Valuation & Loan Sec

Question 1

RICS Valuation - Global Standards 2021 (Red Book Global)

Answer 1

Provides a framework for valuation in which each valuer will apply their own experience. Does not tell valuers how to value.

• Introduction
• Glossary
• Professional Standards (PS) (mandatory)
• Valuation Technical & Performance Standards (VPS) (mandatory)
• Valuation Practice Guidance Application (VPGA)
• International Valuation Standards (IVS)

Question 2

UK National Supplement 2023

Answer 2

First published in 2018. Latest version published Oct-23. Effective May-24.

• Supplements the Global Red Book for valuations in the UK.
• Reflects the outcome of the indepdent review of valuations undertaken by Peter Pereira Gray.

Key updates:
UK VPS 3 - regulated purpose valuations (i.e. accounts NOT secured lending)
* Valuer rotation policy for regulated purpose valuations. Single responsible valuer = 5 years. Valuation firm = 10 years. Minimum 3 year period after rotating. 2 year transitional period.
* Must state whether % fee from client is more than 5% of the total fee income.

Question 3

Sustainability in valuation (x 2)

Answer 3

RICS Guidance Note: Sustainability and ESG in Commercial Property Valuation and Strategic Advice 2021

VPGA 8 - consider sustainability implications (physical = flooding, transitional = regulatory requirements)

Question 4

Peter Pereira Gray

Answer 4

Independent Review of Real Estate Investment Valuations (2021)

• Commissioned by RICS Standards and Regulation Board

13 Recommendations, including:
* Regulated purpose valuations (accounts) must rotate valuers (see National Supplement VPS3)
* DCF primary method
* Post-qualification requirements
* Ensure a diverse and inclusive profession

Question 5

Exceptions to valuation being Red Book compliant?

Answer 5

PS1 (ALIEN)

Question 6

What to include in the Terms of Engagement?

Answer 6

VPS 1

Question 7

Inspections and Revaluations?

Answer 7

VPS 2

Question 8

What to include in report?

Answer 8

VPS 3

Question 9

Sharing preliminary draft / Changing opinion of value?

Answer 9

VPS 3

Question 10

Bases of value

Answer 10

VPS 4

Question 11

VPS 5

Answer 11

Valuation Approaches and Methods - valuers responsible for justifying method of valuation

Question 12

VPGA 1

Answer 12

Fair Value must be adopted for all IFRS accounts

Question 13

VPGA 2

Answer 13

Secured lending
* Conflict of interest 24 months with borrower
* Additional reporting requirements

Question 14

VPGA 8

Answer 14

Valuation of Real Property Interests
* Consider implications of sustainability on value (physical = flooding, transition = regulatory)

Question 15

VPGA 10

Answer 15

Material uncertainty
* Must not be misleading
* Standard caveat must not be used

Question 16

Advice on Comparable Evidence?

Answer 16

RICS Professional Standard: Comparable Evidence in Real Estate Valuation 2019

• Addresses issue of availability
• Hierarchy of Evidence