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APC 2022 > Valuation - Level 1 > Flashcards

Valuation - Level 1 Flashcards

1
Q

Tell me what are the 5 methods of valuation.

A 
Profits
Contractors
Investment
Comparable
Residual
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2
Q

Tell me about how you would value a building using the profits method of valuation.
Give an example

A

TBC

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3
Q

Tell me about how you would value a building using the Contractors method of valuation.
Given an example

A

TBC

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4
Q

Tell me about how you would value a building using the Investment method of valuation.
Given an example

A

TBC

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5
Q

Tell me about how you would value a building using the Comparable method of valuation.
Given an example

A

TBC

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6
Q

Tell me about how you would value a building using the Residual method of valuation.
Given an example

A

TBC

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7
Q

What is PI Insurance (PII)?

A

Provides financial cover in the event client suffers a financial loss as a result of a breach of professional duty.
eg. Neglect, omission or error

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8
Q

Why do surveyors need PII?

A

Protects from financial loss from their own funds.

RICS requirement

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9
Q

Tell me about the RICS requirements in relation to PII.

A

Must be made on an ‘each & every claim basis’
minimum levels.
Stets out maximum levels of uninsured excess
Provides minimum run off periods
Must cover past and present employees, partners & directors

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10
Q

What is run off cover?

A

Cover once a company has ceased trading or individuals have left.
Runoff terms depend on the typos of contracts firms/individuals worked on.
Underhand contracts = 6 years
Contracts executed as deeds = 12 years

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11
Q

What is the Red Book?

A 
The Red Book contains:
Mandatory rules
Best Practice Guidance
Related Commentary.
For ALL members undertaking valuation work.
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12
Q

Why does the Red Book exist?

A

To improve consistency and transparency in the valuation approach across the globe.

Provides public confidence that valuation undertaken by RICS Registered Valuer is consistent with international valuation standards

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13
Q

Tell me about a factor which may impact value.

A

TBC

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14
Q

What is your duty of care as a surveyor when undertaking a valuation?

A

TBC

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15
Q

Why is independence and objectivity important when valuing?

A

TBC

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16
Q

Is there a separate UK Red Book?

A

TBC

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17
Q

When was the Red Book last updated?

A

TBC

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18
Q

Does this differ to when IVS were last updated?

What changes were made?

A

TBC

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19
Q

Which do you follow - the latest IVS or the Red Book Global?

A

TBC

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20
Q

Which sections of the Red Book are mandatory and which are advisory?

A

TBC

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21
Q

What does PS1-2/VPS1-5/VPGAs relate to?

A

TBC

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22
Q

What type of advice does the Red Book cover?

A

TBC

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23
Q

If you provide preliminary advice / draft valuation report, what should you state in writing to your client?

A

TBC

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24
Q

What type of valuations might be relied upon by a third party?

A

TBC

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25
Q

Tell me what the definition of MR/MV/investment value/fair value?

A

TBC

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26
Q

What is the difference between an assumption and a special assumption?

A

Assumption: where it is reasonable for the valuer to accept that something is true without the need for specific investigation.
e.g. Assume land not contaminated or no history of flooding

Special Assumption: supposition that is taken to be true and accepted as fact even though it is not. Which must be agreed in writing.

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27
Q

What sources of information would you consider when preparing a valuation report?

A

TBC

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28
Q

If you have previously valued an asset, do you need to make any additional disclosures and what might they be?

A

TBC

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29
Q

If your firm is too small to have a rotation policy or valuation panel, what else can you do to ensure objectivity?

A

TBC

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30
Q

When might a conflict of interest exist in relation to a valuation instruction?

A

TBC

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31
Q

What must be included in your terms of engagement / valuation report?

A

TBC

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32
Q

What is a restricted valuation service and can you provide one?

A

TBC

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33
Q

How do you deal with limitations on inspection or analysis?

A

TBC

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34
Q

Can you revalue a property without inspecting?

What RICS guidance relates to the use of comparable evidence?

A

TBC

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35
Q

What is an internal valuer?

A

TBC

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36
Q

Can an external valuer provide an internal purposes valuation?

A

TBC

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37
Q

What happens if market conditions change between the valuation date and report date?

A

TBC

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38
Q

Is special value from a special purchaser reflected in MV?

A

TBC

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39
Q

Where does the definition of fair value come from?

Does this differ from MV?

A

TBC

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40
Q

When is fair value used?

A

TBC

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41
Q

What are the 3 approaches under VPS5?

A

TBC

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42
Q

What is the Valuer Registration Scheme?

A

TBC

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43
Q

Are there any instances where certain sections of the Red Book may not apply?

A

TBC

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44
Q

What are these and which sections don’t apply?

A

TBC

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45
Q

What is the basis of value under UK GAAP FRS 102?

A

TBC

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46
Q

What is a SORP?

A

TBC

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47
Q

When would you use EUV?

A

TBC

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48
Q

What is the definition of EUV?

A

TBC

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49
Q

What additional criteria apply to secured lending valuations?

A

TBC

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50
Q

What information should you specifically request for a secured lending valuation?

A

TBC

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51
Q

What is a regulated purpose valuation?

A

TBC

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52
Q

What additional disclosures must be made for a regulated purpose valuation?

A

TBC

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53
Q

What is the basis of value for a statutory valuation?

A

TBC

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54
Q

What might a statutory valuation relate to?

A

TBC

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55
Q

What is the definition of the statutory basis of valuation?

A

TBC

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56
Q

What is a yield?

A

TBC

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57
Q

What is a Net Initial Yield?

A

TBC

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58
Q

What is a reversionary yield?

A

TBC

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59
Q

What is an equated yield?

A

TBC

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60
Q

What is an equivalent yield?

A

TBC

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61
Q

How would a yield reported from auction differ from a Net Initial Yield?

A

TBC

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62
Q

What purchaser’s costs do you deduct from a valuation?

A

TBC

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63
Q

How would you value a property in uncertain market conditions - does the Red Book give any guidance?

A

TBC

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64
Q

How could you value a long leasehold interest?

A

TBC

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65
Q

How does a term and reversion and DCF differ?

A

TBC

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66
Q

What is the difference between a growth explicit and a growth implicit yield?

Give examples of each of these types of yield.

A

TBC

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67
Q

How would you value an under/over rented investment property?

A

TBC

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68
Q

When would you use a dual rate investment calculation?

A

TBC

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69
Q

Where can you find yield evidence from?

A

TBC

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70
Q

What is the hierarchy of evidence?

A

TBC

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71
Q

What would you do if comparable evidence was limited?

A

TBC

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72
Q

What is NPV?

A

TBC

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73
Q

What is IRR?

A

TBC

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74
Q

What is a term and reversion?

A

TBC

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75
Q

What is a hardcore and topslice?

A

TBC

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76
Q

What is a Discounted Cash Flow (DCF)?

A

TBC

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77
Q

What is a short-cut DCF?

A

TBC

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78
Q

When would you use a DCF?

A

TBC

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79
Q

What are the advantages of a DCF?

A

TBC

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80
Q

What are the disadvantages of a DCF?

A

TBC

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81
Q

What is a YP/PV/YP in perpetuity?

A

TBC

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82
Q

What is marriage value?

A

TBC

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83
Q

When would you include an element of hope value in a valuation?

A

TBC

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84
Q

How would you value a ransom strip?

A

TBC

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85
Q

How does market value differ to investment value/fair value?

A

TBC

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86
Q

What is a dual capitalisation rate and when would you use one?

A

TBC

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87
Q

Is the profits/DRC method used for specialised or specialist property?

A

TBC

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88
Q

What type of properties would you use the profits method for?

A

TBC

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89
Q

When would you use the profits method?

A

TBC

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90
Q

What is intangible goodwill?

A

TBC

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91
Q

What is turnover / gross profit / net profit?

A

TBC

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92
Q

What are the steps to providing a profits valuation?

A

TBC

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93
Q

What is Fair Maintainable Turnover?

A

TBC

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94
Q

What is a Reasonably Efficient Operator?

A

TBC

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95
Q

Does the assessment of the REO include personal goodwill and trading potential?

A

TBC

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96
Q

What is personal goodwill?

A

TBC

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97
Q

What is trading potential?

A

TBC

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98
Q

How do you calculate the tenant’s proportion of rent in a profits valuation?

A

TBC

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99
Q

What is EBITDA?

A

TBC

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100
Q

What is Fair Maintainable Operating Profit?

A

TBC

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101
Q

How do you calculate the divisible balance?

A

TBC

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102
Q

What accounts information would you want to review for a profits valuation?

A

TBC

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103
Q

Do RICS provide any guidance on RLVs or valuing development property?

A

.

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104
Q

What is an RLV?

What is a development appraisal?

How do they differ?

A

.

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105
Q

How else can you value development land?

A

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106
Q

What is the basic process of undertaking a RLV/development appraisal?

A

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107
Q

What does a development appraisal show?

A

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108
Q

What are the key things you need to consider when appraising / inspecting a development site?

A

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109
Q

What else should you consider?

A

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110
Q

Tell me about your due diligence when undertaking a development appraisal.

A

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111
Q

What sources of information do you use when undertaking a

development appraisal?

A

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112
Q

How can you assess development potential?

A

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113
Q

What is GDV/NDV?

A

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114
Q

How do you calculate GDV?

A

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115
Q

What do development costs include?

A

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116
Q

Where can you source build costs from?

A

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117
Q

What are typical finance costs?

A

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118
Q

What would you apply finance costs to and on what basis?

A

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119
Q

What is an S curve?

A

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120
Q

What do holding costs typically include?

A

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121
Q

How do you typically calculate developer’s profit?

A

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122
Q

What are some typical inputs (and %/£) in a RLV?

A

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123
Q

What other criteria might be assessed in terms of performance
measurement for a RLV?

A

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124
Q

What are the advantages/disadvantages of a RLV?

A

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125
Q

What is included in the development programme?

A

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126
Q

What is CIL?

A

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127
Q

What is S106?

A

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128
Q

What are the differences between CIL and S106?

A

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129
Q

What is CIL charged on?

A

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130
Q

What is a Monte Carlo simulation?

A

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131
Q

What is a sensitivity analysis?

How do you carry out a sensitivity analysis?

A

.

132
Q

What variables might you change and why?

A

.

133
Q

What factors affect sensitivity of a development appraisal?

A

.

134
Q

Tell me about your understanding of incorporating affordable housing
into development appraisals.

A

.

135
Q

Tell me about software you have used to provide a RLV.

Give me a limitation of this software.

A

.

136
Q

What RICS guidance relates to the valuation of development property?

A

.

137
Q

What is viability?

A

.

138
Q

When would a cost approach be used?

A

.

139
Q

What type of buildings would a cost approach be used for?

A

.

140
Q

What is the supposition that a DRC is based upon?

A

.

141
Q

What are the 3 components of the cost approach?

A

.

142
Q

How do you assess the value of the land?

A

.

143
Q

How do you assess Gross Replacement Cost?

A

.

144
Q

What costs would you consider within GRC?

A

.

145
Q

What would you do if the building could be replaced with a modern equivalent?

A

.

146
Q

How would you deal with depreciation/obsolescence?

A

.

147
Q

What types of obsolescence are there?

A

.

148
Q

What are the three ways to deal with depreciation?

A

.

149
Q

Is the cost approach a market valuation?

A

.

150
Q

How might onerous lease terms, e.g. restrictive user, break clause, impact upon capital or rental value?

A

.

151
Q

What liabilities may be created through valuation?

A

.

152
Q

What is a liability cap and when would one be used?

A

.

153
Q

Explain why the RICS are carrying out an Independent Valuation Review.

Who is leading this?

A

.

154
Q

Explain what you understand by the term, margin of error.

A

.

155
Q

Explain your understanding of K/S Lincoln v CBRE Hotels (2010).

A

.

156
Q

Explain the precent set in Hyde and another v Nygate and another (2021) in relation to the valuation of high-profile development sites.

A

.

157
Q

RESIDENTIAL SPECIFIC QUESTIONS

A

RESIDENTIAL SPECIFIC QUESTIONS

158
Q

What is leasehold enfranchisement?

A

.

159
Q

How does it differ for flats and houses?

A

.

160
Q

What is the basis of valuation?

A

.

161
Q

What is the basic procedure of leasehold enfranchisement?

A

.

162
Q

What are current mortgage rates (on a BTL mortgage)?

A

..

163
Q

How have they changed over the past few years?

A

.

164
Q

What are current LTV ratios?

A

.

165
Q

How could you value an HMO using the investment method?

A

.

166
Q

What were you specifically looking for in relation to the HMO use?

A

.

167
Q

How can you establish if a property is an HMO?

A

.

168
Q

What are the minimum rooms sizes for an HMO?

A

.

169
Q

What is statutory overcrowding?

A

.

170
Q

What legislation relates to this?

A

.

171
Q

Tell me about any other legislative requirements relating to HMOs you are aware of.

A

.

172
Q

What planning use do HMOs fall into.

A

.

173
Q

Is there generally a premium attributable to HMO use over and above value as single family house?

A

.

174
Q

Why did you use an investment method of valuation?

A

.

175
Q

What is an Article 4 direction?

A

.

176
Q

How might gross and net yields differ for HMOs?

A

.

177
Q

What RICS guidance are you aware of relating to HMO valuation?

A

.

178
Q

Was there any UK-specific guidance you also complied with?

A

.

179
Q

What category of buy-to-let valuation does a HMO fall within?

A

.

180
Q

What are some of the broader issues facing the HMO sector?

A

.

181
Q

Tell me about the regulation of the HMO sector.

A

.

182
Q

How can rental incentives impact on HMO valuation?

A

.

183
Q

What are guaranteed rents / cash backs in lieu of rental income and how can these impact upon value?

A

..

184
Q

How can Market Rent impact upon the underwriting of a loan?

A

.

185
Q

How have you commended upon any limitations to accuracy of your HMO valuations?

A

.

186
Q

How can maintenance costs impact upon valuation and what does the Red Book say about these for HMOs?

A

.

187
Q

When is it reasonable to adopt the income approach when valuing HMOs under the Red Book?

A

.

188
Q

What additional considerations do you need to make for category 3
scenarios?

A

.

189
Q

What is a lifetime mortgage/home reversion/sale and rent back/home
purchase plan?

A

.

190
Q

What are the Red Book requirements in relation to these?

What is shared ownership/shared equity scheme?

A

.

191
Q

How would you value a shared ownership / shared equity scheme
property?

A

.

192
Q

What is a trustee mortgage valuation?

A

.

193
Q

What legislation relates to this?

A

.

194
Q

What is affordable/market rent?

A

.

195
Q

What is your role in relation to advising a lender client?

A

.

196
Q

Tell me about the requirements in relation to your terms of engagement / inspection.

What is the basis of value?

A

.

197
Q

What factors may have a material impact on value?

A

.

198
Q

What assumptions / special assumptions have you made in relation to this?

A

.

199
Q

What is reinstatement cost and when would you be asked to provide it?

A

.

200
Q

How would you calculate it?

A

.

201
Q

How would you deal with suspected hidden defects?

A

.

202
Q

How would you treat incentives?

A

.

203
Q

Tell me about the application of the RICS Residential Mortgage
Specification in relation to a specific purpose, e.g., re-inspection or
valuation without internal inspection.

A

.

204
Q

Where would you find the RICS Residential Mortgage Specification?

A

.

205
Q

What are the 3 categories of BTL investments?

A

.

206
Q

Have you valued a historic building?

A

.

207
Q

What RICS guidance were you aware of?

A

.

208
Q

Can you tell me a key principle of this guidance?

A

.

209
Q

How do you reflect the historic nature of a building in your valuation advice?

A

.

210
Q

What type of RICS surveys include a valuation?

A

.

211
Q

What level of valuation advice does a Level 2 Home Survey include?

A

.

212
Q

What guidance does the RICS provide in relation to this?

A

.

213
Q

What is the basis of valuation in this type of report?

A

.

214
Q

What assumptions are made in this type of report?

A

.

215
Q

What else do you need to include in relation to your valuation?

A

.

216
Q

Tell me about the RICS guidance relating to the valuation of individual new-build homes.

A

.

217
Q

What is the new build premium?

A

.

218
Q

How would a valuation of new build home differ to a second hand home?

A

.

219
Q

Tell me about how you have applied this guidance to a new build valuation.

A

.

220
Q

What is a key principle of this document?

A

.

221
Q

Tell me about your use and understanding of AVMs.

Does the RICS provide any guidance on this?

A

.

222
Q

What is an AVM?

A

.

223
Q

What is an advantage and a disadvantage of using an AVM?

A

.

224
Q

Give me an example of an AVM you have used.

A

.

225
Q

Have you valued a residential property purpose built for renting?

A

..

226
Q

What RICS guidance are you aware of in relation to this?

A

.

227
Q

What are the key principles?

A

.

228
Q

What are the three key pieces of legislation which have impacted the UK residential market (and purpose built valuation)?

A

.

229
Q

What valuation considerations would you take into account when valuing a purpose built for renting property?

A

.

230
Q

What is the difference between a gross and net yield in this respect?

A

.

231
Q

What factors influence yields?

A

.

232
Q

What residential operating expenses would you need to take into account?

A

.

233
Q

What is Net Operating Income?

A

.

234
Q

How would you calculate it?

A

.

235
Q

Have you valued a BTL / HMO property?

A

.

236
Q

What RICS guidance are you aware of in relation to this?

What are the key principles?

A

.

237
Q

What key factors might affect the impact on the market of a large release of new build property?

A

.

238
Q

Can ‘hope value’ be considered in valuations falling under UK Appendix 10?

A

.

239
Q

If Market Value is assessed prior to or during construction, should the
valuation reflect the evidence and market at the date of valuation or an assumed completion date?

A

.

240
Q

Is there a set discount for a new build premium?

A

.

241
Q

What do RICS say about sales incentives?

A

.

242
Q

Should you reflect sales incentives in your valuation?

A

.

243
Q

Where would you find details of incentives?

A

.

244
Q

What are some of the ways that a home can be offered at a reduced
price?

A

.

245
Q

For houses with restrictions on occupancy, e.g. by income or job type, what is a typical discount used in the market?

A

.

246
Q

What is a new build warranty?

A

.

247
Q

How long would a typical warranty last for?

A

.

248
Q

If a property was built in the last 10 years and does not have a
professional certificate or guarantee/warranty, would this affect value?

A

.

249
Q

What are the two special assumptions relating to Projected Market Value
(PMV) and when would you adopt PMV?

A

.

250
Q

What are some of the types of home finance product?

A

.

251
Q

Who further regulates valuations for home finance products?

A

.

252
Q

What are the key differences between a lifetime mortgage and a
conventional mortgage?

A

.

253
Q

Would the amount of mortgage debt to be redeemed at the end of a lifetime mortgage term be less or more than that of a conventional
mortgage?

A

.

254
Q

What is home reversion?

A

.

255
Q

What is sale and rent back?

A

.

256
Q

What is a home purchase plan?

A

.

257
Q

What are the bases of value for a registered social landlord’s housing stock for secured lending purposes?

A

.

258
Q

What is a statutory valuation?

A

.

259
Q

Who is responsible for Council Tax valuations?

A

.

260
Q

What Council Tax bands exist in England?

A

.

261
Q

What is the basis of value for Council Tax valuations?

A

.

262
Q

What assumptions are made in a Council Tax valuation?

A

.

263
Q

What is the Right to Buy?

A

.

264
Q

What legislation relates to Right to Buy?

A

.

265
Q

When might a lender instruct a drive-by valuation?

A

.

266
Q

What is the impact of the Rentcharges Act 1977?

A

.

267
Q

Until 22 August 2037, how should rentcharges be dealt with?

A

.

268
Q

Within what general distance of a dwelling might Japanese Knotweed have a material impact on value?

A

.

269
Q

Do RICS publish any guidance on leasehold reform?

A

.

270
Q

What right did the Leasehold Reform Act 1967 introduce?

A

.

271
Q

What is the definition of a house under the Leasehold Reform Act 1967?

A

.

272
Q

What are the qualification criteria to acquire the freehold of a house?

A

.

273
Q

How long is a ‘long tenancy’?

A

.

274
Q

Which section are the bases of valuation set out in?

A

.

275
Q

What does the Section 9 (1) basis of valuation comprise?

A

.

276
Q

What does the Section 9 (1A) basis of valuation comprise?

A

.

277
Q

What does the Section 9 (1C) basis of valuation comprise?

A

.

278
Q

Which is the most favourable basis of valuation?

A

.

279
Q

How is a claim to acquire a freehold started?

A

.

280
Q

What is the main impact of the tenant’s notice?

A

.

281
Q

How long does a landlord (reversioner) have to reply to the tenant?

A

.

282
Q

If a landlord intends to reoccupy or redevelop, what Sections can they
rely on?

A

.

283
Q

If the parties cannot agree on a price, where is the matter referred to?

A

.

284
Q

What is marriage value?

A

.

285
Q

What is hope value?

A

.

286
Q

How is marriage value calculated?

A

.

287
Q

What is the deferment rate?

A

.

288
Q

What right did the Leasehold Reform, Housing and Urban Development Act 1993 introduce?

A

.

289
Q

What is the basis of a new lease for a flat under the 1993 Act?

A

..

290
Q

What is the basis of valuation in Schedule 13 for the new lease premium under the 1993 act?
How long can a lease be extended for?

A

.

291
Q

Is a premium payable upon the grant of an extended lease?

A

.

292
Q

What are the additional qualification criteria if the long leaseholder of a house wishes to extend their lease (rather than acquire the freehold)?

A

.

293
Q

What are the ways to calculate a modern ground rent?

A

.

294
Q

What precedent was set in the Sportelli v Cadogan Estate (2008) case?

A

.

295
Q

How is the generic rate in Sportelli calculated?

A

.

296
Q

Does a leaseholder have to pay the landlord’s reasonable professional costs?

A

.

297
Q

What valuation approach should be used to assess the value of the
freeholder’s loss (or landlord’s diminution in value)?

A

.

298
Q

When does marriage value generally become payable?

A

.

299
Q

What is collective enfranchisement?

A

.

300
Q

What does the collective enfranchisement price under Schedule 6 include?

A

.

301
Q

What is the capitalisation rate?

A

.

302
Q

What is the Delaforce (1970) effect?

Explain your understanding of Sloane v Mundy and Reiss v Ironhawk Ltd.

A

.

303
Q

Explain the impact of Cadogan Square Properties Ltd v Earl Cadogan and Cadogan v Erkman.

A

.

304
Q

What is an adverse differential?

A

.

305
Q

What is leasehold relativity?

A

.

306
Q

Explain what you understand in relation to the issue of ‘down valuation.

A

.

307
Q

What RICS guidance relates to residential leasehold properties and secured lending valuation?

A

.

308
Q

What principles from this are you aware of?

A

.

309
Q

What sections of the Red Book and the UK National Supplement should this guidance be read alongside?

A

.

310
Q

What length of unexpired lease term does the guidance relate to?

A

.

311
Q

Why does it not relate to unexpired lease lengths below this?

A

.

312
Q

What factors might affect the valuation of a leasehold property according to the Guidance Note?

A

.

313
Q

What assumptions might be made in this type of secured lending
valuation?

A

.

314
Q

What special assumption might be agreed and why, with the lender
client?

A

.

315
Q

What methods are available to value a leasehold property and when/why might you adopt each?

A

.

316
Q

When would you use a leasehold relativity graph?

A

.

317
Q

What would you use a magnet / plumb bob / spirit level for during an inspection?

A

.

318
Q

How would you value a property affected by Japanese Knotweed?

A

.

319
Q

What does the legal case of Ryb v Conways (2019) say about the valuation of property affected by Japanese Knotweed?

A

.

320
Q

What valuation approach does the RICS recommend is taken when
valuing property is affected by Japanese Knotweed?

A

.

321
Q

What guidance sets this approach out?

A

.

322
Q

How can a NIY of zero be achieved?

A

.

323
Q

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

A

.

324
Q

What impact does tenure/supply/location/immediate environment/
structural condition/ specification/energy efficiency have on value?

A

.

325
Q

What is the current version on the Red Book (global)?

A

.

APC 2022 (27 decks)

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