Valuation Flashcards
What are the five main methods of valuation?
- Comparative
- Investment
- Residual
- Profits
- Depreciated replacement cost (DRC)
What are the five red book exemptions?
BNIES
- Providing brokerage or agency services
- Advice given in prep or during the course of negotiations or litigation
- Internal purposes without liability and without communication to third party.
- Acting for an expert witness
- Performing statutory functions
What are the Professional Standards set out in the Red Book?
PS1 - Compliance with standards and practice statements when written advice is given - 5 exceptions.
PS2 - Act in accordance with ethic standards
- Valuer must have independence and objectively. Conflicts of interest
- Terms of engagement - minimum terms, in relation to clients instructions.
Why is statutory due diligence such as contamination done?
to check there are no material matters that could impact upon the valuation.
Why would you increase the yield to the froth on an over-rented investment?
it is riskier
less security on income as the tenant is paying over MR
Possibly of voids
What’s included in your standard terms of appointment/engagement?
Identification of client and valuer Identification of intended users The assets to be valued Currency Purpose of the valuation Valuation Date Limitation on liability assumptions fee basis Complaints handling procedure
On what basis of measurement was this retail unit in Muswell Hill? Why?
Measured it on GIA.
As typically you measure food stores on a GIA basis.
I also zoned the shop so I could compare with other comparables.
What type of methodology is zoning?
its a valuation method and not a measuring method.
How would you zone a shop?
firstly you would divide the shop up into varying zones with zone A being at the front of the shop. This is the most valuable part.
The halfling back principle from each zone as the further you go back the less valuable the shop floor is.
Each zone is 6.1m in depth until you come to the reminder.
Work out the the size of each zone and its relativity to calculate the floor area ITZA.
What are the minimum PI covers for valuation?
My firm currently have a limits of liability up to £5mill.
This covers any liabilities arising out of an appointment for 6 years after the date of completion.
For your Ilford valuation why did you follow the red book if it was for internal purposes?
My client and I agreed to follow the red book and ignore the exemption.
Wanted to keep to the high professional standards
Follow the general process
make sure there were no material matters that would effect the MV
What basis of measurement did you use for the Ilford example?
Used NSA or GIA.
We also reported on IPMS 3 B (Clarify!!!)
What due diligence did you carry out for the Ilford example?
Council Tax
EPCs
Flooding
Fire Safety Compliance - EWS 1 form
Why does covenant strength matter?
Risk Profile of the Asset
Security of Income
Affects the capital value of the property
Is there any other way to analyse a covenant stregth of a tenant than creditsafe?
Profits test – net profit for business must be 3 times the rent for 3 consecutive years or the net asset value of business must be 5 times the rent
References from previous landlord
