used a Years Purchase in Perpetuity calculation.
Using 1/an appropriate yield, I multiplied this by the annual rent

42
Q

Please can you describe a Term & Reversion valuation?

A

A term and Reversion valuation splits the valuation into the Term - which is the YP for the term with an appropriate yield. and The Reversion - which is the PV subject to the tenancy

43
Q

How does an inheritance tax valuation differ from a red book valuation?

A

Defined in s.160 of the Inheritance Tax act 1984 - the Basis of value for inheritance tax valuations is market value, but also includes lotting and special purchaser to achieve best value

44
Q

When you took check measurements what was this in line with?

A

This was for residential properties and was in line with:
- RICS professional Statement - Property Measurement 2018
- IPMS 3 - residential
- IPMS 3 - office

45
Q

What are the benefits of IPMS over code of measuring practice?

A

Consistency - so that internationally there is consistency
Public Trust
More transparent marketplace

APC (10 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions