Valuation - Level 1 Flashcards
Tell me what the 5 methods of valuation are
- Residual
- Investment
- Comparable
- Profits
- Depreciated Replacement Cost
What are the three approaches to valuation?
- market
- income
- cost
How do you decide which valuation method to apply?
- the type of property
- amount of market evidence
- information availability
What is a years purchase multiplier?
What is PI Insurance (PII)?
Professional Indemnity Insurance
Why do surveyors need PII?
To protect clients, surveyors and third parties against negligence
Tell me about the RICS requirements in relation to PII
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
How did the decision in Hart v Large affect PII?
Taking all reasonable steps to ensure clients understand the differences between the levels of service, including the extent and limitations of each option
How would you distinguish limitations on liability in your valuations?
In the Terms of Engagement
What is the SAAMCO cap?
a lender could not recover more that the amount by which the valuer overvalued the property (often referred to as the “SAAMCO cap”).
Under the SAAMCO cap, is a valuer liable for losses due to a downturn in
the market?
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
What would you do if you received a notice of a PII claim from a client or
their solicitor?
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.
What is run off cover?
‘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.
What is the Red Book?
contains mandatory rules, best practice guidance and related commentary for all members undertaking valuations of an asset
Tell me about a factor which may impact value.
- presence of asbestos
- presence of damp
- presence of contamination
To whom do you owe this duty of care?
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.
Why is independence and objectivity important when valuing?
It means that conclusions will be fair and unbiased, based on evidence and not unduly influenced by management or personal relationships
Is there a separate UK Red Book?
Yes, the UK National Supplement
Why does the UK guidance exist?
to assist members in the application of the global standards in a local context.
When was the Red Book last updated? Does this differ from when IVS were last updated?
January 2022 - no both effective from the same time
What changes were made to the red book?
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.
Which do you follow - the latest IVS or the Red Book Global?
