Valuation Flashcards
Main methods to produce a valuation?
Comparable
investment
residual
development appraisal
profits
Depreciated replacement cost
Give a example for purpose of valuation?
Rating, accounts, landlord and tenant, functions, corporate, Real Estate, advice, relocating, or refurbishing
What does VPS stand for and what is it?
Valuation practice statements processes to follow
What does PS stand for?
Professional standards things to think about
What is the Redbook?
A set of global standards, which set out procedural rules and guidance for written valuations
Name of the red book?
RICS valuation -global standards, 20,22
What is the main aim of the new 2022 addition?
Sustainability and ESG and language clearer
What is the purpose of the red book?
Purpose = consistency, objectivity, transparency COT
Why was the Redbook updated?
International valuation standards update every two years
What are the main headings of the Redbook?
Professional standard one-compliance
Professional standard two – ethics and cornflakes.
Valuation practice statement one - terms of engagement
Valuation practice statement to-inspection.
Valuation practice statement three-reporting
Valuation practice statement for-basis of valuation.
Valuation practice statement five – valuation approach (new) 
What are the exceptions to read book?
Allies
Agency, litigation, internal, expert, witness, statutory
Value it does not need to follow VPS 1-5
What is an independent expert?
Used in rent review disputes to determine rent
What is an expert witness?
Any profession called to give evidence to the court of law, they have duty to the court
Valuation example, talk through VPS, one
VPS, one sets out minimum terms of engagement.
– identification and status of valuer.
-client.
– any other users?
- property name
-Purpose
– basis value.
– valuation date.
– extent of investigations.
What is the vps2 and contents?
Inspection.
Talks about reevaluation with no inspection.
Must record info.
Measurement.
What is the VPS3 and contents?
Valuation reports
Minimum headings 2022
– identify valuer.
-client and other users.
-purpose
– an asset
– basis value.
-valuation date.
– investigation extent.
-Date of report.
– restriction on use.
-valuation amount-
2022, sustainability and ESG should be integral part of the valuation approach and commentary
What is VPS 4?
Basis of value 2022 highlights need for clearly explained definitions
Market rent
Market value.
Investment value (worth).
Fair value.
Synergistic value.
What is market value?
Estimated amount an asset or liability should exchange on valuation date between willing, buyer, willing, seller arm’s-length transaction, proper marketing parties, acts, knowledgeably, prudently, and without compulsion
What is market rent?
Estimated amount interest in property least on valuation date between willing lessor willing lessee appropriate lease terms arm’s-length transaction problem, marketing parties, acted knowledgeably, prudently, and without compulsion
What is investment value?
Worth
Value of asset to owner for individual investment
Can be used with DCF
What is fair value?
Price received in a transaction,
Applied only to financial statements consistent with market value
What is synergistic value?
Two or more assets combined value more than the sum of the separate assets
Specific purchaser
Marriage value
What is a special assumption?
Special Assumption that differs from the norm and not usually made typically
Assume land as planning
What is an assumption?
Reasonable to assume true without investigation
What is the VPS5?
Valuation approach
Definition should be in valuation report and why approached this for client.
Market approach.
Income approach.
Cost approach.
What is the market approach?
Based on comparing property with similar property
What is an example of the market approach method
Comparable method
What is the income approach?
Capitalising present and predicted income to produce a single capital value
What is a method of the income approach?
Investment method.
Profits method.
What is the cost approach?
Indication of value, using the principle that buyer will pay no more than another or to construct
What is an example of the cost approach method
Residual method.
Depreciate replacement cost method.
ESG and sustainability advice, paper name?
Sustainability and ESG in commercial property, valuation and strategic advice, 20,21
What is included in sustainability and ESG in commercial property valuation and strategic advice?
Definitions of ESG and sustainability and role of valuer
How sustainability ties into whole process.

What is the UK supplement read book called?
UK valuation standards-January 2019
Talk through your valuation of Shirley Road
Property-vacant ground floor retail unit.
Purpose- rental value agency
Basis -market rent
Terms of engagement vps1
Method valuation - market approach.
Technique-comparable.
Advice to client good market ability and layout of property there will be interest in the property.
Methods and ways to produce a valuation?
Comparable
Investment.
Residual and development appraisal.
Profits.
Depreciated replacement costs.
Talk me through your message, the valuation in Rye
Looked at subject property.
Selected comparables and verified the information.
Analyse the comparable.
Put them in a table.
Valued the property
Assessed
What is an adjustment?
Made to express the comparables in terms of the subject property, so poor location, attempt to say what it was sold for, if it was in the same position
What would you have in a compatibles table?
Agreed, rent, area, price per area, date, transaction, specification, condition, location, layout, not adjustment
Comparable evidence note? And contents?
Comparable evidence in real estate valuation, 2019
Comparable sources, hierarchy of evidence, recording, comparable evidence, comparable analysis
Types of investment method and what you’re achieving?
Term and reversion, hard-core, DCF
Used when there is an income stream to value, rent is capitalised to produce capital value
Profits method, key points
Three years accounts, fair, maintainable, trade, fair, maintainable operating profit
Rental – fair, maintainable, operating, profit, 50-50 landlord split
Residual and development appraisal key points
Gross development value – all of the cost to develop including profit.
Residual = values side.
Development appraisal overview
GDV – all cost to develop, including land, value equals developers profit
Points to note in residual valuation
Planning applications section 106payments and CIL
Fees, 10% costs
How to calculate the net effective rent?
Add income divide by lease length,
Include premiums rent, free period, stepped rents
What is the hierarchy of rental evidence?
1 new, letting
2 lease renewal.
3 rent review
4 independent expert.
5 opinion.
6 the arbitration-court decisions.
7 asking rents
What is the all risks yield?
Risk return growth
What is gross initial yield?
Rent divided by price equals Capital value
What is net initial yield
Add purchases costs to price, and divide by rent
What is equivalent yield
 Average between term and reversion
Name types of due diligence
Competent?
Conflict check.
Confirm instructions in writing.
Terms of engagement.
Asbestos
Contamination
Environmental matters.
Flooding
Title and tenure.
Planning
Talk through valuation instruction beginning to end
1 receive instructions.
2 conflict and competence check
3 issue, terms of engagement signed, and returned.
4 due diligence pre-inspection check
5 inspect and measure
6 method evaluation
7 research market comps
8 analyse, comparable evidence
9 weight comparable is explain and justify
10 value property
11 draft report
12 check registered, valuer & sign off
13 issue, report and invoice
14 keep secure record six years
Types of things that affect valuation
Bigger picture property economics.
In perfect opaque market.
Knowing market
Prime, yields and zone a.
Talk through calculations.
Name a case law for surveyor, not looking after client
Negligence hart v large
Surveyor negligent in inspection didn’t find damp
Didn’t advise to get professional consultant certificate before purchase
What is an expert witness?
Any profession that gives expert advice to court duty to court not client
What is an independent expert?
Use for rent review, disputes determines rent
What are the exceptions to the red book?
ALIES
Agency litigation internal expert witness statutory
Not follow vps 1-5
What is an expert witness?
Any profession, the kids expert advice to court and has a duty to court
What is an independent expert?
Rent review, disputes determines rent
What is an arbitrator?
Third-party decision without court
What is a special assumption?
Assumption that differs from the norm and not typically made such as planning granted for land assumed
What is the current RVs uniform business rates?
0.499 less than 51,000.
0.512 More than 51,000
When will the new rateable list published and what antecedent valuation date is it based off?
First of April 2023, first of April 2021
Have new MEES regulations changed
Yes, all commercial buildings existing leases minimum EPC, E 1 April 2023
What are the exemptions of MEES regulation compliance?
High cost - cost of implementing cheapest recommendation exceeds £3500
Seven-year payback exemptions. - expected savings, over seven years is less than the cost of installation
All improvements made exception - landlord implemented all improvements, up to total of 3500
Devaluation - independent surveyor advises improvement reduces market value by more than 5% 
New landlord, exemptions.
What is biodiversity net gain? What act? What bng target and when?
Contributing to nature recovery whilst developing land.
Land in a better state than before development
Environment act 20,21, minimum 10% November 2023
What is the bank of England base rate?
4.25% rising to 4.5%.
What is inflation currently reported at?
10.1%
What is the estimated increase in construction materials?
20%
