Valuation Level One Flashcards
Tell me what are the 5 methods of valuation.
Tell me about how you would value a building using the profits/contractors/investment/comparable/residual method of valuation.
What is PI Insurance (PII)?
Why do surveyors need PII?
Tell me about the RICS requirements in relation to PII.
What is the SAAMCO cap?
Under the SAAMCO cap, is a valuer liable for losses due to a downturn in the market?
Under the SAAMCO cap, is a valuer’s liability usually limited to the overvaluation on the valuation date?
What would you do if you received a notice of a PII claim from a client or their solicitor?
What is run off cover?
What is the Red Book?
Why does the Red Book exist?
Tell me about a factor which may impact value.
What is your duty of care as a surveyor when undertaking a valuation?
Why is independence and objectivity important when valuing?
Is there a separate UK Red Book?
When was the Red Book last updated?
Does this differ to when IVS were last updated?
What changes were made?
Which do you follow - the latest IVS or the Red Book Global?
Which sections of the Red Book are mandatory and which are advisory?
What does PS1-2/VPS1-5/VPGAs relate to?
What type of advice does the Red Book cover?
If you provide preliminary advice / draft valuation report, what should you state in writing to your client?
What type of valuations might be relied upon by a third party?
Tell me what the definition of MR/MV/investment value/fair value?
What is the difference between an assumption and a special assumption?
What sources of information would you consider when preparing a valuation report?
If you have previously valued an asset, do you need to make any additional disclosures and what might they be?
If your firm is too small to have a rotation policy or valuation panel, what else can you do to ensure objectivity?
When might a conflict of interest exist in relation to a valuation instruction?
What must be included in your terms of engagement / valuation report?
What is a restricted valuation service and can you provide one?
How do you deal with limitations on inspection or analysis?
Can you revalue a property without inspecting?
What RICS guidance relates to the use of comparable evidence?
What is an internal valuer?
Can an external valuer provide an internal purposes valuation?
What happens if market conditions change between the valuation date and report date?
Is special value from a special purchaser reflected in MV?
Where does the definition of fair value come from?
Does this differ from MV?
When is fair value used?
What are the 3 approaches under VPS5?
What is the Valuer Registration Scheme?
Are there any instances where certain sections of the Red Book may not apply?
What are these and which sections don’t apply?
What is the basis of value under UK GAAP FRS 102?
What is a SORP?
When would you use EUV?
What is the definition of EUV?
What additional criteria apply to secured lending valuations?
What information should you specifically request for a secured lending valuation?
What is a regulated purpose valuation?
What additional disclosures must be made for a regulated purpose valuation?
What is the basis of value for a statutory valuation?
What might a statutory valuation relate to?
What is the definition of the statutory basis of valuation?
What is a yield?
What is a Net Initial Yield?
What is a reversionary yield?
What is an equated yield?
What is an equivalent yield?
How would a yield reported from auction differ from a Net Initial Yield?
What purchaser’s costs do you deduct from a valuation?
How would you value a property in uncertain market conditions - does the Red Book give any guidance?
How could you value a long leasehold interest?
How does a term and reversion and DCF differ?
What is the difference between a growth explicit and a growth implicit yield?
Give examples of each of these types of yield.
How would you value an under/over rented investment property?
When would you use a dual rate investment calculation?
Where can you find yield evidence from?
What is the hierarchy of evidence?
What would you do if comparable evidence was limited?
What is NPV?
What is IRR?
What is a term and reversion?
What is a hardcore and topslice?
What is a Discounted Cash Flow (DCF)?
What is a short-cut DCF?
When would you use a DCF?
What are the advantages of a DCF?
What are the disadvantages of a DCF?
What is a YP/PV/YP in perpetuity?
What is marriage value?
When would you include an element of hope value in a valuation?
How would you value a ransom strip?
How does market value differ to investment value/fair value?
What is a dual capitalisation rate and when would you use one?
Is the profits/DRC method used for specialised or specialist property?
What type of properties would you use the profits method for?
When would you use the profits method?
What is intangible goodwill?
What is turnover / gross profit / net profit?
What are the steps to providing a profits valuation?
What is Fair Maintainable Turnover?
What is a Reasonably Efficient Operator?
Does the assessment of the REO include personal goodwill and trading potential?
What is personal goodwill?
What is trading potential?
How do you calculate the tenant’s proportion of rent in a profits valuation?
What is EBITDA?
What is Fair Maintainable Operating Profit?
How do you calculate the divisible balance?
What accounts information would you want to review for a profits valuation?
Do RICS provide any guidance on RLVs or valuing development property?
What is an RLV?
What is a development appraisal?
How do they differ?
How else can you value development land?
What is the basic process of undertaking a RLV/development appraisal?
What does a development appraisal show?
What are the key things you need to consider when appraising / inspecting a development site?
What else should you consider?
Tell me about your due diligence when undertaking a development appraisal.
What sources of information do you use when undertaking a development appraisal?
How can you assess development potential?
What is GDV/NDV?
How do you calculate GDV?
What do development costs include?
Where can you source build costs from?
What are typical finance costs?
What would you apply finance costs to and on what basis?
What is an S curve?
What do holding costs typically include?
How do you typically calculate developer’s profit?
What are some typical inputs (and %/£) in a RLV?
What other criteria might be assessed in terms of performance measurement for a RLV?
What are the advantages/disadvantages of a RLV?
What is included in the development programme?
What is CIL?
What is S106?
What are the differences between CIL and S106?
What is CIL charged on?
What is a Monte Carlo simulation?
What is a sensitivity analysis?
How do you carry out a sensitivity analysis?
What variables might you change and why?
What factors affect sensitivity of a development appraisal?
Tell me about your understanding of incorporating affordable housing into development appraisals.
Tell me about software you have used to provide a RLV.
What RICS guidance relates to the valuation of development property?
Give me a limitation of this software.
What is viability?
When would a cost approach be used?
What type of buildings would a cost approach be used for?
What is the supposition that a DRC is based upon?
What are the 3 components of the cost approach?
How do you assess the value of the land?
How do you assess Gross Replacement Cost?
What costs would you consider within GRC?
What would you do if the building could be replaced with a modern equivalent?
How would you deal with depreciation/obsolescence?
What are the three ways to deal with depreciation?
Is the cost approach a market valuation?
How might onerous lease terms, e.g. restrictive user, break clause, impact upon capital or rental value?
What liabilities may be created through valuation?
What is a liability cap and when would one be used?
Explain why the RICS are carrying out an Independent Valuation Review. Who is leading this?
Explain what you understand by the term, margin of error.
Explain your understanding of K/S Lincoln v CBRE Hotels (2010).
Explain the precent set in Hyde and another v Nygate and another (2021) in relation to the valuation of high-profile development sites.
How can a NIY of zero be achieved?
In a scenario where rents are static and the capital value increases, would you expect yields to increase or decrease?
In a scenario where rents are static and the capital value increases, would you expect yields to increase or decrease?
What does heterogenous mean in terms of comparable evidence?
What does the term ‘tone of value’ mean to you?
Development appraisal?
What is CIL?
What is S106?
What are the differences between CIL and S106?
How can a development appraisal be used in valuing developments?
Tell me about planning/costs/GDV/individual site elements in relation to a development appraisal?
What is a Monte Carlo simulation?
What is a sensitivity analysis?
How do you carry out a sensitivity analysis?
What variables might you change and why?
What factors affect sensitivity of a development appraisal?
Tell me about your understanding of RICS Financial Viability in Planning/Valuation of Development Property.
Tell me about your understanding of incorporating affordable housing into development appraisals.
What is an S curve?
Tell me about your due diligence when undertaking a development appraisal.
What sources of information do you use when undertaking a development appraisal?
How do you calculate GDV/NDV/finance costs/project costs/project timescales etc?
How do you calculate developer’s profit?
What other metrics can you produce from a development appraisal?
What is the difference between a residual valuation and a development appraisal?
Tell me about software you have used.
What are the differences between these and when may one be more suitable than another?
Give me a limitation of a piece of software you have used.
Give me a limitation of a piece of software you have used.
What is profit on cost/profit on GDV? When would you use one/both of these?
What is internal rate of return?
How does this differ according to your client’s requirements?
What is viability?
What is a Financial Viability Assessment (FVA)?
Why would one be carried out?
What are the key viability benchmarks?
What are the key inputs and outputs?
What is site value for a scheme-specific FVA?
When undertaking a Local Plan or CIL FVA, how is site value defined?
What happens if a scheme is deemed financially unviable for a developer?
What are the main forms of finance available to developers?
What are lenders’ current requirements in relation to gearing?
What is mezzanine finance and how is it priced?
What information do lenders generally require regarding a property before agreeing to lend?
What is the difference between senior debt and equity finance?
What is a charge?
Tell me about an external factor which influences the appraisal process.
Explain what the Golden Brick means in relation to VAT.
What tools do Natural England provide to help developments achieve biodiversity net gain (BNG)?
What is BNG?
What % improvement in biodiversity value should development deliver?
What sets out this requirement?
Describe VPS 1 - 5.
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
What does PS1 & PS2 relate to?
- PS1; Compliance with standards where a written valuation is provided
- PS2; Ethics, competency, objectivity and disclosures
Which RICS document outlines the process for identifying and using comparable evidence?
Comparable Evidence in Real Estate Valuation (RICS Guidance Note) 1st ed. 2019.
What is an Assumption?
- Matters that are reasonable to accept as fact in the context of the valuation assignment without specific investigation or verification.
Before accepting an instruction, you need to ensure you comply with PS 2. What pre-instruction checks should I carry out?
-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.
Major factor in determining the yield?
- Risk
- Other factors include; lease terms, security and regularity of income, use of property & location.
What is Years Purchase (YP)?
The number of years required for the income to repay the purchase price.
Are you aware on any RICS Guidance notes on COVID-19?
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.
What is market value?
-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.
Which VPGA relates to secured lending?
VPGA 2
What guidance should you follow when measuring a property?
- Code of Measuring practise. RICS Guidance Note. May 2015.
(GEA, GIA & NIA)
What is VPGA 2 & VPGA 10?
VPGA 2 - Valuation of interests for secured lending.
VPGA 10 - Matters that may give rise to material uncertainty.
The RICS Property Measurement, Professional Statement comprises what two elements;
- Professional statement: property measurement
- RICS IPMS Data Standard
What is included in Terms of Engagement for a Valuation?
- 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
What is in a Redbook Valuation?
- 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
