Valuation Flashcards
What are the 5 main methods of valuation?
- Comparative. 2. Investment. 3. Profits. 4. Residual. 5. Contractors.
What is Market Value?
The estimated amount that an asset should exchange between a willing buyer and willing selling in an arms length transactions at the date of valuation.
What is the Red Book?
Mandatory rules and best practice for members undertaking asset valuations. The latest version is The Red Book Global Standards - January 2022.
Why do we need to value property?
For financial reporting, secured lending, residential mortgages, tax purposes, compulsory purchase.
What is Depreciated Replacement Cost (or Contractors)?
An indication of value based on the cost of obtaining that asset based on its current equivalent. Calculate its replacement cost and deduct for physical deterioration and obsolescence. “Method of last resort” used for properties such as libraries and schools.
What is the Comparable Method?
Based upon actual sales data of similar properties. Can withstand the most scrutiny.
What is the Residual Method of Valuation?
How much a purchaser should pay for a site. The gross value is established then all the costs associated with the development are deducted. The surplus is known as the residual value.
What is the Profits Method?
Used for trade related properties where the value is derived from the business and its trading potential. The gross income minus costs = net profit. Minus operators pay = Fair Maintainable Trade. Capitalised at appropriate rate.
What is Hope Value?
The market value of land based upon the expectation of obtaining planning permission for development.
What is Marriage Value?
The extra value that arises from the merger of two physical or legal interests.
What is Special Value?
An extraordinary element of value over and above market value.
