Valuation L1 Flashcards
What is the purpose of RICS Valuation – Global Standards (2022)?
Provide guidelines and standards for valuers to ensure consistency, accuracy, and professionalism in property valuations worldwide.
How is RICS Valuation - Global Standards (2022) structured?
it is structured to provide comprehensive guidance and standards for property valuations.
How is this different from the previous version?
updates to reflect changes in industry practices, regulatory requirements, and market conditions.
What does the Registered Valuer Scheme refer to?
A programme which ensures individuals are conducting valuations meets a specific standard of professionalism and competency
What are the requirements to qualify as a Registered Valuer?
Complete the RICS Valuation Professional Assessment
Explain your understanding on the Residual method of valuation.
It is used to estimate a properties value post-development.
Subtracting all development costs and profits margins from the GDV.
Tell me what the 5 methods of valuation are.
Comparable Method
Investment Method
Residual Method
Profits Method
Costs Method
How do you decide which valuation method to apply?
This is based on the property data, type availability, purpose and client preferences.
What is a years purchase multiplier?
Its used to convert rental income into capital value
Give me an example of a good covenant and how this might impact a valuation.
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.
What is PI Insurance (PII)?
Professional Indemnity Insurance
Why do surveyors need PII?
to protect themselves and their clients against potential financial losses resulting from errors
What would you do if you received a notice of a PII claim from a client or their solicitor?
Notify Quod’s designated officer.
Gather all relevant documentation
Work to respond to the claim, providing transparency
Maintain communication
What is the Red Book?
It refers to the RICS Valuation Global Standards.
Why does the Red Book exist?
Its primary purpose is to provide a globally recognized set of standards and guidelines for property valuation.
Ensuring transparency and professionalism
Are there any other RICS documents related to valuation?
The Black Book
And what is the ‘Black Book’?
It refers to the RICS Valuation Professional Standards
Tell me about a factor which may impact value.
- Level of supply vs demand
- Economic growths or falls
- Employment rates
- Inflation
- Interest rates
What is the UK valuation guidance called?
The Red Book
Why does the UK guidance exist?
To provide standards and guidance for professionals in the valuation industry.
How should this be applied in relation to the Global Red Book?
to ensure that valuations conducted in the UK adhere to both global and local standards.
What RICS guidance relates to the use of comparable evidence?
RICS Valuation Global Standards (the Red Book)
What is a Net Initial Yield?
Its used to calculate the annual rental income generated by a property as a percentage of its current market value.
What is an equated yield?
Adjusted annual yield for comparing property investments with varying lease terms and rental patterns.
What is an equivalent yield?
Adjusted annual yield used to compare different lease structures and rental patterns of property investments
What is a term and reversion?
A method of valuing property where the income is measured for the current period (term) and the expected future capital value (reversion).
What is a hardcore and topslice?
“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.
What is a Discounted Cash Flow (DCF)?
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.
What is S106?
The Section 106 of the Town and Country Planning Act allows local authorities to enter into agreements with developers.
What are the differences between CIL and S106?
CIL - Funds infrastructure in the local area
S106 - Targets specific infrastructure impacts from the development
In a scenario where rents are static and the capital value increases, would you expect yields to increase or decrease?
Decrease
This is because the yield is inversely proportional to the capital value: as the capital value increases, the yield decreases.
Briefly outline the structure of the Redbook
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)
