Valuation - Level 3 Flashcards
1
Q
When would you choose a term and reversion approach?
A
Lease extension valuation
2
Q
What are the bases of value?
A
- Market value
- Market rent
- Fair value
- Investment value
3
Q
What are the 5 methods of valuation and explain
A
- Comparable
- Investment method
- Profits method
- Residual method
- Depreciated replacement cost
4
Q
What is the yield for lease extensions and why?
A
5% flats
4.75% Houses
Earl Cadogan Vs Sportelli
- the deferment rate.
5
Q
What is the heirarchy of evidence?
A
Demonstrates the best comparable evidence sources.
Three categories. E.g. Best open market sales. Least - arbitration results.
6
Q
When would you carry out a Depreciation Replacement Cost valuation?
A
Buildings where there is not normally a transactional market.
E.g. brewery/ unique properties
7
Q
When might you use the profits method of valuation?
A
When valuing a restaurant, hotel or pub.
8
Q
If you were doing an investment valuation, when might you use the hardcore method?
A
When a property is being overrented.
9
Q
When would you use the residual method of valuation and what are its main components?
A
- Used to value property with development potential or vacant land.
Purchase price/site acquisition value = GDV - (Construction + Fees + Profit)
10
Q
What is fair value and when would you use it?
A
The price that would be received to sell an asset between market participants at the measurement date.
11
Q
Give an example of a special assumption.
A
Assuming planning permission, when it is yet to be granted.
Assuming a property is vacant when it is let.
12
Q
What is a special purchaser?
A
A particular buyer for whom an asset has a special value because advantages would arise from its ownership.
13
Q
What is a marketing period?
A
The length of time a property to predicted to be marketed for before sale.
14
Q
Define market value.
A
The estimated amount for which an asset should exchange
on the valuation date,
between a willing buyer and a willing seller
in an arm’s length transaction
after proper marketing.
15
Q
What is marriage value?
A
Additional value created by the combination of two or more assets or interests. E.g. lease extension.
16
Q
What is a protected or regulated tenancy?
A
A tenancy which started before the 15 January 1989 - governed by Rent Act 1977.
- Tenants had strong rights in relation to rent, security of tenure and succession rights.
- The rent must be fair and is determined by the Valuation Office.
17
Q
What is the investment (or worth) value?
A
The value of an asset to the owner or prospective owner for individual investment objectives.
18
Q
What is Liquidation value?
A
The likely price of an asset when it is allowed insufficient time to sell on the open market.
Exposure to potential buyers is limited.
19
Q
What is Equitable value?
A
The estimated price for the transfer of an asset or liability between identified knowledgeable and willing parties that reflects the respective interests of those parties.
20
Q
What is the Comparable Method and when would you use it?
A
- Using comparable data, based on the subject property’s characteristics to assess the value.
- Most common
- E.g. Houses, shops
- Provides an estimated market value.
21
Q
What is the Cost and when would you use it?
A
based on the supposition that no one would pay more for an existing property than the amount it would cost to buy an equivalent site in terms of size and location plus the cost of constructing an equivalent building
The DRC method requires the valuer to consider 3 components:
the cost or value of an equivalent parcel of land;
the cost of constructing a replica or simple substitute building or a modern equivalent building; and
an allowance for depreciation.
22
Q
What is the Investment Method and when would you use it?
A
It is used where it is possible to assess the relationship between price paid by buyers and the expected income to be derived from ownership.
- The Future rental income, which discounted back to the present day = Net Present Value
23
Q
What is the Profits Method and when would you use it?
A
The profits method is a method used for income-producing properties that, due to location or some other factor, enjoy a monopoly.
- It is not used when a valuation is possible by comparison or by use of the income approach.
- E.g. hotel, gold course
24
Q
What is the Residual Method and when would you use it?
A
-The residual appraisal method is also cost-based and is used to assess the market value of land or land and buildings where there is potential for the land to be put to a higher value use
25
What are the main drivers that impact value?
- Age
- Location
- Tenure
- Condition
- Lease terms
- Size
26
What is the latest valuation standards?
RICS Valuation - Global Standards 2020
27
What are the different parts of the Red Book?
1. Professional Standards
2. Valuation Technical and Performance Standards (VPS)
3. Valuation Applications (VPGA)
28
What method of valuation and basis of valuation would you use for bank lending?
Market Value/rent
Comp method
Investment method
29
Why is independence and objectivity important?
Ensures that a valuation is carried out to the appropriate level and standard.
30
What are Automated Valuation Models (AVM)?
A service that can provide a value for a property using mathematical modelling combined with a database.
31
What are the sections you include in a residential property valuation report?
1. Identification and status of valuer
2. Identification of client
3. Purpose of Valuation
4. Identification of asset valued
5. Basis of value adopted
6. Valuation date
7. Extent of investigation
8. Nature and course of the information relied upon
9. Assumptions and special assumptions
10. Valuation approach and reasoning
11. Date of the valuation report
12. Comment on material uncertainty and limitations
32
What is loan security?
Security given to the lender, sometimes called collateral.
The asset acts as protection for the lender.
33
When have you previously used an AVM?
Supporting evidence for a LSV
34
What are the main components of a residual valuation?
Purchase price/site acquisition value = GDV - (Construction + Fees + Profit)
35
What is GDV?
Gross Development Value
The potential sale price, following development to an interested party.
36
What are the Red Book Valuation Practice standards?
Mandatory
Valuation technical and performance standards
37
What are the Red Book VPGAs?
Advisory
Valuation Practical Guidance Applications
38
What is professional scepticism and when should it be used?
An attitude that includes a questioning mind and critical analysis of data during the valuation process.
39
What 3 steps must you take before accepting an instruction?
1. Competence
2. Independence
3. Terms of Engagement
40
What are the five steps for comparable valuation?
1. Search and select comparables
2. Assemble comps schedule
3. Adjust comparables using the hierarchy of evidence
4. Analysis comparables to form opinion of value
5. Report value and prepare file note
41
What is the hierarchy of evidence for comparable evidence?
The relative weight attached to different types of evidence
A. Open market transaction data/ direct comparables
B. General market data / databases
C. Transactional evidence from other locations
42
What is the RICS guidance note for comparable valuation?
RICS Guidance Note - Comparable evidence in real estate valuation (1st edition) 2019
43
What are the factors to consider when determining a yield to use for Investment Method?
1. Quality of location
2. Use of the property
3. Lease terms
4. Prospects for rental and capital growth
44
What is Discounted Cash Flow?
Growth explicit investment method of valuation
45
What is the purpose of RICS Valuation - Global Standards?
C.O.T
Consistency
Objectivity
Transparency
46
When were the RICS Valuation - Global Standards updated?
31 January 2020
47
How would you ensure a surveyor is appropriately qualified to carry out a valuation?
Check on RICS website to see if they are registered.
48
How would you gather appropriate comparable data?
Hierarchy of evidence
A. Open market transaction data/ direct comparables
B. General market data / databases
C. Transactional evidence from other locations
49
What is the hierarchy of evidence?
Demonstrates the relative weight attached to different types of evidence
50
What does the Leasehold and Reform Housing and Urban Development Act 1993 Part 1 Chapter 2 allow?
Gives individuals tenants the right to acquire a new lease.
51
What is the premium payable for a new lease?
1) The diminution of the landlords interest
(the difference between value of landlord interest in current lease
And
The value of the landlords interest after grant of the new lease)
+
2) 50% of marriage value
+
3) Compensation for loss for new lease
52
What is a Reinstatement Cost Assessment?
Valuation to assess the total cost for rebuilding the whole property - declared value
53
What are the key principles of the RICS Comparable Evidence in Real Estate Valuation 1st Ed?
Use of comparable evidence in valuation
1. encourage consistency
2. address issues of avilability
3. consider potential sources and their relative importance
54
What are the IVS?
International Valuation Standards
55
Once a Reinstatement Cost Asessment has been carried out, how is it used?
The declared value is increased by 15-50% to get the sum insured and used to assess the insurance premium
56
What three forms do the Global Standards for Valuation take?
The three forms the Global Standards for Valuation take are:
Professional Standards - centred on ethics and conduct, underpinned by knowledge and competence
Technical standards – centred on common definitions and conventions, underpinned by consistent application through recognised approaches
Performance or delivery standards – centred on rigour in analysis and objectivity of judgment, backed by appropriate documentation and clarity when reporting.
57
What are the RICS Valuation - Global Standards used for?
RICS Valuation - Global Standards are used for:
With its focus on practical implementation, RICS Valuation – Global Standards, commonly referred to as the RICS Red Book Global, applies the latest international standards and supplements them with additional requirements and best practice guidance that, when combined, provide the highest levels of assurance regarding professionalism and quality.
RICS Valuation - Global Standards are used by competent surveyors to produce valuations.
58
What are the mandatory professional standards?
The mandatory professional standards are:
PS 1 – Compliance with standards where a written valuation is provided
PS 2 – Ethics, competency, objectivity and disclosures.
Global professional and ethical standards as they expressly apply to valuers are denoted by the use of a PS reference number and are mandatory (unless otherwise stated) for all members providing written valuations. They define the parameters for compliance with the Red Book Global, including adoption of the International Valuation Standards; set out the associated RICS regulatory requirements; and clarify the detailed application of the RICS Rules of Conduct when members are undertaking valuation work.
59
What are the mandatory valuation, technical and performance standards?
The mandatory valuation, technical and performance standards are:
VPS 1 – Terms of engagement (scope of work)
VPS 2 – Inspections, investigations and records
VPS 3 – Valuation reports
VPS 4 – Bases of value, assumptions and special assumptions
VPS 5 – Valuation approaches and methods.
Global valuation technical and performance standards are denoted by the use of a VPS reference number and contain specific, mandatory (unless otherwise stated) requirements and related implementation guidance, directed to the provision of a valuation that is IVS-
compliant.
While VPS 1, 4 and 5 focus more on technical standards and VPS 2 and 3 focus more on performance and delivery standards, it would not be helpful to seek to categorise them further in any way. Instead their current order corresponds with that of the International
Valuation Standards, which the VPSs adopt and apply.
60
What are the advisory RICS global valuations practice guidance - applications?
The advisory RICS global valuation practice guidance - applications are:
VPGA 1 – Valuation for inclusion in financial statements
VPGA 2 – Valuation of interests for secured lending
VPGA 3 – Valuation of businesses and business interests
VPGA 4 – Valuation of individual trade related properties
VPGA 5 – Valuation of plant and equipment
VPGA 6 – Valuation of intangible assets
VPGA 7 – Valuation of personal property, including arts and antiques
VPGA 8 – Valuation of real property interests
VPGA 9 – Identification of portfolios, collections and groups of properties
VPGA 10 – Matters that may give rise to material valuation uncertainty.
RICS valuation practice guidance – applications are denoted by the use of a VPGA reference number and provide further implementation guidance in the specific instances listed. Thus, among the topics covered, they include valuations for specific purposes (of which financial reporting and secured lending are among the most widely encountered), and valuations of certain specific asset types, where particular issues and/or practical considerations expressly need to be taken into account. These VPGAs embody ‘best practice’ – that is procedures that in the opinion of RICS meet a high standard of professional competence.
While not themselves mandatory, the VPGAs do include links and cross references to the material in the International Valuation Standards and to material in these global standards that is mandatory. This is intended to assist members in identifying material relevant to the
particular valuation assignment they are undertaking.
61
What is an assumption?
An assumption is - a supposition taken to be true.
* It involves facts, conditions or situations affecting the subject of, or approach to, a valuation that, by agreement, do not need to be verified by the valuer as part of the valuation process.
* Typically, an assumption is made where specific investigation by the valuer is not required in order to prove that something is true.
62
What is the basis of value?
a statement of the fundamental measurement assumptions of a valuation.
63
What is an external valuer?
a valuer who, together with any associates, has no material links with the client, an agent acting on behalf of the client or the subject of the assignment.
64
What is an investment property?
a property held by the owner to earn rentals or for capital appreciation, or both
65
What is PS 1?
PS 1 - Compliance with standards where a written valuation is provided
66
What is PS 2?
PS 2 - Ethics, competency, objectivity and disclosures.
67
What is VPS 1?
VPS 1 – Terms of engagement (scope of work)
68
What is VPS 2?
VPS 2 – Inspections, investigations and records
69
What is VPS 3?
VPS 3 – Valuation reports
70
What is VPS 4?
VPS 4 – Bases of value, assumptions and special assumptions
71
What is VPS 5?
VPS 5 – Valuation approaches and methods.
72
What is VPGA 1?
VPGA 1 – Valuation for inclusion in financial statements
73
What is VPGA 2?
VPGA 2 – Valuation of interests for secured lending
74
What is VPGA 3?
VPGA 3 – Valuation of businesses and business interests
75
What is VPGA 4?
VPGA 4 – Valuation of individual trade related properties
76
What is VPGA 5?
VPGA 5 – Valuation of plant and equipment
77
What is VPGA 6?
VPGA 6 – Valuation of intangible assets
78
What is VPGA 7?
VPGA 7 – Valuation of personal property, including arts and antiques
79
What is VPGA 8?
VPGA 8 – Valuation of real property interests
80
What is VPGA 9?
VPGA 9 – Identification of portfolios, collections and groups of properties
81
What is VPGA 10?
VPGA 10 – Matters that may give rise to material valuation uncertainty.
82
What is market approach?
Market approach is:
An approach that provides an indication of value by comparing the subject asset with identical or similar assets for which price information is available.
83
What is real estate?
Real Estate is:
Land and all things that are a natural part of the land (e.g. trees, minerals) and things that have been attached to the land (e.g. buildings and site improvements) and all permanent building attachments (e.g. mechanical
and electrical plant providing services to a building), that are both below
and above the ground.
84
What is a special assumption?
A special assumption is:
An assumption that either assumes facts that differ from the actual facts existing at the valuation date or that would not be made by a typical market participant in a transaction on the valuation date.
85
What is a specialised property?
A specialised property is:
A property that is rarely, if ever, sold in the market, except by way of a sale of the business or entity of which it is part, due to the uniqueness arising from its specialised nature and design, its configuration, size, location or
otherwise.
86
What is sustainability?
taken to mean the consideration of matters such as (but not restricted to) environment and climate change, health and well-being and corporate responsibility that can or do impact on the valuation of an asset.
In broad terms it is a desire to carry out activities without depleting resources or having harmful impacts.
87
What is a valuation?
An opinion of the value of an asset or liability on a stated basis, at a specified date. Unless limitations are agreed in the terms of engagement this will be provided after an inspection, and any further investigations and enquiries that are appropriate, having regard to the nature of the asset and the purpose of the valuation.
88
What is the valuation date?
The date on which the opinion of value applies.
89
What are standards as set out in the Red Book?
Standards are mandatory
90
What are the mandatory standards?
The International Valuation Standards (IVS) as issued by the International Valuation Standards Council (IVSC).
RICS professional standards – denoted by the prefix PS.
RICS valuation technical and performance standards – denoted by the prefix VPS.
Note - The IVS are adopted and applied by RICS in Red Book Global Standards
91
What is guidance as set out in the Red Book?
Guidance is advisory but best practice
92
What are the guidance advisories?
Guidance advisory:
RICS valuation practice guidance applications
– denoted by the prefix VPGA.
VPGAs are advisory and not mandatory in content. However, they alert members (where appropriate)
to relevant mandatory material contained elsewhere in Red Book Global, including to the relevant IVS, by the inclusion of appropriate cross-references.
93
**_Take me through the process of a valuation_**
* Check competence and independence
* ToE issued
* DUE DILIGENCE
* Inspect and measure
* RESEARCH MARKET, analyse undertake val
* Complete valuation report, check and issue
94
**_Why is statutory due diligence required when undertaking a valuation?_**
To check that there are no material matter which could impact the valuation.
95
**_What could statutory due diligence include?_**
Asbestos Register, Fire safety compliance, EPC if applicable, Flooding, Public rights of way, Planning history / compliance, Conservation area, Mining area.
96
What is the RICS Valuer Registration Scheme?
* A monitoring scheme for all valuers carrying our Red Book Valuations
* To improve the quality and raise status of valuers as a profession
97
**_Who is a registered valuer?_**
A registered valuer is a valuer who:
• adheres to the Red Book valuation standards
• is committed to openness and transparency
• are experts in their field, delivering credible and high-quality reports.
98
**_What are the THREE aims of the RICS Valuer Registration Scheme (VRS)?_**
1. Improve the quality of valuation and ensure the highest possible professional standards
2. To meet the RICS requirement to self-regulate effectively
3. To protect and raise the status of the valuation profession as the leading expertise in valuation
99
What is your opinion of the VRS?
Positive as clients can feel confident that valuations are being undertaken by qualified professional valuers.
100
**_What is the purpose of the Red Book?_**
**_VS, EC_**
* To provide a comprehensive set of global valuation standards
* Ensures consistency and best practice.
101
**_What makes a good comparable?_**
* *Recent*
* *Comprehensive*
* *Verifiable*
* *Very similar*
* *Arm’s length transaction in open market*
* *Consistent with local market practice*
102
**_How do you analyse comparable evidence?_**
• Establish points of comparison (i.e measurements, cmpare with like for like)
• Adjusting comparable evidence
1. Quantitative (size, condition , lease liabilities)
2. Qualitative (location, view, market dependent)
3. Use professional judgement and experience
103
**_What happens if you have a shortage of comparable evidence?_**
Look further afield; valuer’s expertise to forewarn clients of uncertainty –
104
**_What does the Red Book say about comparable evidence?_**
* IVS 105 states that comparables must be adjusted on a qualitative and quantitative basis.
* * Also states the valuer should document the reasons for the adjustments and how they were quantified
105
**_What is the process of valuing using the profits method?_**
1. Establish the fair maintainable trade based upon the Reasonable efficient operator expectations
2. Arrive at gross and net profit
3. Establish the Fair Maintainable Operating Profit based upon the Reasonable efficient operators profit.
4. Capitalise the Fair Maintainable Operating Profit
5. Consider additions or deductions
6. Arrive at a valuation
106
**_How would you calculate a yield?_**
Gross Yield = Annual Rent / Property Value
107
**_What is yield?_**
Yield is a return measure for an investment over a set period of time, expressed as a percentage.
108
**_What is the EBITDA?_**
Earnings before interest, taxation, depreciation and amortisation (adjusted net profit)
109
**_What is a DCF (discounted cash flow)?_**
A method of estimating an investment’s current value based on the discounting of projected future revenues and costs.
110
What guidance has the RICS issued in response to Covid-19?
* Issued "Impact of COVID-19 on valuation" statement
* Guidance for professionals (e.g. Guidance on valuation, guidance on PII)
* Support and guidance for SMEs
111
RICS have categorised comparables into three categories, forming a hierarchy of evidence:
* Category A – direct transactional evidence
* Category B – general market data providing guidance rather than a direct indication of value, such as evidence from published sources, commercial databases, indices, historic evidence and demand/supply data
* Category C – other sources, such as transactional evidence from other property types and locations and other relevant background data
112
What challenges do valuers face?
* Limited or infrequent transactions
* Lack of up-to-date evidence
* Evidence created by special purchasers, who may have paid more than the market because of an over-riding motivation
* Lack of similar or identical evidence due to the complex nature of real estate
* Lack of market transparency
113
What affects mortgage interest rates?
A rise in the Bank of England’s Base rate will generally give rise to an increase in mortgage interest rates and a fall to a fall in interest rates.
114
Define an arms length transaction?
There is no personal or professional relationship between the buyer and seller
115
What does a valuer need to value a new build with incentives?
* . A copy of the developers disclosure form
* . Further guidance on RICS guidance note - Valuation of individual new build homes 2nd edition
* . Valuer should include statement such as
* ‘ it may not be possible to obtain the valuation figure if the property is resold as second hand especially if comparable new property is on offer at the same time’
* . Mortgage providers stipulate that if incentives are more than 10% then they should be deducted
116
What does the RICS Guidance note on Valuation of Individual new build homes stipulate with regards to incentives?
* . It is the Valuers responsibility to seek and establish the incentives.
* . The valuer should differentiate between sales incentives that do not add value to the property and those that may enhance the value.
* . When valuing a new build property on comparable evidence the valuer should account for the impact of incentives in the pric
117
What valuations do I carry out on a daily basis?
CAPITAL VALUATIONS
. Purchase/sale
. Secured lending
RENTAL VALUATIONS
. letting
. . As part of a capital valuation
118
What is secured lending?
The purpose of having a loan valuation completed is to establish whether the amount of the loan can be secured against the value of the property and, should you default on the loan, whether the lender can realistically recoup the amount.
The basis used will be Market Value.
119
What is a lifetime mortgage?
An equity release product.
- repayment is deferred until the sale of the property (lifetime) death of the mortgagor
- the interest is rolled up and compounded over the length of the mortgage term.
120
When in stamp duty tax paid?
Under £125,000 = £0
Between £125k-£250k= 2%
Between £250k - £925k = 5%
First time buyers up to £300k = £0
You have up until 30 days after completion to file a return to HMRC
121
When adopting or justifying a valuation approach what must the valuer consider?
. The nature of the asset
. The purpose, intended use and context of the particular assignment
. Any statutory or other mandatory requirements applicable in the jurisdiction concerned.
122
How can the investment method be expressed in a simple calculation?
Market Rent (Net of Outgoings) X Years Purchase (YP) = Market Value
123
How is the Years Purchase (YP) in perpetuity calculated as?
100/YIELD
124
A residual valuation can be expressed as a simple equation
(Value of completed development) - ( development costs + developers profit) = land value
125
What is a basis of value?
It is a statement of the fundamental measurement assumptions of a valuation and must be stated in the report based on the appropriateness to apply
126
What is a projected market value?
* ‘The estimated amount for which an asset is expected to exchange at a date after the valuation date, and specified by the valuer, between a willing buyer and a willing seller, in an arms length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.’
127
Explain what is included in a reinstatement/replacement Cost for insurance Purposes.
. Demolition
. Shoring up and weather-protection of adjoining buildings
. Rebuilding costs
. Professional fees
128
What does PS 2 ‘Ethics, competency, objectivity and disclosures’ state?
All members practising as valuers must have the appropriate experience, skill and judgment for the task in question and must always act in a professional and ethical manner free from any undue influence, bias or conflict of interest.
129
What is a restricted information (desk top) valuation (no inspection undertaken)?
Red Book valuation. If undertake a valuation on the basis of restricted information and/or no physical inspection, must fulfil requirements
1. The nature of the restriction must be agreed in writing in the terms of engagement (VPS 1)
2. The possible valuation implications of the restriction confirmed in writing before the value is reported
3. The valuer should consider whether the restriction is reasonable with regard to the purpose of the valuation
4. The restriction must be referred to in the report
130
Global VPGA 8 – Valuation of real property interests
Covers inspections and investigations
Inspection: includes characteristics to have regards to on inspection that impact value;
a. Surrounding area
b. property characteristics and use
c. site characteristics
d. potential for redevelopment
Investigation:
1. review TITLE (solicitor synopsis)
2. CONDITION of buildings
3. PLANNING use / consents
4. ENVIRONMENTAL enquiries (taking care that we are not specialists)
5. assumption SERVICES are in working order
131
Global VPGA 10 – matters that may give rise to material valuation uncertainty
Relevant in the UKs current political climate.
Markets can be disrupted; financial, macro-economic, legal, political or natural events.
If valuation date coincides with, or is in the immediate aftermath of, may be a reduced level of certainty that can be attached to a valuation. Valuer need to make a judgement and clearly express it in Report, and make additional attempt to support and adequately explain methodology highlighting limitations.
132
Is the 2018 UK national supplement to the Red Book mandatory?
Contains both mandatory requirements (PS and VPS) and guidance (VPGAs).
133
What is a party wall?
It stands astride the boundary of land belonging to two or more different land owners
134
What is the RICS Valuer Registration Scheme (VRS)?
A regulatory monitoring scheme for all valuers carrying out Red Book valuations. RICS publishes a register.
Three aims of the scheme:
1. Improve the quality of valuation
2. To meet the RICS’ requirement to self regulate effectively
3. Protect and raise status of the valuation profession
Can use the term ‘RICS Registered Valuer’ on business stationery
135
What differences are there between the Red Book and IVS?
IVS are produced by the IVSC (council) which is an international body
RICS Red Book adopts the IVS and provides an implementation an application framework for members and firms
136
Why would you undertake research on flooding risks?
This may detrimentally impact on the marketability and valuation of the property as it may be difficult to or expensive to obtain insurance – use Environment Agency website to check the flooding risk.
137
What are the widely accepted valuation approaches under the IVS 105?
* Market approach – using comparable evidence (i.e. Comparable method)
* Income approach – converting current/future cash flows into a capital value (i.e. Investment, Residual, Profits method)
* Cost approach – reference to the cost of constructing the asset (i.e. Contractors/DRC method)
138
When was the Red Book’s UK National supplement effective from?
Issued November 2018, effective from 14 January 2019
139
What are the categories of benefit when buying a new home?
1. first owner benefits (benefits that are only available to the first owner), i.e. transient benefits that fall away after occupation and
2. resale benefits (benefits that can be sold on to the next owner), i.e. permanent features.
140
What is the guidance note for valuing newbuild homes?
Valuation of individual newbuild homes 3rd edition, December 2019
141
What does the leasehold reform aim to do?
The new reforms aim to accelerate the phasing out of ground rent in England in the following ways:
- Existing leaseholders will be given the right to extend their lease by 990 years
- New home buyers could also save thousands of pounds in the long-term by no longer having to pay ground rent to the freeholder.
-Reforms in 2019 mean new houses must be sold freehold to make sure homeowners are not also paying “rent”.
- When the reforms come into force, ground rent will be gradually phased out as existing leaseholders will also be able choose to extend the length of their lease and it will be set at zero pounds.
142
What are the purposes for which valuations are undertaken?
Loan security valuation,
Taxation
Probate
Matrimonial
Shared Ownership
Court Proceedings
Performance Management
143
What are the proposed changes to the Red Book?
* 2022
* Incorporate changes made to the International Valuation Standards
* More details on when members apply exceptions to VPS1-5 (under PS 1 section 5 exceptions)
* More info on sustainability (ESG)
144
**Tell me about BNS's minimum terms of engagement**
* Nationwide has standard terms of engagement
* What is included (example x3/4)
* **a Identification and status of the valuer**
* **b Identification of the client(s)**
* **c Identification of any other intended users**
* **d Identification of the asset(s) or liability(ies) being valued**
145
Exceptions to Red Book valuation
ALIES
Agency
Litigation
Internal
Expert witness
Statutory basis - rating
