Valuation Flashcards
Market Value definition
The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.
Investment Value definition
The value of an asset to the owner or a prospective owner for individual investment or operational objectives.
Fair Value definition
The 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 - International Financial Reporting Standard 13.
Depreciated Replacement Cost definition
The current cost of replacing an asset with its modern equivalent asset, less deductions for physical deterioration and all relevant forms of obsolescence and optimisation.
Market Rent definition
The estimated amount for which a property would be leased on the valuation date between a willing lessor and a willing lessee on appropriate lease terms in an arm’s length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.
Marriage Value definition
An additional element of value created by the combination of two or more interests where the combined value is more than the sum of the separate values.
RICS Red Book name
RICS Valuation - Global Standards 2017
RICS Red Book Professional Standards
PS1 = Compliance with standards where a written valuation is provided. PS2 = Ethics, competency, objectivity and disclosures
RICS Red Book Valuation Technical and Performance Standards
VPS1 = Terms of engagement VPS2 = Inspections, investigations and records VPS3 = Valuation reports VPS4 = Bases of value, assumptions and special assumptions VPS5 = Valuation approaches and methods
What are the RICS Red Book Exceptions?
1) Agency or brokerage service in respect of the acquisition or disposal of an asset.
2) Acting as an expert witness
3) Performing a statutory function
4) Internal purposes only without liability and without communication to a third party
5) Valuation advice expressly in preparation of negotiation or litigation.
What is an assumption?
Where it is reasonable for the valuer to accept that something is true without the need for specific investigation or verification.
What is a special assumption?
Where an assumption either assumes facts that differ from those existing at the valuation date or that would not be made by a typical market participant in a transaction on that valuation date.
What are the 3 valuation approaches?
1) Market Approach
2) Income Approach
3) Cost Approach
What are the 5 valuation methods?
1) Comparable
2) Investment
3) Residual
4) Profits
5) Depreciated Replacement Cost
