Valuation Level One Flashcards
1
Q
Tell me what are the 5 methods of valuation.
A
2
Q
Tell me about how you would value a building using the profits/contractors/investment/comparable/residual method of valuation.
A
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?
A
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?
A
19
Q
What changes were made?
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20
Q
Which do you follow - the latest IVS or the Red Book Global?
A
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?
A
23
Q
What type of advice does the Red Book cover?
A
24
Q
If you provide preliminary advice / draft valuation report, what should you state in writing to your client?
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25
What type of valuations might be relied upon by a third party?
26
Tell me what the definition of MR/MV/investment value/fair value?
27
What is the difference between an assumption and a special assumption?
28
What sources of information would you consider when preparing a valuation report?
29
If you have previously valued an asset, do you need to make any additional disclosures and what might they be?
30
If your firm is too small to have a rotation policy or valuation panel, what else can you do to ensure objectivity?
31
When might a conflict of interest exist in relation to a valuation instruction?
32
What must be included in your terms of engagement / valuation report?
33
What is a restricted valuation service and can you provide one?
34
How do you deal with limitations on inspection or analysis?
35
Can you revalue a property without inspecting?
36
What RICS guidance relates to the use of comparable evidence?
37
What is an internal valuer?
38
Can an external valuer provide an internal purposes valuation?
39
What happens if market conditions change between the valuation date and report date?
40
Is special value from a special purchaser reflected in MV?
41
Where does the definition of fair value come from?
42
Does this differ from MV?
43
When is fair value used?
44
What are the 3 approaches under VPS5?
45
What is the Valuer Registration Scheme?
46
Are there any instances where certain sections of the Red Book may not apply?
47
What are these and which sections don’t apply?
48
What is the basis of value under UK GAAP FRS 102?
49
What is a SORP?
50
When would you use EUV?
51
What is the definition of EUV?
52
What additional criteria apply to secured lending valuations?
53
What information should you specifically request for a secured lending valuation?
54
What is a regulated purpose valuation?
55
What additional disclosures must be made for a regulated purpose valuation?
56
What is the basis of value for a statutory valuation?
57
What might a statutory valuation relate to?
58
What is the definition of the statutory basis of valuation?
59
What is a yield?
60
What is a Net Initial Yield?
61
What is a reversionary yield?
62
What is an equated yield?
63
What is an equivalent yield?
64
How would a yield reported from auction differ from a Net Initial Yield?
65
What purchaser’s costs do you deduct from a valuation?
66
How would you value a property in uncertain market conditions - does the Red Book give any guidance?
67
How could you value a long leasehold interest?
68
How does a term and reversion and DCF differ?
69
What is the difference between a growth explicit and a growth implicit yield?
70
Give examples of each of these types of yield.
71
How would you value an under/over rented investment property?
72
When would you use a dual rate investment calculation?
73
Where can you find yield evidence from?
74
What is the hierarchy of evidence?
75
What would you do if comparable evidence was limited?
76
What is NPV?
77
What is IRR?
78
What is a term and reversion?
79
What is a hardcore and topslice?
80
What is a Discounted Cash Flow (DCF)?
81
What is a short-cut DCF?
82
When would you use a DCF?
83
What are the advantages of a DCF?
84
What are the disadvantages of a DCF?
85
What is a YP/PV/YP in perpetuity?
86
What is marriage value?
87
When would you include an element of hope value in a valuation?
88
How would you value a ransom strip?
89
How does market value differ to investment value/fair value?
90
What is a dual capitalisation rate and when would you use one?
91
Is the profits/DRC method used for specialised or specialist property?
92
What type of properties would you use the profits method for?
93
When would you use the profits method?
94
What is intangible goodwill?
95
What is turnover / gross profit / net profit?
96
What are the steps to providing a profits valuation?
97
What is Fair Maintainable Turnover?
98
What is a Reasonably Efficient Operator?
99
Does the assessment of the REO include personal goodwill and trading potential?
100
What is personal goodwill?
101
What is trading potential?
102
How do you calculate the tenant’s proportion of rent in a profits valuation?
103
What is EBITDA?
104
What is Fair Maintainable Operating Profit?
105
How do you calculate the divisible balance?
106
What accounts information would you want to review for a profits valuation?
107
Do RICS provide any guidance on RLVs or valuing development property?
108
What is an RLV?
109
What is a development appraisal?
110
How do they differ?
111
How else can you value development land?
112
What is the basic process of undertaking a RLV/development appraisal?
113
What does a development appraisal show?
114
What are the key things you need to consider when appraising / inspecting a development site?
115
What else should you consider?
116
Tell me about your due diligence when undertaking a development appraisal.
117
What sources of information do you use when undertaking a development appraisal?
118
How can you assess development potential?
119
What is GDV/NDV?
120
How do you calculate GDV?
121
What do development costs include?
122
Where can you source build costs from?
123
What are typical finance costs?
124
What would you apply finance costs to and on what basis?
125
What is an S curve?
126
What do holding costs typically include?
127
How do you typically calculate developer’s profit?
128
What are some typical inputs (and %/£) in a RLV?
129
What other criteria might be assessed in terms of performance measurement for a RLV?
130
What are the advantages/disadvantages of a RLV?
131
What is included in the development programme?
132
What is CIL?
133
What is S106?
134
What are the differences between CIL and S106?
135
What is CIL charged on?
136
What is a Monte Carlo simulation?
137
What is a sensitivity analysis?
138
How do you carry out a sensitivity analysis?
139
What variables might you change and why?
140
What factors affect sensitivity of a development appraisal?
141
Tell me about your understanding of incorporating affordable housing into development appraisals.
142
Tell me about software you have used to provide a RLV.
143
What RICS guidance relates to the valuation of development property?
144
Give me a limitation of this software.
145
What is viability?
146
When would a cost approach be used?
147
What type of buildings would a cost approach be used for?
148
What is the supposition that a DRC is based upon?
149
What are the 3 components of the cost approach?
150
How do you assess the value of the land?
151
How do you assess Gross Replacement Cost?
152
What costs would you consider within GRC?
153
What would you do if the building could be replaced with a modern equivalent?
154
How would you deal with depreciation/obsolescence?
155
What are the three ways to deal with depreciation?
156
Is the cost approach a market valuation?
157
How might onerous lease terms, e.g. restrictive user, break clause, impact upon capital or rental value?
158
What liabilities may be created through valuation?
159
What is a liability cap and when would one be used?
160
Explain why the RICS are carrying out an Independent Valuation Review. Who is leading this?
161
Explain what you understand by the term, margin of error.
162
Explain your understanding of K/S Lincoln v CBRE Hotels (2010).
163
Explain the precent set in Hyde and another v Nygate and another (2021) in relation to the valuation of high-profile development sites.
164
How can a NIY of zero be achieved?
165
In a scenario where rents are static and the capital value increases, would you expect yields to increase or decrease?
166
In a scenario where rents are static and the capital value increases, would you expect yields to increase or decrease?
167
What does heterogenous mean in terms of comparable evidence?
168
What does the term 'tone of value' mean to you?
169
Development appraisal?
170
What is CIL?
171
What is S106?
172
What are the differences between CIL and S106?
173
How can a development appraisal be used in valuing developments?
174
Tell me about planning/costs/GDV/individual site elements in relation to a development appraisal?
175
What is a Monte Carlo simulation?
176
What is a sensitivity analysis?
177
How do you carry out a sensitivity analysis?
178
What variables might you change and why?
179
What factors affect sensitivity of a development appraisal?
180
Tell me about your understanding of RICS Financial Viability in Planning/Valuation of Development Property.
181
Tell me about your understanding of incorporating affordable housing into development appraisals.
182
What is an S curve?
183
Tell me about your due diligence when undertaking a development appraisal.
184
What sources of information do you use when undertaking a development appraisal?
185
How do you calculate GDV/NDV/finance costs/project costs/project timescales etc?
186
How do you calculate developer’s profit?
187
What other metrics can you produce from a development appraisal?
188
What is the difference between a residual valuation and a development appraisal?
189
Tell me about software you have used.
190
What are the differences between these and when may one be more suitable than another?
191
Give me a limitation of a piece of software you have used.
192
Give me a limitation of a piece of software you have used.
193
What is profit on cost/profit on GDV? When would you use one/both of these?
194
What is internal rate of return?
195
How does this differ according to your client’s requirements?
196
What is viability?
197
What is a Financial Viability Assessment (FVA)?
198
Why would one be carried out?
199
What are the key viability benchmarks?
200
What are the key inputs and outputs?
201
What is site value for a scheme-specific FVA?
202
When undertaking a Local Plan or CIL FVA, how is site value defined?
203
What happens if a scheme is deemed financially unviable for a developer?
204
What are the main forms of finance available to developers?
205
What are lenders' current requirements in relation to gearing?
206
What is mezzanine finance and how is it priced?
207
What information do lenders generally require regarding a property before agreeing to lend?
208
What is the difference between senior debt and equity finance?
209
What is a charge?
210
Tell me about an external factor which influences the appraisal process.
211
Explain what the Golden Brick means in relation to VAT.
212
What tools do Natural England provide to help developments achieve biodiversity net gain (BNG)?
213
What is BNG?
214
What % improvement in biodiversity value should development deliver?
215
What sets out this requirement?
216
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
217
What does PS1 & PS2 relate to?
- PS1; Compliance with standards where a written valuation is provided
- PS2; Ethics, competency, objectivity and disclosures
218
Which RICS document outlines the process for identifying and using comparable evidence?
Comparable Evidence in Real Estate Valuation (RICS Guidance Note) 1st ed. 2019.
219
What is an Assumption?
- Matters that are reasonable to accept as fact in the context of the valuation assignment without specific investigation or verification.
220
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.
221
Major factor in determining the yield?
- Risk
- Other factors include; lease terms, security and regularity of income, use of property & location.
222
What is Years Purchase (YP)?
The number of years required for the income to repay the purchase price.
223
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.
224
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.
225
Which VPGA relates to secured lending?
VPGA 2
226
What guidance should you follow when measuring a property?
- Code of Measuring practise. RICS Guidance Note. May 2015.
(GEA, GIA & NIA)
227
What is VPGA 2 & VPGA 10?
VPGA 2 - Valuation of interests for secured lending.
VPGA 10 - Matters that may give rise to material uncertainty.
228
The RICS Property Measurement, Professional Statement comprises what two elements;
1. Professional statement: property measurement
2. RICS IPMS Data Standard
229
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
230
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
