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RICS APC - GD > Valuation > Flashcards

Valuation Flashcards

1
Q

Tell me what the 5 methods of valuation are.

A
  1. Comparable
  2. Investment
  3. Residual
  4. DRC
  5. Profits
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2
Q

Tell me about how you would value a building using the profits/contractors/investment/comparable/residual method of valuation.

A
  • Comparable - Comparable evidence is researched and selected on basis of similarity to subjects eg type, size, condition etc. Adjustments are then made to the sales to account for differences and a value is picked
  • Investment - The investment method involves assessing market rent and a market based yield. The rent is then capitalised using the yield to establish the capital value.
  • Residual - Involves establishing the GDV of a development. Development costs and profit are then deducted to establish the land value.
  • DRC - Involves assessing the cost to replace the land and the building with a modern equivalent, including all associated costs and then making appropriate deductions for depreciation and obsolescence.
  • Profits - Involves establishing fair maintainable operating profit (FMOP) capable of being generated by a reasonably efficient operator. This is based upon assessment and analysis of fair maintainable turnover. A market based profit multiplier is then used to convert FMT into a capital value.
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3
Q

How do you decide which valuation method to apply?

A

It depends on what type of property you are valuing

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4
Q

When and why would you use one of these methods?

A
  • Comprable method - Used for straight forward properties were there is comparable evidence
  • Residual method - used for development properties
  • Profits method - used for properties where the major value component of the property is driven by the profitability of the business that occupies the building
  • Investment method - used from investment properties that are held for their income stream
  • DRC - used where there is no active market for the asset being valued due to the specialist nature of the property
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5
Q

What is a years purchase multiplier?

A

Multiplier used to convert income to capital value

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6
Q

Give me an example of a good covenant and how this might impact a valuation.

A
  • Tesco - lower yield applied
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7
Q

What level of PII cover does your firm have?

A

£10,000,000

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8
Q

How would you distinguish limitations on liability in your valuations?

A

Liability cap

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9
Q

Where in your valuation report do you state any limitations on liability?

A

Terms and conditions

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10
Q

What relevance does Hart v Large have on your valuation practice?

A
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11
Q

What aspect of Hart v Large allowed the judge to award damages without applying the SAAMCO cap?

A
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12
Q

What is the SAAMCO cap?

A
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13
Q

Under the SAAMCO cap, is a valuer liable for losses due to a downturn in the market?

A
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14
Q

Under the SAAMCO cap, is a valuer’s liability usually limited to the overvaluation on the valuation date?

A
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15
Q

What would you do if you received a notice of a PII claim from a client or their solicitor?

A
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16
Q

Is there a difference between being negligent when undertaking a survey/valuation and providing negligent advice?

A
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17
Q

What is the Red Book?

A

Set of standards published by RICS that contain mandatory rules, best practise guidance and related commentary for all members undertaking valuations of an asset

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18
Q

Why does the Red Book exist?

A

Promote and support high standards in valuation delivery worldwide

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19
Q

Tell me about a factor which may impact value.

A

Size

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20
Q

What is your duty of care as a surveyor when undertaking a valuation?

A
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21
Q

To whom do you owe this duty of care?

A
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22
Q

Why is independence and objectivity important when valuing?

A
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23
Q

Is there a separate UK Red Book?

A

There isn’t a separate UK Red Book. There is an additional UK Supplement that sits alongside the Global Red Book.

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24
Q

What is the UK valuation guidance called?

A

RICS Valuation - Global Standards - UK National Supplement

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25
Q

Why does the UK guidance exist?

A

Provides specific information on UK matters

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26
Q

When was the Red Book last updated?

A

Global - 2022
UK - 2019

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27
Q

Does this differ from when IVS were last updated?

A

The IVS were updated in 2022 as well, the Red Book was updated to incorporate these updates

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28
Q

What changes were made?

A
  • IVS changes incorporated
  • Articulating in more detail the need for clear unambigous and documented terms of engagement when members apply and exceptions to VPS 1-5, under PS1 section 5 exceptions
  • More detailed commentary on matters relating to sustainability/resilience and ESG
  • Improving and/or clarifying some of the existing Red Book Global text in light of feedback, experience and evolving needs
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29
Q

Which do you follow - the latest IVS or the Red Book Global?

A

The Red Book incorporates IVS, so both

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30
Q

Which sections of the Red Book are mandatory and which are advisory?

A

Mandatory
* PS 1 & 2
* VPS 1 - 5

Advisory
* VPGAs

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31
Q

What does PS1-2/VPS1-5/VPGAs relate to?

A

Professional Standards
* PS 1 - Compliance with standards where a written valuation is provided
* PS 2 - Ethics, competency, objectivity and disclosures
**Valuation Technical & Performance Standards **
* VPS 1 - Terms of engagement (scope of work)
* VPS 2 - Inspections, investigations and records
* VPS 3 - Valuation reports
* VPS 4 - Bases of value,assumptions and special assumptions
* VPS 5 - Valuation approaches and methods
**Valuation Practise Guidance Applications **
* VPGA 2 - Valuation of interests for secured lending
* VPGA 8 - Valuation of real property interests
* VPGA 9 - Identification of portfolios, collections and groups of properties
* VPGA 10 - Matters that may give rise to material valuation uncertainty

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32
Q

What type of advice does the Red Book cover?

A
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33
Q

If you provide preliminary advice / draft valuation report, what should you state in writing to your client?

A
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34
Q

What type of valuations might be relied upon by a third party?

A
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35
Q

Tell me what the definition of MR/MV/investment value/fair value?

A
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36
Q

What is the difference between an assumption and a special assumption?

A
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37
Q

What sources of information would you consider when preparing a valuation report?

A
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38
Q

If you have previously valued an asset, do you need to make any additional disclosures and what might they be?

A
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39
Q

If your firm is too small to have a rotation policy or valuation panel, what else can you do to ensure objectivity?

A
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40
Q

When might a conflict of interest exist in relation to a valuation instruction?

A
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41
Q

What must be included in your terms of engagement / valuation report?

A
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42
Q

Where is this covered in the Red Book?

A
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43
Q

What is a restricted valuation service and can you provide one?

A
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44
Q

How do you deal with limitations on inspection or analysis?

A
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45
Q

Can you revalue a property without inspecting?

A
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46
Q

What RICS guidance relates to the use of comparable evidence?

A
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47
Q

What is an internal valuer?

A
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48
Q

Can an external valuer provide an internal purposes valuation?

A
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49
Q

What happens if market conditions change between the valuation date and report date?

A
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50
Q

Is special value from a special purchaser reflected in MV?

A
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51
Q

Where does the definition of fair value come from?

A
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52
Q

Does this differ from MV?

A
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53
Q

When is fair value used?

A
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54
Q

What are the 3 approaches under VPS5?

A
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55
Q

What is the Valuer Registration Scheme?

A
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56
Q

Are there any instances where certain sections of the Red Book may not apply?

A
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57
Q

What are these and which sections don’t apply?

A
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58
Q

What is the basis of value under UK GAAP FRS 102?

A
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59
Q

What is a SORP

A
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60
Q

When would you use EUV?

A
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61
Q

What is the definition of EUV?

A
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62
Q

What additional criteria apply to secured lending valuations?

A
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63
Q

What information should you specifically request for a secured lending valuation?

A
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64
Q

What is a regulated purpose valuation?

A
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65
Q

What additional disclosures must be made for a regulated purpose valuation?

A
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66
Q

What is the basis of value for a statutory valuation?

A
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67
Q

What might a statutory valuation relate to?

A
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68
Q

What is the definition of the statutory basis of valuation?

A
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69
Q

Is this the same for all statutory valuations?

A
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70
Q

What is a yield?

A
  • Used to describe the quality of an investment
  • Expressed as a percentage between income receieved from an investment and its capital value
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71
Q

What is a Net Initial Yield?

A
  • Type of income yield
  • Initial income divided by purchase price
  • Reflects purchasers costs
  • Common market measure of investment performance
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72
Q

What is a reversionary yield?

A
  • Used in term and reversion valuations
  • Used to capitalise the reversionary income
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73
Q

What is an equated yield?

A
  • Internal rate of return of a growth explicit cash flow
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74
Q

What is an equivalent yield?

A
  • Single yield that can be used to capitalise both the term and reversionary incomes
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75
Q

How would a yield reported from auction differ from a Net Initial Yield?

A
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76
Q

What purchaser’s costs do you deduct from a valuation?

A
  • Agent fees
  • Legal Fees
  • LBTT
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77
Q

When do you deduct purchaser’s costs from a valuation?

A

At the end of an investment valuation

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78
Q

How would you value a property in uncertain market conditions - does the Red Book give any guidance?

A
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79
Q

How does a term and reversion differ to a DCF?

A

Term and reversion is growth implicit whereas a DCF is growth explicit

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80
Q

What is the difference between a growth explicit and a growth implicit yield?

A
  • Growth implicit - reflects all of the subjects risks and rewards
  • Growth explicit -
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81
Q

Give an example of a growth implict and explicit yield

A
  • Growth implicit - ARY
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82
Q

How would you value an under/over rented investment property?

A
  • Under rented - term & reversion
  • Over rented - hardcore/topslice
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83
Q

When would you use a dual rate investment calculation?

A

When the return of capital is calculated at a lower rate than the return on capital

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84
Q

Where can you find yield evidence from?

A
  • Databases
  • Corporate Publications
  • IPF
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85
Q

What is the hierarchy of evidence?

A
  • Category A - direct transactional evidence
  • Category B - general market data providing guidance rather than a direct indication of value, such as evidence from published sources, commercial databases, indices, historic evidence, demand/supply data
  • Category C - other sources, such as transactional evidence from other property types and locations and other relevant background data
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86
Q

**

What would you do if comparable evidence was limited?

A

Use the next best thing and make adjustments

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87
Q

What is NPV?

A

Discounted (present) value of a cashflow

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88
Q

What is IRR?

A

Measure of an investment’s profitability over it’s lifetime

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89
Q

What is a term and reversion?

A
  • Type of investment valuation used for under rented investments
  • Done by capitalising the rent passing until the point at which it reverts back to market rent (next lease event). Reversionary rent is capitalised in perpetuity but deferred from now unitl point it is received. Two values are then added together.
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90
Q

What is a hardcore and topslice?

A
  • Type of investment valuation used for over rented investments
  • Done by capitalising the contract rent in perpetuity and the top slice (incremental rent), which is the difference between profit rent and market rent, is capitalised in perp but deferred until the next lease event. These two values are then added together.
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91
Q

What is a Discounted Cash Flow (DCF)?

A

Form of growth explicit investment value

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92
Q

What is a short-cut DCF?

A
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93
Q

When would you use a DCF?

A
  • Comparable evidence is scarce
  • Unusual property
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94
Q

What are the advantages of a DCF?

A
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95
Q

What is a YP/PV/YP in perpetuity?

A
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96
Q

What are the disadvantages of a DCF?

A
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97
Q

What is marriage value?

A
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98
Q

When would you include an element of hope value in a valuation?

A
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99
Q

Can you include hope value in a secured lending / mortgage valuation?

A
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100
Q

How would you value a ransom strip?

A
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101
Q

How does market value differ to investment value/fair value?

A
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102
Q

What is a dual capitalisation rate and when would you use one?

A
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103
Q

Is the profits/DRC method used for specialised or specialist property?

A
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104
Q

What type of properties would you use the profits method for?

A
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105
Q

What type of properties would you use the DRC method for?

A
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106
Q

When would you use the profits method?

A
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107
Q

What is intangible goodwill?

A
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108
Q

What is turnover / gross profit / net profit?

A
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109
Q

What are the steps to providing a profits valuation?

A
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110
Q

What is Fair Maintainable Turnover?

A
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111
Q

What is a Reasonably Efficient Operator?

A
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112
Q

Does the assessment of the REO include personal goodwill and trading potential?

A
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113
Q

What is personal goodwill?

A
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114
Q

What is trading potential?

A
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115
Q

How do you calculate the tenant’s proportion of rent in a profits valuation?

A
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116
Q

What is EBITDA?

A
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117
Q

What is Fair Maintainable Operating Profit?

A
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118
Q

How do you calculate the divisible balance?

A
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119
Q

What accounts information would you want to review for a profits valuation?

A
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120
Q

Do RICS provide any guidance on RLVs or valuing development property?

A
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121
Q

What is an RLV?

A
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122
Q

What is a development appraisal?

A
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123
Q

How do they differ?

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124
Q

How else can you value development land?

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125
Q

What is the basic process of undertaking a RLV/development appraisal?

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126
Q

What does a development appraisal show?

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127
Q

What are the key things you need to consider when appraising / inspecting a development site?

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128
Q

What else should you consider?

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129
Q

Tell me about your due diligence when undertaking a development appraisal.

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130
Q

What sources of information do you use when undertaking a development appraisal?

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131
Q

How can you assess development potential?

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132
Q

What is GDV/NDV?

A
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133
Q

How do you calculate GDV?

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134
Q

What do development costs include?

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135
Q

When do you apply VAT when assessing development costs?

A
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136
Q

Where can you source build costs from?

A
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137
Q

What are typical finance costs?

A
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138
Q

What would you apply finance costs to and on what basis?

A
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139
Q

What is an S curve?

A
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140
Q

What factors influence the decision to use an S curve when applying finance costs?

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141
Q

Is there a quick rule of thumb which can be used when applying finance costs?

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142
Q

What do holding costs typically include?

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143
Q

How do you typically calculate developer’s profit?

A
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144
Q

What are some typical inputs (and %/£) in a RLV?

A
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145
Q

What other criteria might be assessed in terms of performance measurement for a RLV?

A
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146
Q

What are the advantages/disadvantages of a RLV?

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147
Q

What is included in the development programme?

A
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148
Q

What is CIL?

A
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149
Q

What is S106?

A
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150
Q

What are the differences between CIL and S106?

A
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151
Q

What is CIL charged on?

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152
Q

What is a Monte Carlo simulation?

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153
Q

What is a sensitivity analysis?

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154
Q

How do you carry out a sensitivity analysis?

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155
Q

What variables might you change and why?

A
156
Q

What factors affect sensitivity of a development appraisal?

A
157
Q

ell me about your understanding of incorporating affordable housing into development appraisals.

A
158
Q

Tell me about software you have used to provide a RLV.

A
159
Q

What RICS guidance relates to the valuation of development property?

A
160
Q

Give me a limitation of this software.

A
161
Q

What is viability?

A
162
Q

When would a cost approach be used?

A
163
Q

What type of buildings would a cost approach be used for?

A
164
Q

What is the supposition that a DRC is based upon?

A
165
Q

What are the 3 components of the cost approach?

A
166
Q

How do you assess the value of the land?

A
167
Q

How do you assess Gross Replacement Cost?

A
168
Q

What costs would you consider within GRC?

A
169
Q

What would you do if the building could be replaced with a modern equivalent?

A
170
Q

How would you deal with depreciation/obsolescence?

A
171
Q

What types of obsolescence are there?

A
172
Q

What are the three ways to deal with depreciation?

A
173
Q

Is the cost approach a market valuation?

A
174
Q

How might onerous lease terms, e.g. restrictive user, break clause, impact upon capital or rental value?

A
175
Q

What liabilities may be created through valuation?

A
176
Q

What is a liability cap and when would one be used?

A
177
Q

Explain why the RICS are carrying out an Independent Valuation Review. Who is leading this?

A
178
Q

Explain what you understand by the term, margin of error.

A
179
Q

What caselaw relates to margins of error?

A
180
Q

Explain your understanding of K/S Lincoln v CBRE Hotels (2010).

A
181
Q

Explain the precent set in Hyde and another v Nygate and another (2021) in relation to the valuation of high-profile development sites.

A
182
Q

How can a NIY of zero be achieved?

A
183
Q

n a scenario where rents are static and the capital value increases, would you expect yields to increase or decrease?

A
184
Q

What does heterogenous mean in terms of comparable evidence?

A
185
Q

What does the term ‘tone of value’ mean to you?

A
186
Q

What does the Court of Appeal decision Scullion v BOS (Trading as Colleys) tell you about a mortgage valuer’s liability?

A
187
Q

What are current mortgage rates (on a BTL mortgage)?

A
188
Q

How have they changed over the past few years?

A
189
Q

What are current LTV ratios?

A
190
Q

How could you value an HMO using the investment method?

A
191
Q

What were you specifically looking for in relation to the HMO use?

A
192
Q

How can you establish if a property is an HMO?

A
193
Q

What are the minimum rooms sizes for an HMO?

A
194
Q

What is statutory overcrowding?

A
195
Q

What legislation relates to this?

A
196
Q

Tell me about any other legislative requirements relating to HMOs you are aware of.

A
197
Q

What planning use do HMOs fall into

A
198
Q

Is there generally a premium attributable to HMO use over and above value as a single family house?

A
199
Q

Why did you use an investment method of valuation?

A
200
Q

What is an Article 4 direction?

A
201
Q

How might gross and net yields differ for HMOs?

A
202
Q

What RICS guidance are you aware of relating to HMO valuation?

A
203
Q

Was there any UK-specific guidance you also complied with?

A
204
Q

What category of buy-to-let valuation does a HMO fall within?

A
205
Q

What are some of the broader issues facing the HMO sector?

A
206
Q

Tell me about the regulation of the HMO sector.

A
207
Q

How can rental incentives impact on HMO valuation?

A
208
Q

What are guaranteed rents / cash backs in lieu of rental income and how can these impact upon value?

A
209
Q

ow can Market Rent impact upon the underwriting of a loan?

A
210
Q

How have you commended upon any limitations to accuracy of your HMO valuations?

A
211
Q

How can maintenance costs impact upon valuation and what does the Red Book say about these for HMOs?

A
212
Q

When is it reasonable to adopt the income approach when valuing HMOs under the Red Book?

A
213
Q

What additional considerations do you need to make for category 3 scenarios?

A
214
Q

What is a lifetime mortgage/home reversion/sale and rent back/home purchase plan?

A
215
Q

hat are the Red Book requirements in relation to these?

A
216
Q

What is shared ownership/shared equity scheme?

A
217
Q

How would you value a shared ownership / shared equity scheme property?

A
218
Q

What is a trustee mortgage valuation?

A
219
Q

What legislation relates to this?

A
220
Q

What is affordable/market rent?

A
221
Q

hat is your role in relation to advising a lender client?

A
222
Q

What liability do you have to the borrower when advising a lender client?

A
223
Q

Does this vary depending on whether the valuation is disclosed by the mortgagee?

A
224
Q

ell me about the requirements in relation to your terms of engagement / inspection.

A
225
Q

What is the basis of value?

A
226
Q

What factors may have a material impact on value?

A
227
Q

What assumptions / special assumptions have you made in relation to this?

A
228
Q

What is reinstatement cost and when would you be asked to provide it?

A
229
Q

How would you calculate it?

A
230
Q

How would you deal with suspected hidden defects?

A
231
Q

How would you treat incentives?

A
232
Q

Tell me about the application of the RICS Residential Mortgage Specification in relation to a specific purpose, e.g., re-inspection or valuation without internal inspection.

A
233
Q

Where would you find the RICS Residential Mortgage Specification?

A
234
Q

What are the 3 categories of BTL investments?

A
235
Q

Have you valued a historic building?

A
236
Q

What RICS guidance were you aware of

A
237
Q

Can you tell me a key principle of this guidance?

A
238
Q

How do you reflect the historic nature of a building in your valuation advice?

A
239
Q

hat type of RICS surveys include a valuation?

A
240
Q

What level of valuation advice does a Level 2 Home Survey include?

A
241
Q

What guidance does the RICS provide in relation to this?

A
242
Q

What is the basis of valuation in this type of report?

A
243
Q

What assumptions are made in this type of report?

A
244
Q

What else do you need to include in relation to your valuation?

A
245
Q

Tell me about the RICS guidance relating to the valuation of individual new-build homes.

A
246
Q

What is the new build premium?

A
247
Q

How would a valuation of new build home differ to a second hand home?

A
248
Q

Tell me about how you have applied this guidance to a new build valuation.

A
249
Q

What is a key principle of this document?

A
250
Q

Tell me about your use and understanding of AVMs.

A
251
Q

Does the RICS provide any guidance on this?

A
252
Q

What is an AVM?

A
253
Q

What is an advantage and a disadvantage of using an AVM?

A
254
Q

ive me an example of an AVM you have used.

A
255
Q

ve you valued a residential property purpose built for renting?

A
256
Q

What RICS guidance are you aware of in relation to this?

A
257
Q

What are the key principles?

A
258
Q

What are the three key pieces of legislation which have impacted the UK residential market (and purpose built valuation)?

A
259
Q

What valuation considerations would you take into account when valuing a purpose built for renting property?

A
260
Q

What is the difference between a gross and net yield in this respect?

A
261
Q

What factors influence yields?

A
262
Q

What residential operating expenses would you need to take into account?

A
263
Q

What is Net Operating Income?

A
264
Q

How would you calculate it?

A
265
Q

Have you valued a BTL / HMO property?

A
266
Q

What RICS guidance are you aware of in relation to this?

A
267
Q

When was it last updated and what changes were made?

A
268
Q

What are the key principles?

A
269
Q

How might the release of a large number of new build properties impact the local market?

A
270
Q

Can ‘hope value’ be considered in valuations falling under UK Appendix 10?

A
271
Q

If Market Value is assessed prior to or during construction, should the valuation reflect the evidence and market at the date of valuation or an assumed completion date?

A
272
Q

Is there a set discount for a new build premium?

A
273
Q

What do RICS say about sales incentives?

A
274
Q

Should you reflect sales incentives in your valuation?

A
275
Q

Where would you find details of incentives?

A
276
Q

When and why would you review a UK Finance Disclosure of Incentives Form?

A
277
Q

hat are some of the ways that a home can be offered at a reduced price?

A
278
Q

or houses with restrictions on occupancy, e.g., by income or job type, what is a typical discount used in the market?

A
279
Q

What is a new build warranty?

A
280
Q

How long would a typical warranty last for?

A
281
Q

If a property was built in the last 10 years and does not have a professional certificate or guarantee/warranty, would this affect value?

A
282
Q

What are the two special assumptions relating to Projected Market Value (PMV) and when would you adopt PMV?

A
283
Q

What are some of the types of home finance product?

A
284
Q

Who further regulates valuations for home finance products?

A
285
Q

1.

What are the key differences between a lifetime mortgage and a conventional mortgage?

A
286
Q

Would the amount of mortgage debt to be redeemed at the end of a lifetime mortgage term be less or more than that of a conventional mortgage?

A
287
Q

What is home reversion?

A
288
Q

What is sale and rent back?

A
289
Q

What is a home purchase plan?

A
290
Q

What are the bases of value for a registered social landlord’s housing stock for secured lending purposes?

A
291
Q

What is a statutory valuation?

A
292
Q

Who is responsible for Council Tax valuations?

A
293
Q

What Council Tax bands exist in England?

A
294
Q

What is the basis of value for Council Tax valuations?

A
295
Q

What assumptions are made in a Council Tax valuation?

A
296
Q

What is the Right to Buy?

A
297
Q

What legislation relates to Right to Buy?

A
298
Q

When might a lender instruct a drive-by valuation?

A
299
Q

What is the impact of the Rentcharges Act 1977?

A
300
Q

Until 22 August 2037, how should rentcharges be dealt with?

A
301
Q

Within what general distance of a dwelling might Japanese Knotweed have a material impact on value?

A
302
Q

How could a mortgagee seeking remedy from a defaulting borrower serve a valid notice?

A
303
Q

Explain what you understand in relation to the issue of ‘down valuation’.

A
304
Q

What does the legal case of Ryb v Conways (2019) say about the valuation of property affected by Japanese Knotweed?

A
305
Q

What valuation approach does the RICS recommend is taken when valuing property is affected by Japanese Knotweed?

A
306
Q

What guidance sets this approach out?

A
307
Q

What is the House Price Index and how would you use it when valuing a residential property?

A
308
Q

What are some of the key drivers of demand for housing?

A
309
Q

How would you assess and report on condition in an investment valuation?

A
310
Q

How could a S106 agreement affect the valuation of a new build home?

A
311
Q

How would you analyse a part-exchange comparable?

A
312
Q

What is a neighbourhood in terms of residential valuation and why do you need to understand this concept?

A
313
Q

When analysing comparable evidence, how would you apply the concept of adjusted value?

A
314
Q

What residential design features do you consider add value in your locality?

A
315
Q

Tell me why terms of engagement are important.

A
316
Q

What checks do you undertake before accepting a valuation instruction?

A
317
Q

How do you ensure you know who your client is when undertaking a valuation instruction?

A
318
Q

Are there any additional requirements when undertaking a valuation in which the public has an interest or third parties may rely?

A
319
Q

Are there any additional requirements for loan security valuations?

A
320
Q

Talk me through an example of when you have agreed terms of engagement with a client.

A
321
Q

What are the key elements included within terms of engagement?

A
322
Q

What does the Red Book say about terms of engagement?

A
323
Q

What does the Red Book say about inspections?

A
324
Q

What does the Red Book say about reporting requirements?

A
325
Q

What are the differences between a desktop and a full valuation report?

A
326
Q

Tell me about how you ensure that information relied upon in your valuation is appropriate and reliable?

A
327
Q

Tell me about your valuation at Cove?

A
328
Q

How did you select and analyse the comparables?

A
329
Q

At Hayfield Crescent, how did you source comparables for the non- traditional property? Was this difficult if there is a marketability issue?

A
330
Q

At South Anderson Drive, how did you find comparables relating to the proposed extended house? Talk me through your selection, analysis and conclusion?

A
331
Q

ave you used any other methods of valuation?

A
332
Q

At Mayfield Gardens, how did you advise the lender client with relation to the proposed works? How was this evidenced?

A
333
Q

AT the development opportunity in Newmachar, talk me thought how the client took on board the provided advice?

A
334
Q

Did the two methods of valuation support?

A
335
Q

At the new build home in Bucksburn, discuss why the property was valued as second hand and how this impacted your reasoned advice?

A
336
Q

How would you usually carry out a new build valuation?

A
337
Q

How would you analyse the comparables and advise the client of MV?

A
338
Q

Can you talk me through your level 2 examples?

Summary of Experience

A
  • Home Report in Cove - Captured various details during inspection such as floor area, accommodation, level of finish and condition. Used online database to find comparables for property, conducted analysis and reached a value.
  • Home Report in Hayfield Crescent - property was a ‘Tee-Beam’. Property was formally defective and still faces heavily restricted lending. Purchaser was most likely going to have to be a cash purchaser and this would need to be reflected in value. When searching for comparables I ensured I selected properties of similar construction and branched out to other PRC properties such as Whitson Fairhurts.
  • Valuation on South Anderson Drive - client was looking to extend and renovate property and wanted to know value on completion of works. Client provided me with various pieces of data such as plans and specifications. When searching for comparables I looked for ones that reflected the properties increased floor area and level of finish.
339
Q

What are your level 3 examples?

Summary of Experience

A
  • MVR in Mayfield Gardens - Valuation was for short term finance and applicant was planning to carry out works to property. Lender provided me with scope of works and asked for current market value and market value on completion of works. Also requested we comment on works provided. Advised the lender that the works did allow for a slight uplift in value, they didnt allow for a massive uplift in value.
  • Development Valuation in Newmachar - Valuation of a development oppurtunity as client was looking to sell it. Site had planning permission to convert agricultural shed into two semi detached dwellings. Conducted a residual valuation and then used a comparable valuation at end to cross check residual value.
  • MVR in Bucksburn - Valuation of new build property. Lender requested that we value property as second hand which differs from other lenders that request value as new. As purchase price was for property as new, the value as second hand was lower. I advised the lender that the value reflected the property if it was sold on the second hand market and was therefore lower than the purchase price. Advised the lender than if the value was to be as new-build, it would likely be higher than second hand.
340
Q

When would each method of valuation be employed?

Valuation - Level 1

A
  • Comprable method - Used for straight forward properties were there is comparable evidence
  • Residual method - used for development properties
  • Profits method - used for properties where the major value component of the property is driven by the profitability of the business that occupies the building
  • Investment method - used from investment properties that are held for their income stream
  • DRC - used where there is no active market for the asset being valued due to the specialist nature of the property
341
Q

Can you tell me the basics of each method of valuation

Valuation - Level 1

A
  • Comprable method - involves gathering sales of similar properties that have similar characteristics to the one being valued. You then carry out an analysis of the comparables and make adjustments to reflect differences.
  • Residual method - Involves establishing the GDV of a development. Development costs are then deducted to establish the land value.
  • Profits method - Involves establishing fair maintainable operating profit (FMOP) capable of being generated by a reasonably efficient operator. This is based upon assessment and analysis of fair maintainable turnover. A market based profit multiplier is then used to convert FMT into a capital value.
  • Investment method - The investment method involves assessing market rent and a market based yield. The rent is then capitalised using the yield to establish the capital value.
  • There are two traditional methods used that vary depending on if the property is under or over rented. For over rented properties, a hardcore and topslice is applied. For under rented a term and reversion is used.
  • DRC - Involves establishing the cost of land, build costs to replace the asset with a modern equivalent and then making an allowance for deterioation and obscelence
342
Q

What are some reasons for a valuation to be required?

Valuation - Level 1

A
  • Pre-sale
  • Marketed sale
  • Loan security
  • Taxation
  • Seperation
  • Financial planning
343
Q

What is the most recent version of the Red Book and its UK counterpart?

Valuation - Level 1

A
  • Global - 31 January 2022
  • UK - 14 January 2019
344
Q

What parts of the Red Book are mandatory?

Valuation - Level 1

A
  • PS 1-2
  • VPS 1 - 5
345
Q

Can you tell me the parts of the Red Book that apply to your area of practise?

Valuation - Level 1

A

Global
* VPGA 2 - Valuation of interests for secured lending
* VPGA 8 - Valuation of real property interests
* VPGA 9 - Identification of portfolios, collections and groups of properties
* VPGA 10 - Matters that may give rise to material valuation uncertainty
UK
* UK VPGA 10 - commercial secured lending
* UK VPGA 11 - valuation for residential mortgage purposes
* UK VPGA 12 - valuation of residential property for miscallaneous purposes
* UK VPGA 13 - residential secured lending guifance for other related purposes including RICS HomeBuyer Services
* UK VPGA 15 - valuations for CGT, IHT, SDLT & ATED

346
Q

What is the most recent version of the Comparable Evidence guidance?

Valuation - Level 1

A
347
Q

What are some key principles of the Comparable Evidence guidance?

Valuation - Level 1

A
348
Q

What are the bases of value listed in the Red Book?

Valuation - Level 1

A
  • Market Value
  • Market Rent
  • Investment value (worth)
  • Fair value
349
Q

What is Market Rent?

Valuation - Level 1

A

Market Rent is the estimated amount for which an interest in real property should be leased on the valuation date between a willing lessor and willing lesee on appropriate lease terms in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeable, prudently and without compulsion

350
Q

What is Market Value?

Valuation - Level 1

A

Market Value is the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion

351
Q

Why are councils externally insulating non-trads?

Inspection - Level 2

A
  • Poor thermal efficiency
352
Q

How would you handle clients money?

Ethics, Rules of Conduct & Professionalism - Level 1

A
353
Q

Is there a maximum amount of cash you can accept?

Ethics, Rules of Conduct & Professionalism - Level 1

A
354
Q

Tell me about your valuation at Cove?

Valuation - Level 2

A
355
Q

How did you select and analyse the comparables?

Valuation - Level 2

A
356
Q

At Hayfield Crescent, how did you source comparables for the non- traditional property? Was this difficult if there is a marketability issue?

Valuation - Level 2

A
357
Q

At South Anderson Drive, how did you find comparables relating to the proposed extended house? Talk me through your selection, analysis and conclusion?

Valuation - Level 2

A
358
Q

Whats a ‘Tee-Beam’?

Valuation - Level 2

A
359
Q

How would you value the ‘Tee-Beam’ if there were no comparables?

Valuation - Level 2

A
360
Q

What are the issues associated with ‘Tee-Beams’?

Valuation - Level 2

A
361
Q

Can you give me an example of a Special Assumption?

Valuation - Level 2

A
362
Q

At Mayfield Gardens, how did you advise the lender client with relation to the proposed works? How was this evidenced?

Valuation - Level 3

A
363
Q

At the development opportunity in Newmachar, talk me thought how the client took on board the provided advice?

Valuation - Level 3

A
364
Q

Did the two methods of valuation support?

Valuation - Level 3

A
365
Q

At the new build home in Bucksburn, discuss why the property was valued as second hand and how this impacted your reasoned advice?

Valuation - Level 3

A
366
Q

How would you usually carry out a new build valuation?

Valuation - Level 3

A
367
Q

For the development in Newmachar, how did you get your build costs, developers profit etc?

Valuation - Level 3

A
368
Q

What RICS guidance relates to the valuation of new builds?

Valuation - Level 3

A
369
Q

What are some key principles from the new build guidance?

Valuation - Level 3

A
370
Q

What would you do if the Special Assumption a client asks you to provide isn’t realistic?

A
371
Q

How would you determine construction costs?

A
372
Q

What are the deficiencies of residual valuations?

A
373
Q

What are the sources of funding? And cost?

A
374
Q

How much developers profit? What are the options for estimating this?

A
375
Q

What is difference between development appraisal and residual valuation?

A
376
Q

You state a value after repairs at £90,000 but the quotations for repairs total £15,000 which is £5,000 more than expected. Would you adjust value?

A
377
Q

If you were asked to value a repossessed property what might you be asked for? (Projected Market Value)

A
378
Q

What is hope value? How would you quantify it? When would you report it or not report it?

A
379
Q

How would you report the value a property with development potential/hope value or planning permission in a Home Report?

A
380
Q

How would you value a property with cladding/balcony/spray foam insulation/Japanese knotweed?

A
381
Q

**

A
382
Q
A
383
Q
A
384
Q
A
385
Q
A
386
Q

How do you adjust a valuation for new build incentives?

A
387
Q

Lender requires a transcript and the comparisons are not suitable, what do you do?

A

RICS APC - GD (20 decks)

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