Valuation?

Question 1

What is the hierarchy of evidence?

Answer 1

1. Completed transactions for near-identical properties
2. Completed transactions of similar real estate assets
3. Completed of similar real estate, full data may not be available
4. Similar real estate sold subject to contract
5. Asking prices

Question 2

Sources of comparable information?

Answer 2

• direct comparables (hierarchy of evidence)
• general market data (published sources, historic data, indices)
• other sources (transaction evidence from other locations/property types, other background data - interest rates)

Question 3

Red book exemptions?

Answer 3

Statutory purposes
Rating 
Market appraisal 
Accounting purposes 
Internal valuation purposes
Evidence for litigation

Question 4

What is the definition of market value?

Answer 4

The estimate amount for which an asset or 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 both parties had acted knowledgeably, prudently and without compulsion.

Question 5

What is the definition of market rent?

Answer 5

The estimated amount for which an interest in property should be leased on the valuation date

Between a willing lessor and a willing lessee in an arms length transaction

After proper marketing and where both parties have acted knowledgably, prudently and without compulsion.

Question 6

What is the definition of fair value?

Answer 6

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.

Question 7

When is fair value used?

Answer 7

Only used for valuations that are being undertaken for financial reporting purposes?

RICS are of the opinion this is generally in line with MV.

Question 8

What is the definition of investment value?

Answer 8

The value of an asset to a particular owner or prospective owner

For an individual investment or operational objectives.

Question 9

How can investment value be used?

Answer 9

As a measurement of worth to reflect value against a clients own investment.

May differ from MV

Question 10

What is an assumption?

Answer 10

When it is reasonable for the valued to accept something is true without the need for specific investigation

Question 11

What is a special assumption?

Answer 11

A supposition that is taken to be true and accepted as fact, even if it is not true.

This must be agreed with the client in writing.