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Tom Oliver- APC > Valuations > Flashcards

Valuations Flashcards

1
Q

What is the full title of the red book?

A

RICS Valuation- Global Standards

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2
Q

Who are the International Valuations Standards Council?

A

non profit organisation that set the global standards for valuation
RICS are a member and sponsor of IVSC

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3
Q

When did the current edition of the red book come into force?

A

31st January 2022

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4
Q

What editions of the Red Book have been in effect during your training?

A

2022

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5
Q

What adaptions are being currently considered?

A

Various changes to the global standards including the IVS and ESG and technological adaptations are to be effective from 31/01/2025, with each VPS appropriately cross referencing IVS.

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6
Q

When did the UK National Supplement come into effect?

A

19th October 2023 and effective from the 1st May 2024.

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7
Q

What is the purpose of the Red Book?

A

-consistency, objectivity and transparency

-ensures valuation anywhere in the world is in accordance with highest professional standards

-provides framework for uniformity and best practice

-ensures compliance with Rules of Conduct

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8
Q

What were the reasons for the 2022 Red Book update?

A

-reflect changes in IVS made by IVSC

-reflect progress in ethics and measurement

-more detail when applying exceptions to VPS 1 - 5

-improved definitions and commentary on ESG section in glossary

-clarify existing text

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9
Q

Purpose of U.K. National supplement?

A

-supplement Red Book

-ensured U.K. valuations are consistent with U.K. accounting standards

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10
Q

To what valuations does the Red Book apply?

A

All valuations unless listed as exception

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11
Q

What valuations are exceptions to the Red Book?

A
  • Internal purposes

-Agency/brokerage work prior to acquisition or disposal instructions

-Statutory function

-Expert witness

-Negotiation or litigation

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12
Q

What valuations are carried out for Statutory Functions?

A
  • lease renewal (see S34 of 1954 Act)
  • rating
  • compulsory purchase
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13
Q

Difference between valuation technical and performance standards (VPS) and valuation practice guidance applications (VPGA)?

A

PS mandatory
VPGA advisory
Note: these are two elements that make up the Red Book

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14
Q

What are the consequences if valuer does not comply with VPS?

A

RICS can take disciplinary action
action depends on severity of breach

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15
Q

What are the consequences if valuer does not comply with VPGA?

A

may get sued for negligence if giving advice

Note: even if complied with Red Book, can still be sued as could have used bad comparables etc

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16
Q

How is departure from the Red Book mandatory requirements possible?

A
  • if inappropriate to comply with VPS 1 - 5
  • if client agrees

EG if good reason not to enter the property

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17
Q

Exception vs Departure from Red Book

A

Exception = Red Book does not apply

Departure = Red Book does apply but valuer does not comply with mandatory requirements

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18
Q

What do valuation files contain?

A

-conflict of interest check
-agreed terms of engagement
-inspection notes (photos, plans)
-comparable evidence
-valuation calculations
-valuation report

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19
Q

What information is required to do a valuation?

A

location

type of property

Note: also need to know purpose of valuation and to check for conflict of interest

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20
Q

Main contents of terms of engagement?

A

valuer name
client name
property address
purpose of valuation
basis of value
date
currency
fee basis
inspection and limitations
assumption and special assumptions
reference to CHP
statement on PII

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21
Q

PS1 Red Book

A

Compliance with valuation standards within U.K. jurisdiction

(comply with U.K. law)

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22
Q

PS2 Red Book

A

Ethics, competency, objectivity and disclosures

(valuer must have appropriate experience, skill and judgement, and avoid conflict of interest)

23
Q

How do you respond to request to value property for Pavement / Drive By / External assessment?

A
  • if new building and you have floor plans, fine to go ahead
  • if previously inspected, fine to go ahead
  • if new instruction but no plans/leases to review then cannot go ahead

Note: this is still Red Book valuation, often carried out as re-valuation

24
Q

Red Book Global Bases of Value

A
  • market value
  • market rent
  • investment value
  • fair value
25
Q

U.K. Specific Bases of Value

A
  • existing use value
  • existing use value for social housing (resi)
  • projected market value (resi)

Note: second two are residential ones

26
Q

Basis of Value vs Method of Valuation

A

Basis of Value = Red Book definition of value

Method of Valuation = technique used to arrived at a figure that we would describe with a Basis of Value

27
Q

What assumptions are made in producing a valuation?

A

-planning permission for existing use

-free from contamination and hazardous substances

-if any parts are covered, assume those areas are free from defects

28
Q

PS1

A

Compliance with standards where a written valuation is provided.

29
Q

PS2

A

Ethics, Competency, Objectivity and Disclosures

30
Q

VPS

A

Valuation technical and performance standards

31
Q

VPS1

A

Terms of engagement

32
Q

VPS2

A

inspections

33
Q

VPS3

A

Valuation Reports

34
Q

VPS4

A

Bases of value, assumptions and special assumptions

35
Q

VPS5

A

Valuation approaches and methods

36
Q

VPGA

A

Valuation Professional Guidance Applications

37
Q

How many VPGA’S are there

A

10 VPGA’s

38
Q

IVS

A

International Valuation standards

39
Q

What does the Red Book comprise of?

A

Introduction
Glossary
PS1 &2
VPS 1-5
VPGA 1-10
IVS

40
Q

Special Assumption

A

an assumption that assumes facts which differ from those existing at the date of valuation

41
Q

Examples of Special Assumptions

A

if property vacant, assume let on defined terms (and vice versa)
if property being refurbished, assume refurb has completed
if no planning, assume planning permission has been granted

42
Q

Market Value definition

A

The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arms length transaction after proper marketing where all parties have acted knowledgeably, prudently and without compulsion.

43
Q

Market Rent definition

A

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

44
Q

Special Value definition

A

An amount that reflects particular attributes of an asset that are only of value to a special purchaser

45
Q

Special Purchaser definition

A

A particular buyer for whom a particular asset has special value because of advantages arising from its ownership that would not be available to other buyers in a market

EG can pay more than market value or can participate in synergistic value (might own property A and want to buy neighbouring property B so can merge assets to get synergistic value)

46
Q

Synergistic Value definition

A

The result of a combination of two or more assets where the combined value is more than the sum of the separate values

47
Q

Marriage Value definition

A
48
Q
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49
Q
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50
Q
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51
Q
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52
Q
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53
Q
A

Tom Oliver- APC (18 decks)

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