Valuation Flashcards
Tell me what the 5 methods of valuation are.
Comparable
Depreciated replacement cost/contractor’s
Investment
Profits
Residual
What is a years purchase multiplier?
It is a multiplier which is calculated through the setting of a yield (or other variable) and a number of years. To find the years purchase multiplier, the valuer must make an assumption of a yield rate and refer to the Parrys tables
Give me an example of a good covenant and how this might impact a valuation.
A positive covenant requires some form of action to be taken e.g. to erect a fence along a boundary or to undertake specific repairs to the property which has a positive impact on the valuation
How would you distinguish limitations on liability in your valuations?
Where in your valuation report do you state any limitations on liability?
in a prominent position within the body of the report
What relevance does Hart v Large have on your valuation practice?
To protect a prospective purchaser of a renovated property, a surveyor should:
spell out any limitation on the advice given and, if necessary, recommend further investigation
be particularly alert to any signs of inadequate design or faulty workmanship
draw attention in appropriate terms to protections available to the purchaser, including a PCC.
What aspect of Hart v Large allowed the judge to award damages without applying the
SAAMCO cap?
Mr Large’s legal team sought also to rely on the principles in SAAMCO and Hughes-Holland. They argued that Mr Large was not an “advisor” in the sense of these authorities and that a surveyor in a house purchase could never be considered to be the advisor. Further, they argued that the “advice”/”information” categories were binary and there could never be any sort of hybrid situation. Coulson LJ reviewed the authorities that explain the difference between ‘information’ and ‘advice’, before firmly rejecting these arguments and finding that the “advice”/”information” categories are not rigid and could overlap. In particular, he referred to the cases that draw a distinction between the role of someone providing information for the purposes of enabling a third party to decide upon a particular course of action (an ‘information’ case); and the role of someone providing advice as to what course of action that third party should take (an ‘advice’ case). Having reviewed the authorities, he reasserted the factual findings of the High Court which concluded that this was not a mere “information” case. He concluded that, while this could be considered a hybrid case, it was in fact much closer to an advice case, because Mr Large had failed to advise the Harts to take the course of action of requesting a PCC.
What is the SAAMCO cap?
SAAMCO established that a valuer’s liability for providing a negligent valuation is limited to the consequences of that valuation being wrong
Under the SAAMCO cap, is a valuer liable for losses due to a downturn in the market?
In SAAMCO, the House of Lords effectively held that losses attributable to a subsequent fall in the property market fell outside the scope of duty of care owed
Under the SAAMCO cap, is a valuer’s liability usually limited to the overvaluation on the
valuation date?
The damages would be limited to the difference between the negligent valuation and the true valuation at the time
What would you do if you received a notice of a PII claim from a client or their
solicitor?
you may have only 48 hours in which to notify the claim or your insurers may reject it. In any event, you should notify your insurers as soon as reasonably practicable
Is there a difference between being negligent when undertaking a survey/valuation
and providing negligent advice?
yes,, the difference is between information and advice, and the liability cap associated with information but not advice
What is run off cover?
Run-off cover is insurance for claims made against a law firm after it has stopped doing business.
What is the Red Book?
contains mandatory rules, best practice guidance and related commentary for valuers
Why does the Red Book exist?
Promote and support high standards in valuation work and offers useful resource for valuation users, gives mandatory practices for registered valuers and ensures a consistent approach
Tell me about a factor which may impact value.
supply and demand
Use
Restrictive covenants
What is your duty of care as a surveyor when undertaking a valuation?
A valuer owes a duty to use reasonable care and skill in valuing property
To whom do you owe this duty of care?
to my client and anyone relying on my report
Why is independence and objectivity important when valuing?
to be able to provide unbiased advice - It is important that my opinion and advice is free from bias due to the impact on clients, the wider market and trust in the profession plus it is used for financial decision making
Is there a separate UK Red Book?
there is a UK supplement
What is the UK valuation guidance called?
RICS Valuation - Global Standards
2017: UK national supplement
Why does the UK guidance exist?
as it is subject to UK jurisdiction
When was the Red Book last updated?
January 2022
was the red book updated differ from when IVS were last updated?
no, this is also january 2022