Valuation Difficult Topics Flashcards
1
Q
- What do the RICS Valuation Global Standards outline?
A
Mandatory requirements to promote best practice and high standards.
Series of sections:
- PS – Professional Standards
- VPS – Valuation Performance Standards
- VPGA – Valuation Applications
- IVS – International Valuation Standards
2
Q
- Can you provide any examples of sections of the Professional Standards section of the Global Standards?
A
PS1 – Compliance with standards for written valuation:
o 5 types of valuation non-red book compliant
PS2 – Ethics, competency, objectivity and disclosures:
o Abide by Rules of Conduct
o No conflict of interest
o Comply with Terms of Engagement
3
Q
- Can you provide any examples of sections of the Valuation and Technical Performance Standards (VPS) section of the Global Standards?
A
- VPS1 – Terms of Engagement
- VPS2 – Inspections
- VPS3 – Valuation Reports
- VPS4 – Bases of Value and Assumptions
- VPS5 – Valuation Approaches and Methods
4
Q
- Can you provide any examples of sections of the Valuation Applications (VPGA) section of the Global Standards?
A
- 10 in total
- VPGA1 – Valuation for inclusion in financial accounts
o Fair Value - VPGA2 – Valuations for secured lending
- VPGA10 – Matters giving rise to material uncertainty
5
Q
- What do you know about the RICS Global Standards UK National Supplement?
A
- UK jurisdiction only
- Supplementary document to make the Red Book more user friendly
- Not an alternative to the Red Book
- Most of the advice is guidance and the document is not mandatory
- Series of VPGAs, some of them new
- New section for valuation for commercial lending VPGA 10
6
Q
- What do you know about the UK VPS3: Regulated Purpose Valuations?
A
- Within the UK National Supplement
- Talks about the reliance of third parties on valuation reports
- For purposes of:
o Company accounts reporting
o Stock exchange listings
o Takeovers and mergers - Not loan security reports as they are not third party relied
7
Q
- What does the Guidance Note Comparable Evidence in Real Estate detail?
A
- Guidance Note
- Provides advice on assessing and adjusting comparables
- “Valuer should use professional judgement on a case-by-case basis”
- Provides hierarchy of comps validity:
o Category A:
Direct comps
Full data available
o Category B:
Market data from published sources
Indirect evidence
Historic evidence
o Category C:
Other real estate types
Other background info (interest rates, market changes)
8
Q
- What is the Peter Pereira Gray Review 2021?
A
- Commissioned by RICS Standards & Regulations Board
- Hope that changes will increase public confidence
- Made 13 recommendations:
o Separation of valuations from advisory activities within firms
o Developing a time-specific mandatory rotation process for valuers
o Developing a Valuation Compliance Officer within firms
o DCF as the principal model applied in investment valuations
o Review of post-qualification requirements and regular revalidation of valuers
9
Q
- Is there a margin of error on a valuation figure in terms of negligence?
A
- Margin of Error:
K/S Lincoln & Others v CBRE (2010) judge ruled 5% to be appropriate for standard residential property, 10% for one-off commercial property and 15% for property with exceptional features
10
Q
- What is a ransom strip?
A
- Inaccessible piece of land
- Value of ransom strip is 15 to 50% of development value unlocked
- The Upper Tribunal assesses each case
- Stokes v Cambridge is key case with 33% awarded
11
Q
- What is Zoning?
A
- Valuation analysis method
- Retail properties of higher value
- 9.14m (30ft) zones used in some prime London, NI and Scotland
- Usual rates:
o Zone A = 1
o Zone B = 2
o Zone C = 4
o Remainder = 8
o FF = 10
o Flat rate can also be applied - ‘End allowances’ used for split level, hard frontages
- Natural zoning = places like steps
- Mirror zoning = shops with two main frontages
- Return frontage = add percentage to the Zone A to reflect additional
12
Q
- What can you tell me about Stamp Duty Land Tax?
A
- Residential and non-residential properties
- Non-residential or mixed-use properties:
o Up to £150,000 = Nil
o Up to £250,000 = 2%
o Over £250,000 = 5% - Residential properties:
o Up to £250,000 = Nil
o Up to £925,000 = 5%
o Up to £1,500,000 = 10%
o Over £1,500,000 = 15% - Calculator on HMRC Website
13
Q
- What can you tell me about Surrender and Renewal Valuations?
A
- LL or tenant wants to surrender lease and agree new lease on new terms
- Calculate premium to reflect change in value
- Need to value before and after
- Understand the valuation of the premium
14
Q
- Valuations for Charities?
A
- UK VGPA 8 sets out advice regarding charities
15
Q
- What do you know about Rights to Light?
A
- Can be compensation if right to light is damaged
- RICS guidance note on it
- Landmark case at Toronto Square in Leeds to reduce the scale of two floors that were added to an existing office property