Valuations Flashcards

Question

• What are the RICS Valuation Global Standards?

Answer 1

All members providing a written valuation are required to comply with the standards set out in it – in other words, unless stated otherwise, they are mandatory.

Answer 2

1. Preface 2. Introduction 3. Professional Standards 4. Technical and performance standards 5. Applications 6. IVS

Answer 3

``` According to Professional Standard 1: Internal purposes Advice during litigation Statutory duty - tax return Anticipation of work Giving evidence ```

Answer 4

``` VPS 1: ID of valuer ID of client ID of intended users Asset to be valued Currency Purpose of valuation Basis of value Valuation date extent of investigation Source of infor Assumptions and special assumptions format restrictions on use/distribution Fee basis CHP ```

Answer 5

VPS2: Verify necessary information that is being relied upon is professionally reliable. Restricted information - desktop, no inspection - has to be set out in TOE and referred to in report Re-valuing - inspection required unless satisfied no material changes since last inspection - records to be held

Answer 6

``` VPS 3: ID & status of valuer ID of client and intended users Purpose ID of asset Basis of Value Valuation date Extent of investigations Assumptions and special assumptions restrictions on use and distribution Valuation approach and reasoning Valuation figure date of report ```

Answer 7

Yes - but marked as a draft and no impact on value. If any changes on value from additional information must be recorded.

Answer 8

VPS 4 - Basis of Valuation The price agreed for an asset or liability: between a willing buyer and seller on the valuation date in an arms length transaction after proper marketing where both parties act knowledgably, prudently and without compulsion

Answer 9

VPS 4: The amount for which a prop should be leased for: Between a willing lessor and lessee at appropriate terms On the valuation date In an arms length transaction after proper marketing where both parties act knowledgably, prudently and without compulsion

Answer 10

The price received to sell asset/liability in an orderly transaction between market participants on the measurement date Required for IFRS Generally aligned to MV

Answer 11

The value of an asset or liability to a specific owner or potential owner May differ from MV Measured against investment criteria

Answer 12

VPGA 1 : valuation for the inclusion in financial accounts - Fair value for IFRS VPGA 2: Valuations for secured lending - dealing with COI - any previous involvement with lender in last 2 years to be stated. VPGA 10: Material uncertainty - wording to be used regarding COVID - encouraged not to since November 2020

Answer 13

+/- 5% for Resi | +/- 10% for commercial (15% if complex)

Answer 14

Value from future circumstances changing i.e. planning granted - Could be reflected in the yield

Answer 15

VPGA 8 - best interest of charity

Answer 16

An assumptions is something that is generally held as fact - A special assumption that either assumes facts that differ from the actual facts existing at the valuation date or that would not be made by a typical market participant in a transaction on the valuation date.

Answer 17

Commercial: <150k = 0% 150-250k = 2% 250k> = 5% ``` Resi: <125k = 0% 125k-250k = 2% 250-925k =5% 925-1.5m = 10% 1.5m> = 12% ```

Answer 18

Physical, functional or economic benefit such as adjoining land - advantage to ownership

Answer 19

Advantage arising from ownership not available to others

Answer 20

6.8% SDLT : 5% Agency : 1% (0.2% VAT) Legal : 0.5% (0.1% VAT)

Answer 21

Capital payment from one party to another i.e. fixtures and fittings, secure prime shop

Answer 22

Take into account rent frees Total sum of rent received / term = net effective i.e. £50 for 5 years with 1 year rent free = £200 / 5 =$40

Answer 23

Piece of land that controls access to another - upper tribunal suggest value of 15-50% of GDV unlocked by including

Answer 24

``` used for comparison of retail units rental value falls away from street 6.1m zones - 9.14m in London allowances for hard fronts mirror zoning natural zoning masking - obscured areas ```

Answer 25

``` monitoring with 3 aims: 1. improve quality of valuations, increase professional standards 2. Self regulate 3. protect and raise status of profession Clients expect: 1. openness & transparency 2. RICS protection 3. expertise and clear reporting ```

Answer 26

Investment - it was under rented and so the term and reversion method was used

Answer 27

Calling agents, | Internal system

Answer 28

According to the guidance note - comparable evidence in RE valuation 2019 aligned to 3 categories. Fortunately there was comparable evidence where all information was available and accurate internally that could be used in the local vicinity. ``` ERV = £50psf Yield = 4-5% ```

Answer 29

``` Fully Let Freehold WAULT = 4.3 8000 sq ft. EPC rating C ```

Answer 30

Reception and Common Parts recently refurbished. LG and 4 upper floors Steel and concrete frame Grade A - LED lighting, Air Con, Lift, Suspended Ceiling, Natural Daylight

Answer 31

Reception and Common Parts recently refurbished. LG and 4 upper floors Steel and concrete frame Grade A - LED lighting, Air Con, Lift, Suspended Ceiling, Natural Daylight

Answer 32

The value of the building rose due to one of the tenants agreeing a lease renewal for 8 years with 8 months rent free and a 5 year break. The value rose by 5% or £250k

Answer 33

Voids and Rent Frees had been extended due to COVID - from 12 to 18 months rent frees and voids as high as 21. If there was less than a year on the tenancy then the severed scenario would be put in place. These were referred to at the next quarter date.

Answer 34

City - Tenant lease was set to expire in 6 months and there was no tenant incoming. Rent free was moved out to 18 and void 21 months as the comparable data had suggested Value of that floor and building fell - After capitalizing the existing term the delay to the next lease being signed is now longer, the PV value of that income stream is no lower. The extension in the rent free means that the net effective rent will be lower and so the income stream is less.

Answer 35

Professional Standards - PS1 compliance with standards in written valuation and exceptions PS2 - Ethics, competency, objectivity and disclosures

Answer 36

Suitability Transaction (Look for others)

Answer 37

``` Receive instruction Check competence Check independence Issue TOE Receive signed TOE Gather Info DD Inspect/Measure Research and assemble schedule Undertake valuation Draft Report Cross checked by another valuer finalize and sign report invoice archive ```

Answer 38

``` retail - bond street 2.75% retail OOT - 6% Shopping centres - 10% Leisure - 8% SA - 3-5% depending on structure Retirement - 3-4% dependent on structure Office - 3-4% ```

Answer 39

Draw it Term capitalized Reversion capitalized and present valued

Answer 40

Hardcore-Layer Market rent into perpetuity Top slice capitalized at higher yield

Answer 41

RICS Valuation - Global Standards (‘Red Book Global Standards’) contains mandatory rules, best practice guidance and related commentary for all members undertaking asset valuations. The Red Book is issued by RICS as part of our commitment to promote and support high standards in valuation delivery worldwide. The publication details mandatory practices for RICS members undertaking valuation services. It also offers a useful reference resource for valuation users and other stakeholders.

Answer 42

Professional indemnity insurance protects you against claims for loss or damage made by clients or third parties as a result of the impact of negligent services you provided or negligent advice you offered. Compensation claims can be brought against you even if you provided a service or offered advice for free.

Answer 43

Dealing with COI - <2yrs disclosed RICS code of conduct Arrangements recorded Reporting: terms around COI, Val method, recent transaction, suitability for mortgage, circumstances affected price, special assumptions and deviation from MV stated.

Answer 44

Dealing with COI - <2yrs disclosed RICS code of conduct Arrangements recorded Reporting: terms around COI, Val method, recent transaction, suitability for mortgage, circumstances affected price, special assumptions and deviation from MV stated.

Answer 45

nature of restriction agreed restriction in writing restriction reasonable restriction in report

Answer 46

``` Yes: nature agreed in writing val implications in writing reasonable included in report ```

Answer 47

- TOE to clear and accurate even when members are valuing exemptions - Not to refer to exemptions as quasi red book - Emphasis on the inclusion of sustainability and ESG with regard to applications

Answer 48

The RICS Standards and regulation board has commissioned a review of real estate investment valuation. Creation of a valuation quality assurance panel Creation of valuation compliance officer role within firms Guidance from RICS to clarify their expectations around the culture and behaviors expected of RICS professionals undertaking valuations.