Valuation Q’s (ones I don’t know as well)

Question 1

What is a VPS?

Answer 1

Valuation technical and performance standards (mandatory)

Question 2

Can you tell me what VPS 1 is?

Answer 2

Terms of Engagement

Question 3

Can you tell me what VPS 2 is?

Answer 3

Inspections, investigations and records

Question 4

Can you tell me what VPS 3 is?

Answer 4

Valuation reports

Question 5

Can you tell me what VPS 4 is?

Answer 5

Based of value, assumptions and special assumptions

Question 6

Can you tell me what VPS 5 is?

Answer 6

Valuation approaches and methods

Question 7

What is a VPGA?

Answer 7

RICS Valuation Practice Guidance Applications

Question 8

What is the RICS Red Book?

Answer 8

RICS Valuation - Global Standards effective 31 January 2022
It is a set of global standards which set out procedural rules and guidance for written valuations and it was created for consistency, objectivity and transparency

Question 9

What is the valuation date?

Answer 9

Date on which opinion of value applies

Question 10

What is the difference between an assumption and special assumption?

Answer 10

An assumption is something that is taken to be true without the need for the valuer to verify, such as, we have achieved the services at the property are in good working order. A special assumption is something that is known not to be true, but is for the purpose of the valuation, such as assuming the property is vacant when it is occupied.

Question 11

Are there any RICS guidance notes or professional statements you would have regard to when carrying out valuations?

Answer 11

RICS Sustainability and ESG Professional Statement,
Comparable Evidence in Real Estate Valuation

Question 12

What is the purpose of professional indemnity insurance?

Answer 12

The purpose of professional indemnity insurance is to ensure that if a firm faces a claim it is protected from financial loss that it cannot meet from its own resources

Question 13

Does the RICS provide any guidance to assist regulated firms understanding risks and liabilities associated with professional services provided by its members?

Answer 13

Risk, liability and insurance - guidance note effective April 2021

Question 14

What is a liability cap?

Answer 14

Contractual agreement a client could only claim damages up to the amount greed, even if the law would otherwise award a greater sub and damages

Question 15

What are minimum limits of indemnity?

Answer 15

Firms turnover in proceeding year £100,000 or less = limit of indemnity £250,000
Firms turnover in proceeding year £100,001 to £200,000 = minimum limit of indemnity £500,000
Firms turnover in proceeding £ £200,001 or above = minimum limit of indemnity £1,000,000

Question 16

What is the definition of market rent?

Answer 16

The estimated amount for which an interest in real property should be leased on the valuation date between a willing lessee and a willing lessor on appropriate market terms, in an arms length transaction, after proper marketing where parties acted knowledgeably, prudently and without compulsion

Question 17

Why is it important to take a conflict of interest check?

Answer 17

To ensure that nothing impedes or might be perceived to impede an individual’s or firm’s ability to act impartially and in the best interest of the client

Question 18

What is a yield?

Answer 18

A measure of investment return, expressed as a percentage of capital invested

Question 19

What is an all risks yield?

Answer 19

Yield which reflects all the prospect and risks attached to a particular investment

Question 20

What is a true yield?

Answer 20

Assumes rent is paid in advance, not in arrears

Question 21

What is a nominal yield?

Answer 21

Assumes rent is paid in arrears

Question 22

What is gross yield?

Answer 22

Not adjusted for purchasers costs

Question 23

What is a net initial yield?

Answer 23

Adjusted for purchasers costs

Question 24

What is an initial yield?

Answer 24

Income yield for current income and current price

Question 25

What is a reversionary yield

Answer 25

Market rent / current price

Question 26

What is a running yield?

Answer 26

Yield at one moment in time

Question 27

What is an internal valuer?

Answer 27

Employed by a company to value internal assets, no third party reliance

Question 28

What is an external valuer?

Answer 28

Has no material links with the asset to be valued

Question 29

What is a years purchase

Answer 29

Number of years required for its income to repay its purchase price
100/yield

Question 30

Explain the methodology behind a profits valuation.

Answer 30

Turnover - costs = gross profit
Gross profit - reasonable working expenses = unadjusted net profit
Unadjusted net profit - operators remuneration = FMOP (fair maintainable operating profit)
Capitalisation at yield to achieve MV
Not FMOP assumes reasonable efficient operator