Week 6 - val standards Flashcards
explain terms of engagement
Use Red Book compliant Terms of Engagement to mitigate the firm’s risks in the event of a claim
Use a file checklist to ensure that a signed and dated copy is always kept on file
Any client specific instructions that may lead to a departure* from the minimum standards required under Red Book and International Valuation Standards (“IVS”) must be:
confirmed and agreed in writing with the client to be a departure;
clearly defined within both the Terms of Engagement; and
repeated within the content of the report
Confirm the valuation will be undertaken in accordance with IVS
Refer to the complaints handling procedure, with a copy available on request (RICS rules of conduct for firms para 7)
State that compliance with these standards may be subject to monitoring under RICS’ conduct and disciplinary regulations
Set out any agreed limitations on liability
problems with not folllowing rics process
Again, failure to follow prescribed standards may make defending a claim more difficult
Advice which is unclear, poorly structured or non-compliant with RICS valuation standards can lead to poor decisioning by clients, including lenders, with consequent risks of:
litigation (legal costs, time, revenue loss, stress, removal from panels etc); and
brand damage to the individual valuer and firm
Explain how a forced sale is handled
Whilst valuers may be required to provide an opinion of so-called “Forced Sale Value”, it is not a recognised basis of value
The term ‘forced sale value’ must not be used (see VPS 4, section 10, pp 75-77)
“Forced sale” is, in fact, a description of the situation under which an exchange takes place
The hypothetical circumstances upon which the opinion is to be based may vary so the valuer must:
clearly define and agree the situation assumed within the Terms of Engagement; and
restate the defined situation in the valuation report
