Valuation

Question 1

What is the definition of market rent

Answer 1

The estimated amount for which an interest in real property should be leased on the valuation date between a willing lessor and willing lessee on appropriate lease terms in an arms length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.

Question 2

What is the definition of market value?

Answer 2

The estimated about for which an asset liability should exchange on the valuation date between a willing buyer and a willing seller in an arms length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.

Question 3

What is a special assumption?

Answer 3

An assumption that either assumes facts that differ from the actual facts existing at the valuation date or that would not be made by a typical market participant in a transaction on the valuation date. In some jurisdictions these are also referred to as hypothetical conditions.

Question 4

What are terms of engagement?

Answer 4

Written confirmation of the conditions that either the member proposes or that the member and client have agreed will apply to undertaking and reporting of the valuation. Referred to in IVS as ‘scope of work’

Question 5

What is the valuation date?

Answer 5

The date on which the opinion of value applies. The valuation date should also include the time at which it applied if the value of the type of asset can change materially in the course of a single day.

Question 6

What is a valuation according to the red book?

Answer 6

An opinion of value of an asset or liability on a stated basis, at a specified date. If supplied in written form, all valuation advice given by members is subject to at least some requirements of the red book global standards - there are no exemptions (PS 1 paragraph 1.1)

Question 7

What are standards

Answer 7

Mandatory. Members of the RICS must comply with standards. Typically standards use the word ‘must’

Question 8

What are guidance?

Answer 8

Advisory - Guidance includes recommended best practice, which uses the word ‘should’. It recognises that there may be acceptable alternatives to best practice that achieve the same or better outcome.

Question 9

What are the IVS

Answer 9

International valuation standards - issued by the International valuation standards council (IVSC). They are adopted and applied by the RICS in Red Book Global standards, being cross referenced throughout.

Question 12

Tell me about RICS professional standards (Part 3 in the red book)

Answer 12

They are mandatory obligations.

RICS professional standards - denoted by the prefix PS.

RICS valuation technical and performance standards - denoted by the prefix VPS.

Question 13

What is PS1?

Answer 13

Compliance with standards where a written valuation is provided.

1. Mandatory application
2. Compliance with firms
3. Compliance with IVS
4. Compliance with jurisdictional or other valuation standards
5. VPSs 1-6 exceptions
6. Departures
7. Regulation: monitoring compliance with these global standards
8. Application to members of other valuation professional organisations

Question 14

What is PS 2?

Answer 14

Ethics, competency, objectivity and disclosures.
1. Professional and ethical standards (Rules of Conduct) (Conflict of interest)
2. Member qualification (5 criteria to satisfy)
3. Independence, objectivity, confidentiality and the identification and management of conflicts of interest
4. Maintaining strict separation between advisers
5. Disclosures where the public has an interest or upon which third parties may rely
6. Valuation review