Valuation - Level 3

Question 1

Valuation - Bayswater: Example in Bayswater, you said you adjusted the premiums to account for aspect views, roof terrace, what % did you base these premiums on?

Answer 1

15% for the roof terrace and views across Hyde Park

Question 2

Valuation - Bayswater: For Bayswater, loan security purpose, what section of the red book is regarding loan sec?

Answer 2

VPGA 2

Question 3

Valuation - Bayswater: What does stucco fronted mean?

Answer 3

Exterior finish for masonry walls, white/render plaster for decorative look for upmarket buildings

Question 4

Valuation - Bayswater: Where did you record your conversations with agents?

Answer 4

I logged it on my firm’s database in the comparable evidence file

Question 5

Valuation - Bayswater: How long did you store all this information on file for?

Answer 5

6 years – Limitations Act 1980’s

Question 6

Valuation - Bayswater: What is are the common defects for a Victorian property?

Answer 6

• Penetrating Damp (solid wall construction) therefore prone to water penetration
• Neglected chimney stacks, poor flashing cause leeks
• Subsidence
• Rotting windows, as wooden sash

Question 7

Valuation - Bayswater: What varies in TOBs for a loan security vs tax?

Answer 7

COI

Question 8

Valuation - Bayswater: Why do you use comparable evidence

Answer 8

Liquid asset therefore should have lots of comparable. Single resi unit therefore this is how a buyer would view it in the market. Not income producing

Question 9

Valuation - Bayswater: What is listed?

Answer 9

Buildings that are of special architectural or historic interest can be listed, which gives them legal protection

Question 10

Valuation - Bayswater: What do you write about flood risk in report?

Answer 10

high, medium, and low risk. Look at surface water flooding

Question 11

Valuation - Bayswater: How do you make it know of flooding in your vals report?

Answer 11

Highlighted in risk section. My comps have been affected in the same way therefore haven’t adjusted. I assume insurance was available on standard commercial terms

Question 12

Valuation - Bayswater: You said you undertook statutory enquiries, including details of listed buildings, where of you find this information?

Answer 12

Where do you find information on:
Listed buildings – Historic England
Flooding – UK Govt. Website
Conservation – Westminster City Council website
Planning History – Westminster City council Planning portal

Question 13

Valuation - Bayswater: What did you inspect and why did you take photos?

Answer 13

Inspected the surrounding area, layout, condition, roof terrace, looked at the views.

Look photos – provide evidence of state of property and something to refer back to

Question 14

Valuation - Bayswater:

Question 15

Valuation - Bayswater: What is a SWOT analysis?

Answer 15

Strengths, weaknesses, opportunities and threats.

Strengths: close proximity to Hyde Park, large roof terrace
Weaknesses: tired external parts, no porter/concierge
Opportunities: request to initiate works on common parts
Threats: Ukraine/Russia, economic impacts of Covid.

Question 16

Valuation - Bayswater: Define Market Value?

Answer 16

The estimated amount for which an asset or liability should exchange:
- On valuation date
- Between willing buyer and a willing seller
- In an arm’s length transaction
- After property marketing
Where parties had acted knowledgably, prudently and without compulsion

Question 17

Valuation – Queensway: What is a ‘Residual Valuation’ Red Book Valuation?

Answer 17

Valuation in accordance with the Red Book, to assess the market value of a development site as the date of valuation.

Normally using market inputs.

Question 18

Valuation – Queensway: What is valuing for financial accounting purposes?

Answer 18

This is done for internal financial reporting purposes for internal financial planning, and strategic planning therefore I was valuing for market value.

VPGA 1 – Inclusion in financial accounts

• Fair value will be adopted for IFRS adopted accounts

Question 19

Valuation – Queensway: When would you value for financial accounts/use fair value?

Answer 19

I am aware that if it was to be reported inclusion of financial account you would value under:

The Red Book for VPGA 1 – for inclusion in financial accounts
- Fair value under FRS 13

New Introduction:
National Supplement 2023
- VPS 3: Regulated Purpose Valuations: valuation relied on for third parties who have not commissioned the valuation and subject to valuation monitoring.
Purpose:
- For financial accounts
- stock exchange
- takeovers and mergers

Question 20

Valuation – Queensway: IFRS 13

Answer 20

IFRS 13 also sets out certain valuation concepts to assist in the determination of fair value.

Question 21

Valuation – Queensway: Difference between fair value and market value?

Answer 21

Fair Value is used to gauge the true worth of an asset whereas market value is observing the actual value for an asset for which it will be exchanged at

Fair value: The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date:
- basis of valuation is now required if IFRS have been adopted by Client.
Adopted by International Accounting Standards have been adopted by Client

Question 22

Valuation – Queensway: Why were you adopting market value not fair value?

Answer 22

I am aware that valuing for financial accounts you would normally adopt Fair value under VPGA 1, but market value is what my Client has requested because this is for internal finical reporting for financial planning

Question 23

Valuation – Queensway: In Queens Way, within your appraisal, how did you account for the site having planning permission in your inputs?

Answer 23

As it had planning permission it was a lower risk than if it didn’t have planning permission, therefore I reflected this in the developer’s profit, time scales and initial planning costs

Question 24

Valuation – Queensway: Is CIL adopted?

Answer 24

No because it is a conversion from office to residential but therefore there is no relief area to add or CIL (existing – proposed areas). It is staying the same GIA.

Based on additional floorspace based on GIA in sq m

Question 25

Valuation – Queensway: You mention Class E and C3, what you name other class types and what they refer to?

Answer 25

C2 – Care
B8 - industrial warehouse

Question 26

Valuation – Queensway: What is a special assumption?

Answer 26

Assumption: reasonable to accept that something is true without the need for specific investigation

Special Assumption: something that is taken to be true and accepted as a fact, even though its not true
e.g a property without planning permission could be valued on the special assumption that it has planning permission.

Question 27

Valuation – Queensway: Did you report both with and without SA?

Answer 27

Report on both, to make the client aware of Market Value without as a special assumption is know to be not true.

Question 28

Valuation – Queensway: What is difference between GDV and aggregate GDV?

Answer 28

GDV is for an induvial flat and aggregate GDV is for the total of all 4 developed flats

Question 29

Valuation – Queensway: Built costs – established and modelled?

Answer 29

Used BCIS and verified with firms team

Question 30

Valuation – Queensway: Is the office more valuable then resi?

Answer 30

My Firm’s office team valued it as existing but proposed development of resi proved more valuable.

Question 31

Valuation – Queensway: Does change of planning come in when planning is granted for when the conversion happens?

Answer 31

When the conversion happens

Question 32

Valuation – Queensway: What other inputs did you use?

Answer 32

Professional fees: 10-15% plus VAT on total construction costs
Marketing costs: 1-2% of normal GDV
Cost of finance: BoE base Rate plus risk premium
Developers profit: 17.5% as already has planning.
Timescales: 3 months lead in, 12 months conversion, 6 months sale

Question 33

Valuation – Queensway: What types of sensitivity can you have?

Answer 33

Simple (change key variables), scenario (change timing or phasing) and Monte Carlo (probability)

Question 34

Valuation – Queensway: Why did you use a sensitivity analysis?

Answer 34

Required to assess different values if key inputs and variables change slightly

Question 35

Valuation – Queensway: What change did the sensitivity have?

Answer 35

I changed Sales rate and build costs to reflect to our Client the difference in value

Question 36

Valuation – Queensway: What is a bridging loan?

Answer 36

The second loan. Higher interest than standard loan from bank as more risky. Have to pay first loan back before second