Valuation

Question 1

IHT Valuation 1
What did you include in the ToE on account of the purpose being for IHT?

Answer 1

• Purpose of Valuation being for Inheritance Tax Purposes
• Client being executors of d’csd
  vpga 7

Question 2

IHT Val 1
Describe the subject property

Answer 2

• 3 Bedroom detached rural property
• private road side access
• dated, in need of renovation
• small garden

Question 3

IHT Val 1
What was your reasoned advice in respect of your due diligence on title matters?

Answer 3

Having reviewed the title, i advised that there were no charges that caused for concern and that our valuation was based on a good and marketable title

Question 4

IHT Val 1
What was your opinion of value to the client?

Answer 4

£340,000

Question 5

IHT Val 2
Talk us through some of the calculations you took to formulate your advice?

Answer 5

Comparable valuation on land, then cost valuation on building, used ABC & invoice, adding material costs and labour costs.

added comp & cost val together

Question 6

IHT val 2
How did your knowledge of the rural market influence your advice?

Answer 6

despite loss of bps land values haven’t really dropped off, investors still looking at agri land, loss of bps meaning farmers looking to increase to improve economies of scale
building adds value to land too, for farmers further away
decent land size = worthwhile for farmers further away

Question 7

IHT Val 2
What was the rationale for the advice you gave?

Answer 7

agricultural use
comp values cost valued

Question 8

IHT Val 2
talk us through the cost approach for the building and subsequent advice?

Answer 8

chose the approach because there weren’y any available comps due to newness/standard
cost means what someone would pay for it to be erected
advised value of shed was £150,000

Question 9

Expert Witness Valuation
What was your advice in relation why a life interest impacts value?

Answer 9

life interests impact value as it inhibits the owner from having vacant possession therefore right of use of it yourself, or right to let at market value and generate better income

Question 10

What was your valuation advice for the property with vacant possession/not subject to a life interest?

Answer 10

Higher value with VP. Used same value of neighbouring property using comps, as both were in similar state, services etc.

Question 11

Can you talk me through how carried out the valuation?

Answer 11

1) ascertained age of tenant
2) used ONS to ascertain life expectancy
3) deffered VP value using PV £1 at interest rate of 4%
4) multiply by VP market value
5) value - £202,995

Question 12

What bases of value have you used in rural valuations?

Answer 12

Market Rent
Market Value
Deemed cost
Net realisable value

Question 13

What basis of value would you use in a stocktaking valuation?

Answer 13

Net realisable value/deemed cost

Question 14

Tell me about calculating the costs of cultivations in a stocktaking valuation.

Answer 14

• ascertain if farmer had carried out work or a contractor
• how much fert/spray passes carried out
• type of cultivation
  use industry standard averages (Nix) to attribute cost

Question 15

What factors affect value in a stocktaking valuation?

Answer 15

• age of livestock
• amount of inputs
• farmer/contractor
• fluctuation in market
• weather/failed crop

Question 16

Collection and Analysis of Comp evidence
Using an example, talk us through adjustments you made to a comparble valuation.

Answer 16

when valuing a 9 acre property with a sheds and a bungalow with ag tie, i used comp analysis.

Relatively high amount of similar comps but not with ag tie, so then using ag tie comps but not similar properties was able to adjust the value based on a percentage basis & also using comparablle or commonly used discount of 20-30%.

location also considered - was the property in a rural area - more likely to comply with ag tie, making property more valuable

Question 17

How did quality factor in the overall make up of value for the subject site (ag tie)

Answer 17

On this occasion not as much as if it did not have the ag tie, because of the deduction in value, if there was somebody compliant they would offer because of the already reduced market value

Question 18

Assisting in gathering information
Can you give an example of due diligence on title you’ve completed with any anomaly/non-standard being idenitfied as a result? (Example - eardington)

Answer 18

When carrying out a market appraisal I reviewed the title provided to be my the client, I noted that the property had an 80 year overage clause for any development & was only 10 years into the term. was 50% clawback.

unusual to see this length of term & high %. affected value significantly

Question 19

How did this anomaly impact on the value of the property? (eardington)

Answer 19

Signficant decrease in value given the type of property (had huge development potential and was a bare plot of 2 acres with no stable or anything