Valuation - Level 1

Question 1

Tell me what the 5 methods of valuation are

Answer 1

• Residual
• Investment
• Comparable
• Profits
• Depreciated Replacement Cost

Question 2

What are the three approaches to valuation?

Answer 2

• market
• income
• cost

Question 3

How do you decide which valuation method to apply?

Answer 3

• the type of property
• amount of market evidence
• information availability

Question 4

What is a years purchase multiplier?

Question 5

What is PI Insurance (PII)?

Answer 5

Professional Indemnity Insurance

Question 6

Why do surveyors need PII?

Answer 6

To protect clients, surveyors and third parties against negligence

Question 7

Tell me about the RICS requirements in relation to PII

Answer 7

under £100k, - £250,000
£100,001 to £200k - £500,000
£200,001 + - £1 million

• mandatory for surveyors working in practice
• all policies must be underwritten by an RICS approved insurer

Question 8

How did the decision in Hart v Large affect PII?

Answer 8

Taking all reasonable steps to ensure clients understand the differences between the levels of service, including the extent and limitations of each option

Question 9

How would you distinguish limitations on liability in your valuations?

Answer 9

In the Terms of Engagement

Question 10

What is the SAAMCO cap?

Answer 10

a lender could not recover more that the amount by which the valuer overvalued the property (often referred to as the “SAAMCO cap”).

Question 11

Under the SAAMCO cap, is a valuer liable for losses due to a downturn in
the market?

Answer 11

Losses attributable to other factors, such as a fall in the property market, would not be the responsibility of the valuer and should be excluded

Question 12

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

Answer 12

immediately inform the insurers
If you have received correspondence indicating a claim may be made against you, do not respond other than with a general confirmation of the correspondence letter.

Question 13

What is run off cover?

Answer 13

‘Run off’ insurance is professional indemnity insurance which covers the historic liabilities of a business and its directors when the business ceases or is acquired.

Question 14

What is the Red Book?

Answer 14

contains mandatory rules, best practice guidance and related commentary for all members undertaking valuations of an asset

Question 15

Tell me about a factor which may impact value.

Answer 15

• presence of asbestos
• presence of damp
• presence of contamination

Question 16

To whom do you owe this duty of care?

Answer 16

Valuers owe a duty of care towards their clients, both in contract and in tort (for negligence). They may also owe a duty of care towards third parties, in certain circumstances.

Question 17

Why is independence and objectivity important when valuing?

Answer 17

It means that conclusions will be fair and unbiased, based on evidence and not unduly influenced by management or personal relationships

Question 18

Is there a separate UK Red Book?

Answer 18

Yes, the UK National Supplement

Question 19

Why does the UK guidance exist?

Answer 19

to assist members in the application of the global standards in a local context.

Question 20

When was the Red Book last updated? Does this differ from when IVS were last updated?

Answer 20

January 2022 - no both effective from the same time

Question 21

What changes were made to the red book?

Answer 21

The main reason for issuing an update to Red Book Global Standards is to take
account of the changes to the International Valuation Standards (IVS), which Red Book
Global Standards adopts and applies, effective from 31 January 2022.

Question 22

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