Valuation Level 1 APC Book Flashcards

1
Q

What is the difference between an Internal Valuer and an External Valuer?

A

An internal valuer is employed by company to value the assets of the company for internal purposes.

External valuer has no material links with the asset to be valued or the client.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What are the three first steps to first undertake a valuation?

A
  1. Competence (SUK)
  2. Conflicts
  3. Terms of engagement - including the extent and limitation of the valuer’s inspection
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Why do you need to carry out statutory due diligence for valuations?

A

This is required to check that there are no material matters which could impact upon the valuation.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What statutory due diligence would you understand prior to a valuation?

A
  1. Asbestos Register
  2. Business Rates/Council Tax
  3. Contamination
  4. Equality Act 2010 compliance
  5. Environmental matters (telecom masks, high voltage power lines)
  6. EPC rating
  7. Flooding (Envr Agency)
  8. Planning
  9. Highways
  10. Legal Title and tenure
  11. Health & safety compliance
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is the timeline of valuation instruction?

A
  1. Receive instruction from client
  2. Check competence (SUK)
  3. Conflicts/Personal interests
  4. Issues TOE
  5. Receive signed TOE
  6. Gather info - leases, planning
  7. Undertake DD
  8. Inspect & measure
  9. Research market, assemble + verify, analyse comps
  10. Undertake valuation
  11. Draft report
  12. Give val + report to another surveyor to check
  13. Finalise + sign report
  14. Report to client
  15. Issue invoice
  16. Ensure valuation in good order for archiving
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What are the 5 main methods of valuation?

A

PRICC
Profits
Residual
Investment
Comparable
Contractor (Depreciated replacement cost)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What are the three IVS 105 Valuation Approaches and Methods?

A

The IVS 105 Valuation Approaches and Methods document sets out three valuation approaches: (MIC)

  1. INCOME (Investment, Residual, profits)
  2. COST - DRC
  3. MARKET APPROACH - Comparable
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What are the six steps methodology of the comparative method of valuation?

A
  1. Select/search comps
  2. Confirm/verify details and analyse headline rent to get NER as appropriate
  3. Assemble comps in schedule
  4. Adjust comps using the Hierarchy of Evidence
  5. Analyse comps and form opinion of value
  6. Report value and prepare file notes
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is the RICS document on comparable evidence?

A

RICS Professional Standard: Comparable Evidence in Real Estate Valuation (2019)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

RICS Professional Standard: Comparable Evidence in Real Estate Valuation (2019) - what is the purpose of this document?

A

This document outlines principles in the use of comparable evidence. It provides advice in dealing with situations where there is limited availability of evidence and sets out a non-prescriptive hierarchy of evidence, noting that “the valuer should use professional judgement to assess the relative importance of evidence on a case-by-case basis”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What are Direct comparables?

A
  • Completed transactions of near identical properties for which full and accurate information is available
  • Completed transactions of similar real estate assets
  • similar real estate being marketed where offers may have been made but a binding contract has not been completed
  • Asking prices (only with careful analysis)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What kind of general market data may you include in your valuation?

A
  • Info from published sources or commercial databases; its relative importance will depend on relevance, authority and verifiability
  • Other direct evidence (e.g. indices)
  • historic evidence
  • demand/supply data for rent, owner occupation or investment
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What can be used for comparable when there is a lack of transactional evidence?

A

Market Sentiment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is the Contents of the RICS Valuation - Global Standards 2025 (‘Red Book Global)?

A

Six Parts of the Red Book

Part 1 - Introduction
Part 2 - Glossary
Part 3 - PS - Professional Standards
Part 4 - VPS - Valuation Technical and Performance Standards
Part 5 - VPGA (UK) Valuation Practice Guidance Applications
Part 6 - IVS - International Valuation Standards

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is the hierarchy of evidence for valuation purposes?

A

Category A - Direct CONTEMPORARY comparable of near identical properties including completed transactions where full info is available, can including offers and asking prices with careful analysis

Category B - General market data that can provide guidance e.g. info from commercial databases such as costar or Lonres, can include historic evidence, demand and supply data for rent, owner-occupation or investment, indicies

Category C - other sources, background data e.g. interest rates, stock market movements

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

When was the Red Book updated / effective from?

A

Updated December 2024
Effective 2025

17
Q

What is the Term and Revision Method?

A

Used when properties are UNDER RENTED (the MR is more than the PR)
Term capitalised until next review/lease expiry at an initial yield
Reversion to MR valued in perpetuity at a reversionary yield

18
Q

What is the layer/hardcore method?

A

Used for overrented property’s (PR is more tan MR)

19
Q

What is a yield?

A

A measure of investment return

20
Q

How do you calculate a yield?

A

Income / Price X 100

21
Q

Risk is a major factor when determining a yield. What factors affect risk?

A

Prospects for rental and capital growth.
Quality of location and covenant.
Use of the property.
Lease terms.
Obsolescence
Voids - what is the risk?
Security and regularity of the income
Liquidity - ease of sale

22
Q

What is a gross yield?

A

The yield not adjusted for purchasers costs

23
Q

What is Net yield?

A

The resulting yield adjusted for purchasers costs?

24
Q

What is Initial Yield?

A

Simple income yield for current income and current price.

25
What is the profits method?
Basic principle is that the value of the property depends on the PROFITS generated from the business, not the physical building or lotion - assess its trading potential - Must have accurate and audited accounts if possible for 3 years
26
What is EBITDA?
Earnings Before Interest Tax Depreciated and Amortisation
27
What is the Residual method/
Method to find the MARKET VALUE of the SITE based on MARKET INPUTS - this is form of development appraisal - All inputs are taken at the date of valuation
28
What is DRC (Contractor Method)?
Used for properties where there are limited or no direct market evidence, used for specialised properties E.g. Lighthouses, sewages works, bandstand in a park have to estimate amount of depreciation appropriate for physical, functional and economic obsolescence. Not red book compliant
29
What are some key changes in the Red Book Global 2025?
Alignment with the new IVS 2025, for example the glossary. Mandatory ESG reporting. Valuers must now record relevant ESG data and consider any factors related which might impact valuation. AI in valuation.
30
What is PS1?
Compliance with standards and practice statements where written valuation is provided.
31
What is PS2?
Ethics, competency, objectives and disclosures Members undertaking valuations must act with in accordance with the RICS Rules of Conduct, 2021
32
What is Investment Value?
The value of an asset to a particular owner, or prospective owner for individual investment or operational objectives. - May differ from MV - own investment criteria
33
What is VPGA 1?
Valuation for inclusion in financial accounts Fair value will be adopted for all IFRS adopted accounts. Prescribed 'performance standards' must be adhered to
34
What is VPGA 2?
Valuations for secured lending Independence, objectivity and conflicts of interest
35
What UK VPGA related to residential property?
UK supplement VPGA 11