Valuation 2 Flashcards
When is Layer /hardcore method used
For over rented investments
Hardcore method notes
Income flow divided horizontally
Bottom slice is market rent
Top slice is rent passing less market rent until lease event
Higher yield on top slice due to additional risk
Method for comparative method
- Search and select comparables
- Confirm and verify details and analyse headline rent to get a net effective rent
- Assemble comparables in a schedule
- Adjust comparables using hierarchy of evidence
- Analyse comparables to form an opinion of value
- Report value and prepare file note
What are the 3 initial steps to take in a valuation
Competence check - are you competent enough?
Independence check - any conflict of interest
Terms of engagement ment
Name statutory due diligence for valuation . 9 here
1 asbestos register
2. Business rates / council tax
3. Contamination
4. Equality act 2010 compliance
5. Public rights of way
6. EPC
7. Fire safety
8. Legal titles and tenure
9. Planning history and compliance
What is the income approach?
Converting current and future cashflows into a capital value
What is the cost approach
Reference to tue cost of the asses whether by purchase or construction
What is the market approach
Use of comparable evidence
Explain the valuation timeline. 16 steps
- Receive instructions from client
- Check competence
- Check independence
- Issue toe
- Receive signed terms back
- Gather information e.g. lease, title docs, planning
- Undertake die dilligence - checking matters that could have an impact on value
- Inspect and measure
- Research market and comparables
- Undertake valuation
- Draft report
- Peer review of report and valuation
13 finalise and sign report
14 report to client
15 issue invoice
16 ensure correct filing
- What is the red book?
- Who can carry out valuations?
- The red book contains mandatory rules, best practice guidance and related commentary for all members undertaking valuation work across the globe
- Registered valuers under the valuation registration service
What are the different sections of the red book?
- Intro
- Glossary
- Professional standards
- Valuation technical and performance standards (vps)
- Valuation applications
- IVS
What are the professional standards? PS1 PS2
PS1 compliance with standards where written valuation is provided
PS2 ethics, competency, objectivity, and disclosures
What is the definition of market value?
The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and seller in an arms length transaction after proper marketing and where the parties had acted knowledgeably prudently and without compulsion
What are the bases of value?
Defined in IVS 04
-market value
-market rent
Investment value
Equitable value
Synergistic value
Liquidation value
What is the definition of market rent?
Estimated amount for which an interest in real property should be leased on the valuation date between a willing lessee and lessor in an arms length transaction after proper marketing which both parties acted correctly
How can you find comparable evidence? What’s the GN
Comparable evidence in real estate valuation 2019
Cat a direct conparables
Cat b market data
Cat c other sources
What is fair value?
Price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date
What are yields
Measure of return
What are the valuation applications? VGPA
1 inclusion in final accounts
2 for secured lending
8 real property interests
10 material uncertainty
How is the profits method calculated?
Net profits (income - expenditure) capitalised at an appropriate used
When is the red book isn’t used? 5 exceptions name 4
Internal
Statutory function
Agency purposes
Negotiation and litigation
Giving evidence as expert witness
What are the 6 steps for comparable evidence?
Search and select comps
Confirm and verify details
Assemble comps in schedule
Adjust comps using hierarchy
Analyse comps to form opinion
Report value and prepare file note
What is Cat B on the hierarchy and provide examples
General market data/secondary data
Indices
Historic ecidence
Demand and supply data
Investment data
Name examples of cat C evidence
Evidence from other real estate types and locations
Interest rates, stock market
Which yield is used in a residual site valuation?
All risks yield… be prepped to name definition
What’s the simple two step methodology for DRC method ?
Value of land in its existing use
Add current cost of replacing the building plus fees less depreciation and deterioration
What is the guidance note for ESG in valuation?
Sustainability and ESG in commercial property valuation and strategic advice 3rd edition 2021
What’s the typical margin of error for a commercial property valuation
+/- 10%
What’s the current SDLT rates for non resi?
£0-£150,000 Nil
£150,000 - £250,000 2%
£250,000+ 5%
