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RICS Investment and Finance Pathway > Valuation Level One > Flashcards

Valuation Level One Flashcards

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1
Q

Tell me what are the 5 methods of valuation.

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2
Q

Tell me about how you would value a building using the profits/contractors/investment/comparable/residual method of valuation.

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3
Q

What is PI Insurance (PII)?

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4
Q

Why do surveyors need PII?

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5
Q

Tell me about the RICS requirements in relation to PII.

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6
Q

What is the SAAMCO cap?

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7
Q

Under the SAAMCO cap, is a valuer liable for losses due to a downturn in the market?

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8
Q

Under the SAAMCO cap, is a valuer’s liability usually limited to the overvaluation on the valuation date?

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9
Q

What would you do if you received a notice of a PII claim from a client or their solicitor?

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10
Q

What is run off cover?

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11
Q

What is the Red Book?

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12
Q

Why does the Red Book exist?

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13
Q

Tell me about a factor which may impact value.

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14
Q

What is your duty of care as a surveyor when undertaking a valuation?

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15
Q

Why is independence and objectivity important when valuing?

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16
Q

Is there a separate UK Red Book?

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17
Q

When was the Red Book last updated?

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18
Q

Does this differ to when IVS were last updated?

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19
Q

What changes were made?

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20
Q

Which do you follow - the latest IVS or the Red Book Global?

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21
Q

Which sections of the Red Book are mandatory and which are advisory?

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22
Q

What does PS1-2/VPS1-5/VPGAs relate to?

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23
Q

What type of advice does the Red Book cover?

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24
Q

If you provide preliminary advice / draft valuation report, what should you state in writing to your client?

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25
Q

What type of valuations might be relied upon by a third party?

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26
Q

Tell me what the definition of MR/MV/investment value/fair value?

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27
Q

What is the difference between an assumption and a special assumption?

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28
Q

What sources of information would you consider when preparing a valuation report?

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29
Q

If you have previously valued an asset, do you need to make any additional disclosures and what might they be?

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30
Q

If your firm is too small to have a rotation policy or valuation panel, what else can you do to ensure objectivity?

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31
Q

When might a conflict of interest exist in relation to a valuation instruction?

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32
Q

What must be included in your terms of engagement / valuation report?

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33
Q

What is a restricted valuation service and can you provide one?

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34
Q

How do you deal with limitations on inspection or analysis?

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35
Q

Can you revalue a property without inspecting?

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36
Q

What RICS guidance relates to the use of comparable evidence?

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37
Q

What is an internal valuer?

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38
Q

Can an external valuer provide an internal purposes valuation?

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39
Q

What happens if market conditions change between the valuation date and report date?

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40
Q

Is special value from a special purchaser reflected in MV?

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41
Q

Where does the definition of fair value come from?

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42
Q

Does this differ from MV?

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43
Q

When is fair value used?

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44
Q

What are the 3 approaches under VPS5?

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45
Q

What is the Valuer Registration Scheme?

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46
Q

Are there any instances where certain sections of the Red Book may not apply?

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47
Q

What are these and which sections don’t apply?

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48
Q

What is the basis of value under UK GAAP FRS 102?

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49
Q

What is a SORP?

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50
Q

When would you use EUV?

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51
Q

What is the definition of EUV?

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52
Q

What additional criteria apply to secured lending valuations?

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53
Q

What information should you specifically request for a secured lending valuation?

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54
Q

What is a regulated purpose valuation?

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55
Q

What additional disclosures must be made for a regulated purpose valuation?

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56
Q

What is the basis of value for a statutory valuation?

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57
Q

What might a statutory valuation relate to?

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58
Q

What is the definition of the statutory basis of valuation?

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59
Q

What is a yield?

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60
Q

What is a Net Initial Yield?

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61
Q

What is a reversionary yield?

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62
Q

What is an equated yield?

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63
Q

What is an equivalent yield?

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64
Q

How would a yield reported from auction differ from a Net Initial Yield?

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65
Q

What purchaser’s costs do you deduct from a valuation?

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66
Q

How would you value a property in uncertain market conditions - does the Red Book give any guidance?

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67
Q

How could you value a long leasehold interest?

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68
Q

How does a term and reversion and DCF differ?

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69
Q

What is the difference between a growth explicit and a growth implicit yield?

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70
Q

Give examples of each of these types of yield.

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71
Q

How would you value an under/over rented investment property?

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72
Q

When would you use a dual rate investment calculation?

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73
Q

Where can you find yield evidence from?

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74
Q

What is the hierarchy of evidence?

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75
Q

What would you do if comparable evidence was limited?

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76
Q

What is NPV?

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77
Q

What is IRR?

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78
Q

What is a term and reversion?

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79
Q

What is a hardcore and topslice?

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80
Q

What is a Discounted Cash Flow (DCF)?

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81
Q

What is a short-cut DCF?

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82
Q

When would you use a DCF?

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83
Q

What are the advantages of a DCF?

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84
Q

What are the disadvantages of a DCF?

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85
Q

What is a YP/PV/YP in perpetuity?

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86
Q

What is marriage value?

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87
Q

When would you include an element of hope value in a valuation?

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88
Q

How would you value a ransom strip?

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89
Q

How does market value differ to investment value/fair value?

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90
Q

What is a dual capitalisation rate and when would you use one?

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91
Q

Is the profits/DRC method used for specialised or specialist property?

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92
Q

What type of properties would you use the profits method for?

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93
Q

When would you use the profits method?

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94
Q

What is intangible goodwill?

A
95
Q

What is turnover / gross profit / net profit?

A
96
Q

What are the steps to providing a profits valuation?

A
97
Q

What is Fair Maintainable Turnover?

A
98
Q

What is a Reasonably Efficient Operator?

A
99
Q

Does the assessment of the REO include personal goodwill and trading potential?

A
100
Q

What is personal goodwill?

A
101
Q

What is trading potential?

A
102
Q

How do you calculate the tenant’s proportion of rent in a profits valuation?

A
103
Q

What is EBITDA?

A
104
Q

What is Fair Maintainable Operating Profit?

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105
Q

How do you calculate the divisible balance?

A
106
Q

What accounts information would you want to review for a profits valuation?

A
107
Q

Do RICS provide any guidance on RLVs or valuing development property?

A
108
Q

What is an RLV?

A
109
Q

What is a development appraisal?

A
110
Q

How do they differ?

A
111
Q

How else can you value development land?

A
112
Q

What is the basic process of undertaking a RLV/development appraisal?

A
113
Q

What does a development appraisal show?

A
114
Q

What are the key things you need to consider when appraising / inspecting a development site?

A
115
Q

What else should you consider?

A
116
Q

Tell me about your due diligence when undertaking a development appraisal.

A
117
Q

What sources of information do you use when undertaking a development appraisal?

A
118
Q

How can you assess development potential?

A
119
Q

What is GDV/NDV?

A
120
Q

How do you calculate GDV?

A
121
Q

What do development costs include?

A
122
Q

Where can you source build costs from?

A
123
Q

What are typical finance costs?

A
124
Q

What would you apply finance costs to and on what basis?

A
125
Q

What is an S curve?

A
126
Q

What do holding costs typically include?

A
127
Q

How do you typically calculate developer’s profit?

A
128
Q

What are some typical inputs (and %/£) in a RLV?

A
129
Q

What other criteria might be assessed in terms of performance measurement for a RLV?

A
130
Q

What are the advantages/disadvantages of a RLV?

A
131
Q

What is included in the development programme?

A
132
Q

What is CIL?

A
133
Q

What is S106?

A
134
Q

What are the differences between CIL and S106?

A
135
Q

What is CIL charged on?

A
136
Q

What is a Monte Carlo simulation?

A
137
Q

What is a sensitivity analysis?

A
138
Q

How do you carry out a sensitivity analysis?

A
139
Q

What variables might you change and why?

A
140
Q

What factors affect sensitivity of a development appraisal?

A
141
Q

Tell me about your understanding of incorporating affordable housing into development appraisals.

A
142
Q

Tell me about software you have used to provide a RLV.

A
143
Q

What RICS guidance relates to the valuation of development property?

A
144
Q

Give me a limitation of this software.

A
145
Q

What is viability?

A
146
Q

When would a cost approach be used?

A
147
Q

What type of buildings would a cost approach be used for?

A
148
Q

What is the supposition that a DRC is based upon?

A
149
Q

What are the 3 components of the cost approach?

A
150
Q

How do you assess the value of the land?

A
151
Q

How do you assess Gross Replacement Cost?

A
152
Q

What costs would you consider within GRC?

A
153
Q

What would you do if the building could be replaced with a modern equivalent?

A
154
Q

How would you deal with depreciation/obsolescence?

A
155
Q

What are the three ways to deal with depreciation?

A
156
Q

Is the cost approach a market valuation?

A
157
Q

How might onerous lease terms, e.g. restrictive user, break clause, impact upon capital or rental value?

A
158
Q

What liabilities may be created through valuation?

A
159
Q

What is a liability cap and when would one be used?

A
160
Q

Explain why the RICS are carrying out an Independent Valuation Review. Who is leading this?

A
161
Q

Explain what you understand by the term, margin of error.

A
162
Q

Explain your understanding of K/S Lincoln v CBRE Hotels (2010).

A
163
Q

Explain the precent set in Hyde and another v Nygate and another (2021) in relation to the valuation of high-profile development sites.

A
164
Q

How can a NIY of zero be achieved?

A
165
Q

In a scenario where rents are static and the capital value increases, would you expect yields to increase or decrease?

A
166
Q

In a scenario where rents are static and the capital value increases, would you expect yields to increase or decrease?

A
167
Q

What does heterogenous mean in terms of comparable evidence?

A
168
Q

What does the term ‘tone of value’ mean to you?

A
169
Q

Development appraisal?

A
170
Q

What is CIL?

A
171
Q

What is S106?

A
172
Q

What are the differences between CIL and S106?

A
173
Q

How can a development appraisal be used in valuing developments?

A
174
Q

Tell me about planning/costs/GDV/individual site elements in relation to a development appraisal?

A
175
Q

What is a Monte Carlo simulation?

A
176
Q

What is a sensitivity analysis?

A
177
Q

How do you carry out a sensitivity analysis?

A
178
Q

What variables might you change and why?

A
179
Q

What factors affect sensitivity of a development appraisal?

A
180
Q

Tell me about your understanding of RICS Financial Viability in Planning/Valuation of Development Property.

A
181
Q

Tell me about your understanding of incorporating affordable housing into development appraisals.

A
182
Q

What is an S curve?

A
183
Q

Tell me about your due diligence when undertaking a development appraisal.

A
184
Q

What sources of information do you use when undertaking a development appraisal?

A
185
Q

How do you calculate GDV/NDV/finance costs/project costs/project timescales etc?

A
186
Q

How do you calculate developer’s profit?

A
187
Q

What other metrics can you produce from a development appraisal?

A
188
Q

What is the difference between a residual valuation and a development appraisal?

A
189
Q

Tell me about software you have used.

A
190
Q

What are the differences between these and when may one be more suitable than another?

A
191
Q

Give me a limitation of a piece of software you have used.

A
192
Q

Give me a limitation of a piece of software you have used.

A
193
Q

What is profit on cost/profit on GDV? When would you use one/both of these?

A
194
Q

What is internal rate of return?

A
195
Q

How does this differ according to your client’s requirements?

A
196
Q

What is viability?

A
197
Q

What is a Financial Viability Assessment (FVA)?

A
198
Q

Why would one be carried out?

A
199
Q

What are the key viability benchmarks?

A
200
Q

What are the key inputs and outputs?

A
201
Q

What is site value for a scheme-specific FVA?

A
202
Q

When undertaking a Local Plan or CIL FVA, how is site value defined?

A
203
Q

What happens if a scheme is deemed financially unviable for a developer?

A
204
Q

What are the main forms of finance available to developers?

A
205
Q

What are lenders’ current requirements in relation to gearing?

A
206
Q

What is mezzanine finance and how is it priced?

A
207
Q

What information do lenders generally require regarding a property before agreeing to lend?

A
208
Q

What is the difference between senior debt and equity finance?

A
209
Q

What is a charge?

A
210
Q

Tell me about an external factor which influences the appraisal process.

A
211
Q

Explain what the Golden Brick means in relation to VAT.

A
212
Q

What tools do Natural England provide to help developments achieve biodiversity net gain (BNG)?

A
213
Q

What is BNG?

A
214
Q

What % improvement in biodiversity value should development deliver?

A
215
Q

What sets out this requirement?

A
216
Q

Describe VPS 1 - 5.

A

VPS 1 - TOE (scope of work)
VPS 2 - Inspections, investigations & records
VPS 3 - Valuation Reports
VPS 4 - Bases of Value, Assumptions & Special Assumptions
VPS 5 - Valuation approaches & methods

217
Q

What does PS1 & PS2 relate to?

A
  • PS1; Compliance with standards where a written valuation is provided
  • PS2; Ethics, competency, objectivity and disclosures
218
Q

Which RICS document outlines the process for identifying and using comparable evidence?

A

Comparable Evidence in Real Estate Valuation (RICS Guidance Note) 1st ed. 2019.

219
Q

What is an Assumption?

A
  • Matters that are reasonable to accept as fact in the context of the valuation assignment without specific investigation or verification.
220
Q

Before accepting an instruction, you need to ensure you comply with PS 2. What pre-instruction checks should I carry out?

A

-Check you are sufficiently competent, knowledgable and experienced to provide the required valuation advice.
- Ensure no conflicts of interest exist or that they are managed appropriately.
- Undertake the required money laundering checks on your client.
- Issue Red Book compliant Terms of Engagement (see VPS 1) and hold a signed copy on file.

221
Q

Major factor in determining the yield?

A
  • Risk
  • Other factors include; lease terms, security and regularity of income, use of property & location.
222
Q

What is Years Purchase (YP)?

A

The number of years required for the income to repay the purchase price.

223
Q

Are you aware on any RICS Guidance notes on COVID-19?

A

I am aware of the RICS ‘Covid-19 Guide to Surveying Services’ which contains a range of guidance notes to work safely and in line with government guidelines through the Pandemic.
▪ This provides specific guidance on:-
* Physical Inspections for Residential Properties.
* Physical Inspections for Non-domestic Properties.
* Residential Valuations and Surveys.
* Reopening of the Housing Market.
* Reopening of Commercial Buildings.

224
Q

What is market value?

A

-The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without
compulsion.

225
Q

Which VPGA relates to secured lending?

A

VPGA 2

226
Q

What guidance should you follow when measuring a property?

A
  • Code of Measuring practise. RICS Guidance Note. May 2015.
    (GEA, GIA & NIA)
227
Q

What is VPGA 2 & VPGA 10?

A

VPGA 2 - Valuation of interests for secured lending.
VPGA 10 - Matters that may give rise to material uncertainty.

228
Q

The RICS Property Measurement, Professional Statement comprises what two elements;

A
  1. Professional statement: property measurement
  2. RICS IPMS Data Standard
229
Q

What is included in Terms of Engagement for a Valuation?

A
  • Identification & Status of Valuer
  • Identification of the client
  • Purpose of the valuation
  • Identification of the asset or liability being valued
  • Basis of value
  • Date of valuation
  • Dave of inspection
  • Extent of valuers investigations
  • Nature & source of information relied upon
  • Special assumption
  • Fee
  • Fee settlement
  • Complaints handling procedure
  • Liability
  • Signatures
230
Q

What is in a Redbook Valuation?

A
  • Identification & status of valuer
  • Identification of the client (and other intended users)
  • Purpose of the valuation
  • Identification of the assets or liability valued
  • Basis of value
  • Valuation date
  • Extent of investigations
  • Nature & sources of information relied upon
  • Assumption and special assumptions
  • Valuation approach and reasoning
  • Valuation amount
  • Date of valuation report
  • Commentary on material uncertainty
  • Limitations on liability

RICS Investment and Finance Pathway (54 decks)

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