Valuation - Level 2

Question 1

Valuation – Finsbury Park: How does your approach to valuation different from inheritance tax vs LSV?

Answer 1

Similar ways for valuing using the comparable method of valuation but valuing for loan security I would adhere to VPGA 2 and have extra consideration to:
1. Disclosure of any involvement identified in TOE avoiding the COI.
2. Recent transaction on property has been disclosed
3. Comment on suitability of property for mortgage purposes
4. Use of special assumption, comment on material difference between reported value and that without special assumption
5. Acknowledge sustainability factors are becoming more significant influence and loan sec vals should have appropriate regard to this

Question 2

Valuation – Finsbury Park: What is valuing for inheritance tax purposes?

Answer 2

Inheritance tax: on the estate (the property, money and possessions) of someone who’s died.

Question 3

Valuation – Finsbury Park: What do you know about inheritance tax?

Answer 3

No tax to pay if:
- value of your estate is below £325k
- you leave everything below £325k to your spouse, civil partner, charity

If you give home to children the threshold increases to £500k.

standard Inheritance Tax rate is 40%. It’s only charged on the part of your estate that’s above the threshold.

e.g £500,000 and your tax-free threshold is £325,000. The Inheritance Tax charged will be 40% of £175,000

LOOK OUT FOR BUDGET

Question 4

Valuation – Finsbury Park: What is the market value for tax?

Answer 4

The price which a property might reasonably be expected to fetch on the open market

HMRC ( His Majesty’s Revenue & Customs) scrutiny

Question 5

Valuation – Finsbury Park: What are the potential impact of a railway line close by?

Answer 5

Noise, pollution, dusk, vibrations

Question 6

Valuation – Finsbury Park: If there weren’t comparable recent properties (long gardens, unmodernized) what would you do?

Answer 6

Widen the search to incorporate a wider radius of properties

Question 7

Valuation – Finsbury Park: If a good comp was next door to the property but very modern, how would you determine the pricing adjustment?

Answer 7

I would deduct the pricing to incorporate the modern condition of the property comparable to our.

I would also find other comparables which were of similar unmodernized condition to then establish an adjustment for it.

Question 8

Valuation – Finsbury Park: How do you value of a capital value basis?

Answer 8

Look at comps and find bench mark figure. Assess whether the subject property is better or worse / more or less than that

Question 9

Valuation – Finsbury Park: You said you valued for inheritance tax purposes, what other tax is there?

Answer 9

1. Tax: inheretience tax, capital gains tax (on investment property or second home), ATED (own property within a company. Annual tax on envelope of dwelling), council tax (councils pay for the services they provide)
2. Inheritance tax relates to special purchasers and lotting. Reports highest value as tax man wants more money therefore consider SP and lotting.
   a. Special purchaser: invested interest in paying more for the property
   b. Lotting: Dividing an estate into separate lots is one of the best ways to expand the pool of potential buyers and may increase value - Could it achieve more if sold as single lot

Question 10

Valuation – Finsbury Park: What is inheritance tax purposes also known as?

Answer 10

Probate

Question 11

Valuation – Finsbury Park: What is the legislation regarding tax?

Answer 11

Inheritance Tax Act 1984

Question 12

Valuation – Finsbury Park: What is the RICS Document Relating to Comparable evidence?

Answer 12

RICS PS: Comparable Evidence in Real Estate Valuation 2019

Question 13

Valuation – Finsbury Park: Why is it important to collect similar comparable properties to unmod houses?

Answer 13

Comparable on a like or like basis and gives an idea of value to comparable the subject property with

Question 14

Valuation – Finsbury Park: What is the advice you gave?

Answer 14

I advised my opinion of market value in the valuation report

In addition, we established from comparables and speaking with agents that the comparison of long garden to close to the railways and shorter gardens further way from the railway was down to buyer preference rather than having a material impact on MV

Question 15

Valuation – Finsbury Park: What value did we give?

Answer 15

Confidential? - £975k?

Question 16

Valuation – Fulham: What is valuing for loan security?

Answer 16

To establish whether the amount of the loan can be secured against the value of the property and whether the lender can realistically recoup the amount

Question 17

Valuation – Fulham: What is the downside to using Lonres?

Answer 17

You have to consider the properties sometimes have their guide price attached which would normally portray a higher price.
It is London based therefore it has no comps for outside of London
Third party advice, not as reliable. Need to verify it.

Question 18

Valuation – Fulham: For Fulham example, you have used the comparative method, what is the RICS publication relating to the comparative method?

Answer 18

RICS PS: Comparable Evidence in Real Estate Valuation 2019

Question 19

Valuation – Fulham: What aspects were you comparing?

Answer 19

Location, condition, size, outside space, aspect

Question 20

Valuation – Fulham: How do you analyse your comparables?

Answer 20

I use the hierarchy of evidence and compare different features of the comparable to the subject property, then adjust the comparable accordingly. This comparable schedule gives an identification of MV.

Question 21

Valuation – Fulham: Did the house have any opportunity for extension? Did you account for this in your valuation? Can you account for this in loan security? What might this be referred to as?

Answer 21

There was no opportunity for a roof extension. I did not consider this in my valuation, as I what the property is as it is then for loan security, I do not consider the hope value.

Question 22

Valuation – Fulham: If you looked at both £psf and cap value and there was a big differentiation, what would you pay closer regard to?

Answer 22

TBC

Question 22

Valuation – Fulham: What did you inspect?

Answer 22

Location, property both internally and externally. Assess the layout, condition and if there were any defect of the property.

Question 23

Valuation – Fulham: What do you add into the report as this is for loan sec?

Answer 23

• Suitability for loan sec. Suitable to lend against – based on demand + liquidity, level of risk and we give recommendations for this in the report
• COI – looks at current, past and future conflicts. Determine if there is a conflict on this basis. 2 yrs after or obligation to raise it.
• Environmental matters
• Sustainability and ESG increase in this.
• Ask if it has recently been transacted and state in report.

Question 24

Valuation – Fulham: How do you adjust for market movement?

Answer 24

Look at house price indices.

Question 25

Why 12 months?

Answer 25

12 months seems reasonable as the market hasn’t changed drastically over that time, I wouldn’t go past 18 months.

Question 26

What is included in a ‘red book valuation report’?

Answer 26

Executive Summary
About the report: status of valuer, COI, use of valuation, limitation of liability, scope of work

The Property:
Location, site, decription, services, planning, title

Market Analysis:
Market commentary

Valuation:
Methodology
Vaulation basis
Market value

Property Risk Analysis:
General comments
SWOT

Appendices