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apc wg > Valuation > Flashcards

Valuation Flashcards

1
Q

What is the Red Book and why do we need it?

A

The RICS Valuation - Global Standards (A.K.A the Red Book)

  • Provides a global framework of standardised valuation procedures and standards

That are necessary for installing

  • consistency, high standards, and public trust in valuation
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2
Q

When is a Red Book Valuation compulsory?

A

Legal and accountancy related procedures:

  • Probate
  • Capital Gains Tax
  • CPO’s
  • Divorces
  • Property Disputes
  • Sales by charities or NPO’s
  • Valuation of Bank, mortgage, or lending securities
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3
Q

When is a Red Book Valuation not required?

A
  • Advice given during negotiations or litigation
  • Internal use with no liabilities
  • Performing Statutory Functions
  • When acting as an expert witness
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4
Q

What are some of the headings in a Red Book Valuation report?

A
  • Introduction
  • Property description
  • Purpose of Valuation
  • Basis of Valuation
  • Special assumptions
  • Valuation date
  • Market commentary
  • Evidence
  • Signatures
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5
Q

Headings within a Red Book Valuation Terms of Engagement?

A
  • Valuer details
  • Client details
  • Valuation subject
  • Valuation date
  • Purpose of valuation
  • Bases of valuation
  • Special assumptions
  • Fees
  • Complaints Handling Procedure
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6
Q

What are the 5 methods of valuation?

A
  1. Comparable Method
  2. Investment Method
  3. Profits Method
  4. Depreciated Replacement Cost Method
  5. Residual Method
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7
Q

Before accepting a valuation, what should you do?

A
  • Establish purpose of valuation
  • If it’s Red Book or not
  • Conflict of interests check
  • Check for legal requirements
  • Check 3rd party interests
  • Check exceptions do not apply
  • Ensure sufficient PII is in place
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8
Q

What are the Valuation Technical and Performance Standards?

A

VPS1 - Terms of engagement

VPS2 - Inspection, investigation and records

VPS3 - Valuation reports

VPS4 - Bases of Valuation, assumptions, special assumptions

VPS5 - Valuation approaches and methods

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9
Q

What are ‘PS’, ‘VPS’, and ‘VPGA’s’?
Are they mandatory?

A

PS = Performance Standards (Mandatory)

VPS - Valuation technical and performance standards (Mandatory)

VPGA’s = Valuation practise guidance - applications (Guidance)

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10
Q

What is a special purchaser?

A

A buyer for whom an acquisition has special value not available to others in the open market.

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11
Q

What are assumptions?

What are special assumptions?

A

Assumptions -
Conditions or situations affecting the property which (by agreement) are assumed to be true

Special Assumptions -
Assumes facts that differ from actuality, are true

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12
Q

What are the bases of value?

Where are they defined?

A
  • Market Value
  • Market Rent
  • Investment Value
  • Equitable Value
  • Synergistic Value
  • Liquidation Value

Red Book VPS4 & IVS 104

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13
Q

What makes a good comparable?

A

Similar in:
- Size
- Nature / Condition
- Ownership / Tenure
- Geographical distance / Location
- Disposal method

As close to the Valuation Date as possible

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14
Q

What is the residual method of valuation?

How does it work?

A

The residual method of valuation establishes how much a developer should pay for a site with development potential.

The residual method of valuation calculates the gross development value, minus the associated development costs and the developers profit.

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15
Q

What is the comparable method of valuation?

A

The comparable method of valuation provides an indication of value through obtaining comparable evidence.

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16
Q

What is the Profits method of valuation?

How does it work?

A

The profits method of valuation establishes the trading potential of a business in trade related properties, such as cinema’s or schools.

The profits method calculates the gross annual income, minus all associated costs, and them multiplies by the relevant multiplier.

17
Q

What is the Depreciated Replacement Cost Method of Valuation?

How does it work?

A

The depreciated replacement cost method of valuation provides an indication of value based on a buyer paying no more or less than the cost to obtain the asset based on the current equivalent.
It is often used to value properties where this is no active market, such as a mosque.

The depreciated replacement cost method of valuation is calculated by identifying the cost of building the equivalent building, plus the cost of purchasing the land.

18
Q

What is hope value?

A

Hope Value is a term used to describe the market value of land based on the expectation that planning permission will be granted to develop on it.

19
Q

What is marriage value?

A

Marriage value is the extra value that arises from the merger of 2 physical or legal interests.

20
Q

What is special value?

A

Special value is an extraordinary element of value over and above market value.

apc wg (11 decks)

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