Valuation Flashcards
When did the latest Red Book become effective?
2022
How has it been updated from the previous version?
o Adequate ToE to reflect RBG compliance or not. No ambiguity.
o Valuation for financial reporting purposes – inclusion of IFRS 13 and IFRS 16 relating to fair value.
o Reference to use of profit based method for certain trade related properties.
List includes self-storage, flexible workspace and student housing.
o Sustainability and ESG factors:
Interpretations of ESG and sustainability.
VPS 2 and 3 (inspection and reporting), valuers should hae regard to relevance and significance of ESG & S.
VPGA 2 (valuation for secured lending purposes) ESG & S factors should have an integral part of valuation approach and reasoning.
What is the purpose of the Red Book?
To ensure consistency of high standards in the profession when carrying out valuations
What is the structure of the Red Book?
Introduction
Glossary
Professional Standards (PS)
Valuation technical and performance standards (VPS)
Valuation Application (VPGA)
International Valuation Standards (IVS)
Name some best practice guidelines relevant to valuation
VPS 1 – terms of engagement
VPS 3 – valuation report.
What is Comparable Evidence in Real Estate Valuation 2019?
Outlines principles in the use of comparable evidence.
Sets out non-prescriptive hierarchy of evidence.
What are the four bases of value? When would you use each?
o Market Rent
o Market Value
o Investment Value
o Fair Value
What are the five methods of valuation?
o Residual
o Profit
o DRC
o Investment
o Comparable
When is it appropriate to apply each method?
Investment – income stream to value
Comparable – sufficient transactional market evidence
Profit – Valuing trade related property.
Residual – valuing development land
DRC – Valuing unusual building e.g. dilapidated castle.
What each valuation method methodologies?
Investment – term and reversion / layer and hardvore methods.
Comparable – hierarchy of evidence.
Residual – GDV – costs – developer’s profit = land value.
Profit = EBITDA with appropriate multiplier.
DRC = value land, BCIS build cost for asset less depreciation.
What CPD have you undertaken?
I undertook a webinar going into the 5 types of valuation and the 4 bases of value.
What is a Special Assumption?
Supposition that is taken to be true and accepted as fact even though it is not.
E.g. building not let, valued on SA it was.
What is the difference between an assumption and a special assumption?
Assumption is information reasonable for valuer to deem to be true, with no further investigation necessary.
Special assumption, known not to be true, agreed prior with the client.
What is a typical special assumption you have used?
I valued a vacant warehouse in Fradley on the SA that it was 100% let.
How did you establish your Market Value?
Found a suitable comparable evidence for a market rent, found suitable evidence for a market yield as well as suitable lease terms, valued on an equivalent basis.
What are the benefits and limitations of the databases you used?
Benefits = able to scan an array of transactions quickly.
Limits = usually have inconsistencies. Always need to confirm with the agent involved the terms were correct.
How did you ascertain your build costs?
Cost consultant, BCIS, previous examples.
What are the advantages and disadvantages of BCIS?
Broad brush, gives an overview.
Can ascertain a build cost quickly, but not tailored to your specific scheme.