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CRE APC 2024 > Valuation Module 1 > Flashcards

Valuation Module 1 Flashcards

1
Q

What is the full title of the Red Book?

A

RICS Valuation Global Standards 2022 supplemented by the RICS Valuation Global Standards UK National Supplement 2024

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2
Q

When did the current edition of the Red Book come into force?

A

31.01.2022

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3
Q

Who are the International Valuation Standards Council?

A

It’s a not for profit independent body that act in the public interest to ensure international standards and guidance.

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4
Q

What editions of the Red Book have been in effect during my APC training period?

A

2022 GS and 2019 and 2024 UK National standards

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5
Q

What is the purpose of the Red Book?

A

It’s a framework for best practice, setting out procedural rules and guidance. Ensuring consistency, objectivity, and transparency in valuations.

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6
Q

What is the purpose of the UK National supplement?

A

To supplement the RICS Valuation Global Standards. It’s tailored to the UK market.

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7
Q

To what valuations does the Red Book apply?

A

Valuations carried out by RICS registered valuers globally. Real Estate, M&E, Business, Infrastructure, Financial and National Resources (6).

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8
Q

What 5 valuations are exceptions to the Red Book?

A
  1. Internal only. 2. Agency/marketing. 3. Statutory 4. Litigation and 5. Expert witness
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9
Q

Can you name some valuations that are carried out for Statutory Function?

A
  1. Compulsory purchase. 2. Business rates. 3 Leasehold enfranchisement. 4. Demunitive Value. 5. Rent & lease renewal.
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10
Q

What is the difference between Valuation Technical and Performance Standards (VPS) and Valuation Practice Guidance applications (VPGA)?

A

VPS is mandatory, and VPGA is guidance, best practice recommendations.

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11
Q

What is RICS Practice Information?

A

Supports practice, knowledge and performance but is not mandatory.

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12
Q

What are the possible consequences if a valuer does not comply with a VPS.

A
  1. Disciplinary action. 2. Loss of accreditation (suspension/expulsion). 3. Consent order (order to rectify wrong).
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13
Q

What are the possible consequences if a Valuer does not comply with VPGA?

A

Potential contributory factor in a negligence claim.

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14
Q

Describe how Departure from the Red Book mandatory requirements may be possible?

A
  1. Professional judgement. 2. Good reason. 3. Client instruction. It must be justified, disclosed and documented
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15
Q

What information would you require from a telephone enquirer who asked: Can you do me a valuation.

A
  1. My competence (property, location, market, purpose).
  2. Client and seller (ensure no conflict of interest/manage it.
  3. Deadline
  4. Contact info
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16
Q

What do your valuation files contain?

A
  1. COI and due diligence checks
  2. Property information
  3. Client information
  4. Valuation methodology
  5. Base value
  6. Date
  7. Lease details, photos, inspection, and measurements information.
  8. Comparable data
  9. TofE
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17
Q

What are the main contents of the Terms of Engagement for a Valuation?

A
  1. Valuer’s competency
  2. Client details
  3. Property details
  4. Purpose
  5. Bases of value
  6. Valuation date
  7. Limitations
  8. Assumptions and Special assumptions
  9. Fee and indemnity
18
Q

How would you respond to a request to value a property from a Drive-by?

A
  1. Competence (know area, property, market well)
  2. Is the property standard
  3. Add limitations to the report (no internal inspection etc)
19
Q

Please name the Red Book Global Bases of value?

A
  1. Market value
  2. Market rent
  3. Investment value
  4. Fair value
20
Q

Please name the UK specific bases of value?

A

EUV (existing use value) and two residential (EUVSH & Project market value).

21
Q

What is the difference between a Basis of Value and Method of Valuation?

A

Basis of value is a red book definition of value.

Method of validation is the calculation you undertake.

22
Q

Describe three assumptions that are usually made in producing a valuation?

A
  1. Title (good and free of restrictive convenants)
  2. Property condition (that any hidden aspects will not reveal defects and all equipment is maintained and in good repair)
  3. Free from contamination and hazards
23
Q

What is a Special Assumption?

A

Assumes facts that differ from those existing on the valuation date. Like planning permission has been granted.

24
Q

Give three situations when it would be appropriate to make special assumptions?

A
  1. If let assume it’s vacant possession
  2. If vacant, assume it’s let.
  3. Assume development is complete
  4. Assume planning permission is achieved
25
Q

Define market value?

A

Estimated value a proper would exchange for between a willing buyer and willing seller, at arms length after proper marketing, on a set valuation date where the parties acted without compulsion.

26
Q

What do you consider proper marketing?

A
  1. Selling by most appropriate method of sale
  2. Sufficient time to achieve best price
  3. Advertise to target market.
27
Q

What is an arms length transaction?

A

No business or personal relationships.

28
Q

What is synergistic value?

A

The value of merged interest is greater than individual parts. I.e. freehold/leasehold

29
Q

What is marriage value?

A

The difference (additional uplift) between synergistic value and market value.

30
Q

What is a Special Purchaser?

A

One who enjoys special value over and above the open market.

31
Q

When is market rent not appropriate as a basis of value in providing a report on the rental value of a property and why not?

A
  1. Only applies to vacant property
    2.depends on lease disregards
  2. lease renewal conditions
32
Q

When is fair value the appropriate valuation basis?

A

It is used in financial statements.

33
Q

What is regulated purpose valuation?

A

It’s used in company accounts valuation.

34
Q

What is an Asset Valuation?

A

It’s used in balance sheets.

35
Q

When is Euv used?

A

In local and central government, non-specialised owner occupied properties.

36
Q

What is the fundamental difference between market value and existing use value?

A

Market value is the highest and best use value.

EUV cannot consider development or AUV (alternatives use value).

37
Q

When is DRC (Deprecated Replacement Cost) used?

A

As a last resort for bespoke properties that cannot be valued any other way. Eg school, council asset, library, fire station?

38
Q

Name three situations that can adversely affect the certainty of values?

A
  1. Property characteristics
  2. Limited information
  3. Disruptive markets
39
Q

Can you do a forced sale valuation?

A

No. You could do a market value with a special assumption that sale would take place after proper marketing?

40
Q

What is a usual proper marketing period?

A

Residential- 90 days
Commercial- 180 days

41
Q

What does establish a framework for uniformity and best practice mean?

A
  1. Valuer must be confident
  2. no COI
  3. Agree TofE
  4. Inspect, measure, and carry out relevant investigations.
  5. Assemble, analyse, weigh, and rank comparables
  6. Conduct valuation with rationale
  7. Report valuation

CRE APC 2024 (11 decks)

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