Valuation (Submission) Flashcards
When have you used the comparable method?
When valuing an Agricultural Holding in Whitton, Knighton for secured lending purposes.
When have you used the investment method?
When valuing land and buildings at Merrington, Bomere Heath, in which part of the holding was subject to an AHA Tenancy.
What purposes are valuations undertaken?
- Secured lending
- Inheritance Tax
- Matrimonial Purposes
- Tax Planning
What are the main factors that can impact the value of agricultural properties?
- Tenure
- Location
- Size
- Condition
- Restrictions
- Rights of way
- Designations
- Planning Permission
What are the minimum Terms of Engagement for a Valuation Report?
- 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
- Date of inspection
- Extent of valuers investigations
- Nature & source of information relied upon
- Special assumption
- Fee
- Fee settlement
- Complaints handling procedure
- Liability
- Signatures
What is the minimum contents of a Redbook Valuation Report?
- 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
What valuations fall outside the scope of the Red Book?
- Expert Witness
- Litigation & negotiaiton
- Market Appraisal / Agency
- Statutory basis
- Internal Purposes
Why is it importance to carry out the correct conflict checks prior to commencing a Valuation?
- Essential component of being a professional. - Allows RICS firms and members to demonstrate that professionalism, creates trust and gives confidence to clients.
- The RICS Rules of Conduct set out an overarching obligation for both RICS-regulated firms and members to always act with integrity and avoid conflicts of interest.
- Any actions or situations that are inconsistent with their professional obligations.
Why is it important to have the correct Professional Indemnity Insurance in place?
- Requirements of RICS Rules of Conduct for Firms.
- Ensure that if the firm faces a claim, it is protected from financial loss that it cannot meet from its own resources.
- Protect the insured member or firm against the consequences of its liability to pay damages to third parties for breaches of professional duty
- Ensures the firm’s clients do not suffer financial loss, which the firm cannot meet.
How did you gather comparable evidence for the valuation at Whitton?
Obtained Comparables:
- Company Database
- Phoned local agents
- Land Registry
Split into elements:
- Farmhouse
- Buildings
- Land
Analyse:
- Collate evidence in a schedule
- Adjust accordingly using the Hierarchy of evidence
- -
How did you prepare the Report for the farm in Whitton in accordance with the Red Book?
PS 1 - (Compliance with standards where a written valuation report is provided); Complying with the Red Book
PS 2 - (Ethics, competency, objectivity & disclousers); Conflict of interest checks & necessary experience & qualifications
VPS 1- (TOE); Obtained signed TOE
VPS 2 - (Inspections, Investigations & Records); Keeping a record of leigible notes.
VPS 3 - (Valuation Reports); addressed all matters as per TOE - minimum content
VPS 4 - (Bases of Value, Assumptions & Special Assumptions); clearly stated any assumtpions
VPS 5 - (Valuation Approaches & Methods); justifying the valuation approaches and the valuation methods used.
VPGA 2 - (Secured Lending); Additonal requirements
What is the basis of value for an IHT Valuation?
- ‘Open market value’ which is the value that the property would reasonably be expected to achieve if sold on the open market at the date of death (Section 160 of the Inheritance Tax Act 1984).
- That price shall not be assumed to be reduced on the ground that the whole property is to be placed on the market at one and the same time.
What matters requie consideration and comment in a report prepared for secured lending?
- Conflicts / previous involvement
- Valuation methodology / calculations / rationale / comparables
- Suitability of the property as security
- Comments on things that could affect the price
- Potential & demand for alternative uses
- Disrepair
- Comment on environmental issues
- Comments on any volatility in the local market and/or demand
- PI Insurance
- Sales history
How would you value the Term of an AHA tenancy?
- Rent Passing (less say 10% to account for management & agents fees)
- PV of £1 per annum (YP Single rate) @ 1.5% for 17 years
- Multiply together for total
How would you value the Reversion of an AHA tenancy?
- Vacant Possession
- PV of £1 (YP in perpetuity) @
- Multiply together for total
(Add term and reversion together!)
