Valuation Flashcards
1
Q
Tell me what the 5 methods of valuation are.
A
- Comparative Method
- Investment Method
- Profits Method
- Residual Method
- Depreciated Replacement Cost (Contractor’s method)
2
Q
Tell me about how you would value a building using the profits/ contractors /investment /comparable/residual method of valuation.
A
- Comparative:
* Search & select comparable, confirm details.
* Analyze headline rent to get a net effective.
* Assemble comparables in a schedules.
* Adjust comparables using the hierarchy of evidence:
Category A – direct comparables of contemporary (completed identical, near identical and similar, similar where offers have been made and asking prices)
Category B – general market data (info from public sources, historic evidence & demand /supply data)
Category C – other sources (evidence from other real estate types & locations & other background data e.g. interest rates)
* Analyze comparables to form opinion of value.
* Report value & prepare file note.
3
Q
What is a years purchase multiplier?
A
1 ÷ yield to give the multiplier.
4
Q
Give me an example of a good covenant and how this might impact a valuation.
A
Strong financial data to prove ability to pay rent. Improves yield.
5
Q
What is PI Insurance (PII)?
A
Professional Indemnity Insurance. To protect clients, surveyors and third parties against negligence claims when there is a duty of care breached & a claim for damages arises.
6
Q
Why do surveyors need PII?
A
To protect clients, surveyors & third parties.
7
Q
How did the decision in Hart v Large affect PII?
A
Professional Consultants Certificates (PCC) should be obtained from the vendors if a property has been recently refurbished. This provides the client protection against concealed defects.
* Normally damages are applied as in Watts v Morrow. Providing damages to be assessed on the difference between the surveyor’s valuation and the value of the property in its actual condition.
* Hart V Large argues that damages should be assessed on a basis of the difference between his valuation and the value of the property with the defects that could have been identified but were missed.
* This is based on the argument damages should not reflect the cost of repair, unless MR Large (surveyor) provided a warranty as to the condition of the property (which he did not).
RICS Home Survey States – a RICS member must recommend further investigations ‘if they have a suspicion that a visible defect may affect other concealed building elements’.
8
Q
What level of PII cover does your firm have?
A
£5,000,000
9
Q
How would you distinguish limitations on liability in your valuations?
A
Ensure the terms of engagement clearly sets out what services the surveyor will and will not provide.
10
Q
Where in your valuation report do you state any limitations on liability?
A
In the terms of engagement.
11
Q
What is the SAAMCO cap?
A
If negligent, the valuer is liable for the amount by which the property was overvalued, but not the full loss of the lender on a failed transaction which may arise from a drop in the property market.
12
Q
What would you do if you received a notice of a PII claim from a client or their solicitor?
A
Give early notification to the firm’s insurers.
13
Q
What is run off cover?
A
Insurance for claims made against a law firm after it has stopped doing business.
14
Q
What is the Red Book?
A
Mandatory rules, best guide practice & related commentary for all members undertaking valuation of an asset.
15
Q
Why does the Red Book exist?
A
To promote & support high standards in valuation delivery worldwide.
16
Q
Tell me about a factor which may impact value
A
Rent, yield, location
17
Q
Why is independence and objectivity important when valuing?
A
To ensure valuations will be carried out in accordance with the IVS and promote & maintain a high level of public trust.
18
Q
Is there a separate UK Red Book?
A
No, there is the UK national supplement.
19
Q
What is the UK valuation guidance called?
A
VPS (valuation technical and performance standards)
20
Q
When was the Red Book last updated?
A
31st January 2022
21
Q
Does this differ from when IVS were last updated?
What changes were made?
A
No, same date. IVS (International Valuation Standards).
Addition of a new chapter ‘IVS 230 Inventory’. Updated glossary. The introduction has been updated to incorporate the core principles of valuation standard setting & the core principles of valuation.
22
Q
Which sections of the Red Book are mandatory and which are advisory?
A
Professional Standards PS 1-2 are mandatory.
VPS 1-5 are mandatory unless stated otherwise.
Valuation Practice Guidance Applications – VPGA 1-10 are advisory.
23
Q
What does PS1-2/VPS1-5/VPGAs relate to?
A
Professional Statements:
* PS 1: Compliance with standards where a written valuation is provided.
* PS2: Ethics, competency, objectivity & disclosures.
Valuation Technical & Performance Standards
* VPS 1: Terms of engagement
* VPS 2: Inspections, investigations and records
* VPS 3: Valuation reports
* VPS 4: Bases of value, assumptions & special assumptions
* VPS 5: Valuation approaches & methods
Valuation Practice Guidance Applications – VPGA 1-10: Provide guidance on best practice. They typically relate to valuations for specific purposes or of specific asset types e.g. Secure lending.
24
Q
What type of advice does the Red Book cover?
A
Professional standards, technical standards, performance or delivery.
25
If you provide preliminary advice / draft valuation report, what should you state in writing to your client?
* The opinion is provisional & subject to completion of the final report.
* The advice is provided for the client’s internal purposes only and any draft is not to be published or disclosed.
* If any matters of fundamental importance are not reflected, their omission must be declared.
26
Tell me what the definition of MR/MV/investment value/fair value?
* Market Rent – amount for which an interest in real property should be leased on the valuation date between a willing lessor & willing lessee on appropriate lease terms in an arm’s length transaction, after proper marketing & where each parties acted knowledgeably, prudently & without compulsion.
* Market Value – The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer & a willing seller in an arm’s length transaction, after proper marketing & where each parties acted knowledgeably, prudently & without compulsion.
* Investment Value – The Value of an asset to the owner or a prospective owner for individual investment or operational objectives.
* Fair Value – The price that would be received to sell an asset, or paid to transfer a liability, in an ordinary transaction between market participants at the measurement date.
27
What type of valuations might be relied upon by a third party?
A regulated purpose valuation
28
What is the difference between an assumption and a special assumption?
An assumption is a supposition that is taken to be true. It involves facts, conditions or situations affecting the subject of, or approach to a valuation. They do not need to be verified by the valuer as part of the process.
A special assumption either assumes facts differ from the actual facts existing at the valuation date or that they would not be made by a typical market participant in a transaction on the valuation date.
29
If you have previously valued an asset, do you need to make any additional disclosures and what might they be?
Yes; The relationship with the client & previous involvement, rotational policy, time as signatory, proportion of fees.
30
If your firm is too small to have a rotation policy or valuation panel, what else can you do to ensure objectivity?
An arrangement for a valuation to be periodically reviewed at intervals not greater than seven years by another member.
31
When might a conflict of interest exist in relation to a valuation instruction?
Acting for 2 or more parties competing for an opportunity.
Valuing a property previously valued for another client.
Valuing both parties interest in a leasehold transaction.
32
What must be included in your terms of engagement / valuation report?
Where is this covered in the Red Book?
Identification & status of the valuer clients and any other intended user, identification of the asset, valuation currency, purpose of valuation, Basis of value adopted, valuation date, nature & extent of valuer’s work, nature & sources of information relied upon, all assumptions, format of report, restrictions of use, confirmation the valuation will be undertaken in accordanc1e with the IVS, basis on which the fee will be calculated. Firms’ complaints handling procedure, statement that compliance of the standards is subject to monitoring, statement setting out any limitations.
Under VPS 1 - ‘Terms of engagement’
33
What is a restricted valuation service and can you provide one?
e.g. short timescale. Yes, but you must make it clear when confirming acceptance in the terms of engagement that the nature of the restrictions and any resulting assumptions, and the impact on the accuracy of the valuation will be referred to in the report.
34
How do you deal with limitations on inspection or analysis?
Include them in the terms of engagement and in report
35
Can you revalue a property without inspecting?
Not unless the valuer is satisfied there have been no material changes to the physical attributes of the property, or the nature of its location since the last assignment.
36
What RICS guidance relates to the use of comparable evidence?
‘Comparable Evidence in Real Estate Valuation’ 2019
37
What is an internal valuer?
A valuer employed by the enterprise that owns the asset, or the accounting firm responsible for preparing the enterprise’s financial records.
38
Can an external valuer provide an internal purposes valuation?
Yes but it must be clear in the terms of engagement
39
What happens if market conditions change between the valuation date and report date?
Attention should be drawn to this. The valuer should draw the client’s attention to the fact values change and may not be valid at an earlier or later date.
40
Is special value from a special purchaser reflected in MV?
No – Special value = an amount that reflects particular attributes of an asset that are only of value to a special purchaser.
41
Where does the definition of fair value come from?
Does this differ from MV?
International Financial Reporting Standards – IFRS
Ordinarily there is no difference.
42
When is fair value used?
To estimate the price at which an orderly transaction to sell the asset would take place between market participants at the measurement date under current market conditions.
43
What are the 3 approaches under VPS5?
The market approach – based on comparing.
The income approach – based on capitalization.
The cost approach – based on replacement cost.
44
What is the Valuer Registration Scheme?
The RICS quality assurance mechanism monitors all registered RICS members who carry out valuations within the scope of Red Book in order to ensure consistency.
Those who register can use the @RICS registered valuer' on their business & marketing materials
45
Are there any instances where certain sections of the Red Book may not apply?
Yes
5 exceptions under PS 1:
1 - Advice is for negotiation
2 - Valutaion is for inclusion in a statutory return to a tax authority
3 - Valuation is provided to a client purely for internal purposes
4 - Valuation is part of agency & brokerage work in anticipation of recieving instructions to dispose or acquire , except when a purchase report is required.
5 - Valuation advice is in anticipation of giving evidence as an expert witness.
46
What are these and which sections don’t apply?
Various sections of VPS 1 – Terms of engagement
* If no opinion of value is to be provided - Basis of value adopted
* If the reviewer is not required to comment on the valuation date – Valuation date
* If it has specifically been agreed & recorded that a report shall be provided without reasons -Valuation approach & reasoning.
* If the valuer is not required to provide their own valuation opinion – Amount of the valuation.
47
What is the basis of value under UK GAAP FRS 102?
Fair value
48
What is a SORP?
Statement of recommended practice – recommendations & requirements setting out how to prepare ‘true & fair’ accounts.
49
When would you use EUV?
Existing Use Value – If the current use is the highest & best use.
50
What is the definition of EUV?
The value of the land in its existing use.
51
What additional criteria apply to secured lending valuations?
Any valuation for secured lending purposes arrived at by making a special assumption must be accompanied by a comment on any material difference between the reported value with & without that special assumption.
52
What information should you specifically request for a secured lending valuation?
The name of the intended lender.
Whether there has been a recent transaction or an agreed price.
Details of the terms of the lending facilities being contemplated by the lender.
53
What is a regulated purpose valuation?
A set of valuation purposes defined by RICS upon which third parties rely.
54
What is a yield?
A measurement of investment return, expressed as a percentage of capital invested. Income is divided by price.
55
What is a Net Initial Yield?
The current annualized rent divided by capital value net of any purchasers’ costs.
56
What is a reversionary yield?
Market Rent is divided by the current price on an investment let at a rent below the MR.
57
What is an equated yield?
A yield which takes into account growth in future income
58
What is an equivalent yield?
Average weighted yield when a reversionary property is valued using an initial and reversionary yield.
59
How would a yield reported from auction differ from a Net Initial Yield?
Auction costs are c.2% and so the costs deducted will affect the NIY
60
What purchaser’s costs do you deduct from a valuation?
Stamp duty land tax (SDLT) & agent and legal fees.
61
When do you deduct purchaser’s costs from a valuation?
At the end of an investment valuation to calculate the Market Value & to allow comparison with other asset types.
62
How would you value a property in uncertain market conditions - does the Red Book give any guidance?
It may become necessary to recalibrate or make adjustments to the valuation inputs.
Draw attention to this with the client.
63
How could you value a long leasehold interest?
Deduct the ground rent to calculate the net rent received. Capitalize this at a yield for the length of the lease to create market value.
64
How does a term and reversion differ to a DCF?
T&R values reversionary investments. Term is capitalized until the next rent review. Reversion to MR Is valued in perpetuity at a reversionary yield.
DCF – A growth explicit method. Projects estimated cash flows over hold period and an exit yield. The CF is then discounted back.
65
What is the difference between a growth explicit and a growth implicit yield?
Conventional method assumes growth implicit valuation. DCF is growth explicit as it needs to be explicitly identified.
66
How would you value an under/over rented investment property?
Under rented – Term & reversion
Over rented - DCF
67
When would you use a dual rate investment calculation?
A leasehold interest
68
Where can you find yield evidence from?
Comparables
69
What is the hierarchy of evidence?
Category A – direct comparables of contemporary (completed identical, near identical and similar, similar where offers have been made and asking prices)
Category B – general market data (info from public sources, historic evidence & demand /supply data)
Category C – other sources (evidence from other real estate types & locations & other background data e.g. interest rates)
70
What would you do if comparable evidence was limited?
Use Category B & C evidence.
71
What is NPV?
Net Present Value (NPV) – The sum of the discounted cash flows of the project.
72
What is IRR?
Internal Rate of Return – The rate at which all future cashflows must be discounted to produce an NPC of zero. It assesses total return from an investment making assumptions.
73
What is a term and reversion?
T&R values reversionary investments. Term is capitalized until the next rent review. Reversion to MR Is valued in perpetuity at a reversionary yield.
74
What is a hardcore and topslice?
Same principal as T&R used for overrented properties
75
What is a Discounted Cash Flow (DCF)?
A growth explicit method. Projects estimated cash flows over hold period and an exit yield. The CF is then discounted back at a discount rate that perceives the level of risk.
76
What is a short-cut DCF?
When the passing rent is constant for the duration of the rent period, it is discounted at an appropriate rate of return.
77
When would you use a DCF?
Where the projected CF’s are explicitly estimated over a finite period e.g. short leasehold interests, over rented properties.
78
What are the advantages of a DCF?
More flexibility & customization with different scenarios & sensitivity.
79
What are the disadvantages of a DCF?
Require a large number of assumptions, prone to errors, very sensitive.
80
What is a YP/PV/YP in perpetuity?
Years’ Purchase (In perpetuity) = 1/i. The right to receive £1 in perpetuity at a specified compound rate.
81
What is marriage value?
A merger of interest – physical or tenurial. Undertake a before & after valuation to determine the marriage value.
82
How does market value differ to investment value/fair value?
In contrast to market value Investment value does not envisage a hypothetical transaction but is a measure of the value of the benefits of ownership to the current owner, recognizing that these may differ from those of a typical market participant.
83
When would you include an element of hope value in a valuation?
When you expect a future event e.g. planning permission.
84
How would you value a ransom strip?
15% to 50% of the development value unlocked by the inclusion of the ransom strip within the proposed development.
85
What is a dual capitalisation rate and when would you use one?
The assumption that the leasehold purchaser will set aside a sum of profit rent, which is then invested in the annual sinking fund (ASF) to recoup the leasehold interest purchase price at the end of the term.
86
Is the profits/DRC method used for specialised or specialist property?
Depreciated replacement cost (DRC) – Used where direct market evidence is limited or unavailable for specialized properties. E.g. sewage works, socks, schools.
Profits method – Used for valuation of trade related property e.g. pubs, hotel
87
What type of properties would you use the profits method for?
Where the value depends on profitability & trading potential. E.g. pubs, petrol stations, pubs, hotels.
88
What type of properties would you use the DRC method for?
Owner occupied property, sewage works, lighthouses, oil refineries, schools.
89
When would you use the profits method?
When there have been accurate & audited accounts for 3 years.
90
What is intangible goodwill?
Any future economic benefit arising from a business, an interest in a business or the use of a group of assets that is not separable.
91
What is turnover / gross profit / net profit?
Turnover – Income or gross revenue of a business. The complete sum of sales made over a given period.
Gross Profit – the revenue minus the cost of goods sold.
Net Profit – Revenue minus all expenses.
92
What are the steps to providing a profits valuation?
Annual turnover less costs = Gross profit less reasonable working expenses = unadjusted net profit less operator’s renumeration = Adjusted net profit (FMOP – Fair Maintainable Operating Profit).
This EBITDA can then be capitalized.
93
What is Fair Maintainable Turnover?
The level of trade that a REA (Reasonably Efficient Operator) would expect to achieve on the assumption that the property is properly equipped, repaired, maintained & decorated.
94
What is a Reasonably Efficient Operator?
Where the valuer assumes that the market participants are competent operators, acting in an efficient manner.
95
Does the assessment of the REO include personal goodwill and trading potential?
It involves estimating the trading potential rather than adopting the actual level of trade under the existing ownership, and it excludes personal goodwill.
96
What is personal goodwill?
The value of profit generated over & above market expectations that would be extinguished upon sale of the trade related property, together with financial factors related specifically to the current operator of the business.
97
What is trading potential?
The future profit of the property than an REO would expect to be able to realize from occupation of the property.
98
What is EBITDA?
Earnings before interest, taxation, depreciation & amortization
99
What is Fair Maintainable Operating Profit?
Turnover less costs less reasonable working expenses less operators renumeration.
100
How do you calculate the divisible balance?
When assessing the market rent for a new letting, the rent payable on a review or the reasonableness of the actual rent passing an allowance should be made by FMOP to reflect a return on the tenant’s capital invested in the operational entity.
101
What accounts information would you want to review for a profits valuation?
Accurate & audited accounts if possible for 3 years.
102
Do RICS provide any guidance on RLVs or valuing development property?
RICS Guidance Note ‘Valuation of Development Property’ 1st Edition, 2019 (effective February 2020)
103
What is an RLV?
Residual Land Value – An income & cost approach. Based on completed “gross development value” & the deduction of development costs & developers return to arrive at the residual value.
104
What is a development appraisal? How do they differ?
How else can you value development land?
A series of calculations to establish the value/viability/profitability/suitability of a proposed development based upon the clients’ inputs. It can assume or calculate a site value.
A RLV is a form of a development appraisal. The purpose is to find the market value of the site.
The market approach – where the type of property is so homogenous & frequently exchanged that there is sufficient data to use a direct comparison.
105
What is the basic process of undertaking a RLV/development appraisal?
Development appraisal = GDV – input costs – fixed land costs = profit metric
Residual = GDV – input costs – profit = land costs
106
What does a development appraisal show?
The viability of the proposed development.
107
What are the key things you need to consider when appraising / inspecting a development site?
What else should you consider?
Get your inputs; site preparation, planning & building costs, contingency, market costs & fees, finance, developers profit.
Natural hazards (flooding), non-natural hazards (ground contamination), any physical restrictions.
108
Tell me about your due diligence when undertaking a development appraisal.
Rights of the owners, history of the asset, state of the subject industry, general economic outlook.
109
What sources of information do you use when undertaking a development appraisal?
Leases on the property, broker quotations, consensus pricing services, market data pricing.
110
What is GDV/NDV?
Gross Development Value – Projected value of project once completed.
Net Development Value – The estimated amount a development makes once all costs (land, sales, build, planning etc.) have been taken into account.
111
How do you calculate GDV?
Projected income / yield
112
What do development costs include?
Demolition, planning, build costs psf, professional fees, contingency
113
When do you apply VAT when assessing development costs?
To all professional fees
114
Where can you source build costs from?
The BCIS – Building Costs Information Service Construction Data.
115
What are typical finance costs?
LIBOR (London Inter Bank Offer Rate) plus a risk premium.
BoE base rate plus premium.
Rate at which the client can borrow the money.
116
What would you apply finance costs to and on what basis?
1. Site purchase.
2. Total construction & associated costs.
3. Holding costs to cover voids until disposal.
117
What is an S curve?
Where the bulk of the costs are in the middle.
118
What do holding costs typically include?
Void periods – Service charge & business rates
119
How do you typically calculate developer’s profit?
A % of GDV or total construction costs – 15-20%.
120
What are some typical inputs (and %/£) in a RLV?
What other criteria might be assessed in terms of performance measurement for a RLV?
Contingency - 5%
Fees – 10%
Letting Agent Fee – 15%
Letting legal Fee – 5%
Sales Fee – 1%
Sales Legal Costs – 0.80%
Profit Erosion
121
What are the advantages/disadvantages of a RLV?
Advantages; Can assess the feasibility prior to investing in the land by comparing the asking price and residual value, flexible to adaptation & scenarios.
Disadvantages: Importance of accurate inputs, timing is not considered, sensitive to adjustments.
122
What is included in the development programme?
Budget, planning requirements, known risks, project vision.
123
What is CIL?
Community Infrastructure Levy (CIL) – Used by LPAs for off-site payments from developers to raise funds for infrastructure necessary to support development in the area.
124
What is S106?
Planning obligations which are site specific. Can have to pay a financial contribution to the LPA. They are negotiated on a one-to-one basis. E.g. new school, open space etc.
125
What are the differences between CIL and S106?
S106 addresses site specific mitigation required to make a new development. CIL addresses the broader impacts of development.
S.106 – used for affordable housing.
126
What is CIL charged on?
A formula that relates to the size or the change to the size of a development based on the net floor space.
127
What is a Monte Carlo simulation?
A model used to predict the probability of a variety of outcomes when the potential for random variables is present.
128
What is a sensitivity analysis?
They show a range of values as a result of input changes.
129
How do you carry out a sensitivity analysis?
What variables might you change and why?
1. Simple sensitivity analysis of key variables (yield, GDV, finance).
2. Scenario analysis – changing scenarios e.g. phasing or modified design.
3. Monte Carlo – Using probability theory, using software.
Yield, rents, build costs, development profit.
130
What factors affect sensitivity of a development appraisal?
Yield, rents, build costs, development profit, financing.
131
Tell me about your understanding of incorporating affordable housing into development appraisals.
It is a % of the housing. Rented at lower value & capitalized at a lower value.
This is covered in s.106.
132
Tell me about software you have used to provide a RLV.
Argus
133
What RICS guidance relates to the valuation of development property?
Valuation of development property, 2019
134
What is viability?
Whether a project can be carried out, if it makes financial sense and meets necessary criteria.
135
When would a cost approach be used?
Contractor’s method – For plant & equipment where direct market evidence is limited or unavailable for specialized properties.
136
What type of buildings would a cost approach be used for?
Sewage works, lighthouses, oil refineries.
137
What is the supposition that a DRC is based upon?
Where direct market evidence is limited or unavailable for specialized properties.
138
What are the 3 components of the cost approach?
a) Replacement cost method
b) Reproduction method
c) Summation method
139
What would you do if the building could be replaced with a modern equivalent?
The valuer would use the Reproduction Cost Method and adjust the cost of the perceived modern equivalent and arrive at a depreciated replacement cost.
140
What is a liability cap and when would one be used?
Used when something may be outside your scope of work.
141
How would you deal with depreciation/obsolescence?
What types of obsolescence are there?
Deduct depreciation to arrive at the value in a cost method.
Physical, functional, external or economic.
142
Explain why the RICS are carrying out an Independent Valuation Review.
Who is leading this?
To future proof practices in a rapidly changing market.
Peter Pereira Gray
143
Explain what you understand by the term, margin of error.
What caselaw relates to margins of error?
Lincoln & others v CB Richard Ellis 2010
+- 5% for standard resi
+-10% for commercial
+-15% if there are exceptional features
Singer & Friedlander Ltd v J.D Wood (1977) – where it was held the usual margin of error can be varied, and will be narrower for a relatively straightforward valuation case & widened for more complex cases.
144
Explain your understanding of K/S Lincoln v CBRE Hotels (2010).
Sets the principle of 10% margin of error in respect to a valuation of 4 hotels in 2005. The judge stated that an appropriate margin may be + -5% for a standard residential property but for a one-off commercial property + -10% & if there are exceptional features of the property the margin could be + -15%.
145
Tell me why terms of engagement are important.
They define the business relationship. They limit the responsibility of the company.
146
What checks do you undertake before accepting a valuation instruction?
Conflict of interest checks.
more here.....
147
How do you ensure you know who your client is when undertaking a valuation instruction?
In the terms of engagement, can check companies house to see if there are associated companies.
148
Are there any additional requirements when undertaking a valuation in which the public has an interest or third parties may rely?
Yes, additional disclosures may be required to clarify the circumstances a third party may rely on a valuation.
149
Are there any additional requirements for loan security valuations?
Valuers should comment on maintainability of income of the loan, with particular reference to lease breaks or determinations & anticipated market trend.
150
Talk me through an example of when you have agreed terms of engagement with a client.
Eagle tower, Abbey Gardens, Windsor 1 & 2 letting.
151
What are the key elements included within terms of engagement?
The scope & nature of work, the framework in which it has been agreed to be carried out. Fees, expenses, PII, complaints handling procedures.
152
What does the Red Book say about terms of engagement?
VPS1 is a mandatory standard. ToE should enhance client understanding of the service to be provided, with clarity on the basis on which the fee will be calculated.
153
What does the Red Book say about inspections?
VPS2 is a mandatory standard. Inspections must be carried out to the extent necessary to produce a valuation that is professionally adequate for its purpose.
154
What does the Red Book say about reporting requirements?
Outlines the matters that will frequently require consideration & comment in a report. E.g., the suitability of the property as security for mortgage purposes bearing in mind the length & terms of the loan being contemplated.
155
What are the differences between a desktop and a full valuation report?
Full valuation provides a certified valuer carrying out a thorough valuation.
A desktop service may be required where a restricted service e.g. short timescale.
156
Tell me about how you ensure that information relied upon in your valuation is appropriate and reliable?
Fact check any valuation inputs e.g. rent, yield etc.
157
Explorer 1 & 2, Crawley - Leasing Disposal
Distinguish between net effective and headline comparables?
Net effective includes tenant incentive whereas headline is the rent once the incentive has passed.
158
If you could not obtain nearby or recent comparables, what would you have done?
Widened the search area or criteria as appropriate.
159
The Florence Building, Basingstoke - Investment Disposal Talk through a term and reversion valuation?
Capitalize the term until the next review. Reversion to the market rent valued in perpetuity at a reversionary yield.
160
If the property was over-rented, how would you have undertaken your valuation?
Core & top slice. Core = market rent, top slice = rent passing less market rent until next lease event.
161
Building B, Bartley Wood, Hook - Investment Acquisition Talk through the residual valuation you undertook?
Established the site area in acres & site efficiency to input the net lettable area in sq ft. Input a rent and a yield to give GDV. Input void costs and rent free costs as well as build costs, contingency, planning & demolition, professional fees & disposal fees.
162
How did you determine GDV? How did you determine costs?
Is there any RICS guidance associated?
Market rent & yield. Costs from The BCIS – Building Costs Information Service Construction Data.
Valuation of development property 2019
163
Distinguish between a development appraisal and a residual valuation?
A development appraisal - A series of calculations to establish the value/viability/profitability/suitability of a proposed development based upon the clients’ inputs. It can assume or calculate a site value.
A RLV is a form of a development appraisal. The purpose is to find the market value of the site.
