Valuation L1

Question 1

What is the purpose of RICS Valuation – Global Standards (2022)?

Answer 1

Provide guidelines and standards for valuers to ensure consistency, accuracy, and professionalism in property valuations worldwide.

Question 2

How is RICS Valuation - Global Standards (2022) structured?

Answer 2

it is structured to provide comprehensive guidance and standards for property valuations.

Question 3

How is this different from the previous version?

Answer 3

updates to reflect changes in industry practices, regulatory requirements, and market conditions.

Question 4

What does the Registered Valuer Scheme refer to?

Answer 4

A programme which ensures individuals are conducting valuations meets a specific standard of professionalism and competency

Question 5

What are the requirements to qualify as a Registered Valuer?

Answer 5

Complete the RICS Valuation Professional Assessment

Question 6

Explain your understanding on the Residual method of valuation.

Answer 6

It is used to estimate a properties value post-development.

Subtracting all development costs and profits margins from the GDV.

Question 7

Tell me what the 5 methods of valuation are.

Answer 7

Comparable Method
Investment Method
Residual Method
Profits Method
Costs Method

Question 8

How do you decide which valuation method to apply?

Answer 8

This is based on the property data, type availability, purpose and client preferences.

Question 9

What is a years purchase multiplier?

Answer 9

Its used to convert rental income into capital value

Question 10

Give me an example of a good covenant and how this might impact a valuation.

Answer 10

Good Covenant: Refers to a tenant with strong financial standing and a history of fulfilling lease obligations.

Example: Multinational corporation with a long-term lease on a commercial property.
Impact on Valuation:

Lower Risk: Reduced risk of default on rent payments or lease obligations.

Enhanced Marketability: Increased attractiveness to investors, potentially driving up demand.

Higher Rents: Potential for higher rental income or longer lease terms, boosting property value.

Question 11

What is PI Insurance (PII)?

Answer 11

Professional Indemnity Insurance

Question 12

Why do surveyors need PII?

Answer 12

to protect themselves and their clients against potential financial losses resulting from errors

Question 13

What would you do if you received a notice of a PII claim from a client or their solicitor?

Answer 13

Notify Quod’s designated officer.

Gather all relevant documentation

Work to respond to the claim, providing transparency

Maintain communication

Question 14

What is the Red Book?

Answer 14

It refers to the RICS Valuation Global Standards.

Question 15

Why does the Red Book exist?

Answer 15

Its primary purpose is to provide a globally recognized set of standards and guidelines for property valuation.

Ensuring transparency and professionalism

Question 16

Are there any other RICS documents related to valuation?

Answer 16

The Black Book

Question 17

And what is the ‘Black Book’?

Answer 17

It refers to the RICS Valuation Professional Standards

Question 18

Tell me about a factor which may impact value.

Answer 18

• Level of supply vs demand
• Economic growths or falls
• Employment rates
• Inflation
• Interest rates

Question 19

What is the UK valuation guidance called?

Answer 19

The Red Book

Question 20

Why does the UK guidance exist?

Answer 20

To provide standards and guidance for professionals in the valuation industry.

Question 21

How should this be applied in relation to the Global Red Book?

Answer 21

to ensure that valuations conducted in the UK adhere to both global and local standards.

Question 22

What RICS guidance relates to the use of comparable evidence?

Answer 22

RICS Valuation Global Standards (the Red Book)

Question 23

What is a Net Initial Yield?

Answer 23

Its used to calculate the annual rental income generated by a property as a percentage of its current market value.

Question 24

What is an equated yield?

Answer 24

Adjusted annual yield for comparing property investments with varying lease terms and rental patterns.

Question 25

What is an equivalent yield?

Answer 25

Adjusted annual yield used to compare different lease structures and rental patterns of property investments

Question 26

What is a term and reversion?

Answer 26

A method of valuing property where the income is measured for the current period (term) and the expected future capital value (reversion).

Question 27

What is a hardcore and topslice?

Answer 27

“hardcore” refers to the minimum value of a property, typically derived from the land value or replacement cost. “Topslice” refers to the excess value of the property over and above the hardcore value.

Question 28

What is a Discounted Cash Flow (DCF)?

Answer 28

Its used to measure an investment opportunity by estimating the present value of its future cash flows.

Projecting the flow of cash and the expected investment over a specified period.

Question 29

What is S106?

Answer 29

The Section 106 of the Town and Country Planning Act allows local authorities to enter into agreements with developers.

Question 30

What are the differences between CIL and S106?

Answer 30

CIL - Funds infrastructure in the local area
S106 - Targets specific infrastructure impacts from the development

Question 31

In a scenario where rents are static and the capital value increases, would you expect yields to increase or decrease?

Answer 31

Decrease

This is because the yield is inversely proportional to the capital value: as the capital value increases, the yield decreases.

Question 32

Briefly outline the structure of the Redbook

Answer 32

Divided into six parts
Part 1. Introduction.
Part 2. Glossary
Part 3. Professional standards (PS) - 2
Part 4. Valuation technical and performance standards (VPS) - 5
Part 5. Valuation applications (VPGA) - 10
Part 6. The International Valuation Standards (IVS)