VALUATION Flashcards
What is a year’s purchase multiplier?
Used to estimate the value of an income-producing property.
It tells you how many years’ worth of income you would need to earn to equal the property’s value, based on a desired rate of return or yield.
1 / Yield
Give me an example of a good covenant and how this might impact a valuation.
A good covenant strength would lead to a valuation with less risk, you may adopt a lower yield.
How did the decision in Hart v Large affect PII?
Sued for not making the correct observations as a building surveyor.
Emphasis on surveyors to have adequate PII for these situations.
Where in your valuation report do you state any limitations on liability?
This would be stated up front in the terms of engagement.
What is the SAAMCO cap?
Legal principle that limits the scope of a professional’s liability for damages to the extent of the losses directly attributable to their advice or actions
Is there a separate UK National Supplement?
What was changed in the last update to the UK National Supplement?
Yes the National Supplement contains additional guidance specific to the UK such as on taxation.
Last update - Mandatory Valuer Rotation Policy: This introduces a maximum period of 5 years before the rotation of an individual. 10 years for a firm.
Which do you follow - the latest IVS or the Red Book Global?
You would follow the Red Book.
This incorporates latest IVS.
Tell me what the definition of MR/MV/investment value/fair value?
MR - the estimated amount for which an interest in real property should be leased (willing parties, appropriate arms length, prudently without compulsion).
MV - As above but for the sale.
Investment value - Worth to a particular party.
Fair value - The price of an arms length transaction.
Where does the definition of fair value come from?
It comes from accounting regulation.
International Financial Reporting Standards (IFRS)
What are the 3 approaches under VPS5?
Market approach
Income approach
Cost approach
What additional criteria apply to secured lending valuations?
Forced sale value is often included (value of something when sold quicky).
What is a SORP?
A SORP (Statement of Recommended Practice) is a set of guidelines and best practices issued to provide detailed recommendations on accounting and reporting
What is a Net Initial Yield?
Measure of financial return.
Net annual income / purchase price x 100
What is a Reversionary yield?
When a property is under rented, i.e. will achieve more in the future.
Annual income at reversion / purchase price x 100
What is an equated yield?
Equivalent Yield is a weighted average of the Net Initial Yield and Reversionary Yield and represents the return a property will produce based upon the timing of the income received