Valuation 2

Question 1

When is Layer /hardcore method used

Answer 1

For over rented investments

Question 2

Hardcore method notes

Answer 2

Income flow divided horizontally
Bottom slice is market rent
Top slice is rent passing less market rent until lease event
Higher yield on top slice due to additional risk

Question 3

Method for comparative method

Answer 3

1. Search and select comparables
2. Confirm and verify details and analyse headline rent to get a net effective rent
3. Assemble comparables in a schedule
4. Adjust comparables using hierarchy of evidence
5. Analyse comparables to form an opinion of value
6. Report value and prepare file note

Question 4

What are the 3 initial steps to take in a valuation

Answer 4

Competence check - are you competent enough?
Independence check - any conflict of interest
Terms of engagement ment

Question 5

Name statutory due diligence for valuation . 9 here

Answer 5

1 asbestos register
2. Business rates / council tax
3. Contamination
4. Equality act 2010 compliance
5. Public rights of way
6. EPC
7. Fire safety
8. Legal titles and tenure
9. Planning history and compliance

Question 6

What is the income approach?

Answer 6

Converting current and future cashflows into a capital value

Question 7

What is the cost approach

Answer 7

Reference to tue cost of the asses whether by purchase or construction

Question 8

What is the market approach

Answer 8

Use of comparable evidence

Question 9

Explain the valuation timeline. 16 steps

Answer 9

1. Receive instructions from client
2. Check competence
3. Check independence
4. Issue toe
5. Receive signed terms back
6. Gather information e.g. lease, title docs, planning
7. Undertake die dilligence - checking matters that could have an impact on value
8. Inspect and measure
9. Research market and comparables
10. Undertake valuation
11. Draft report
12. Peer review of report and valuation
    13 finalise and sign report
    14 report to client
    15 issue invoice
    16 ensure correct filing

Question 10

1. What is the red book?
2. Who can carry out valuations?

Answer 10

1. The red book contains mandatory rules, best practice guidance and related commentary for all members undertaking valuation work across the globe
2. Registered valuers under the valuation registration service

Question 11

What are the different sections of the red book?

Answer 11

1. Intro
2. Glossary
3. Professional standards
4. Valuation technical and performance standards (vps)
5. Valuation applications
6. IVS

Question 12

What are the professional standards? PS1 PS2

Answer 12

PS1 compliance with standards where written valuation is provided
PS2 ethics, competency, objectivity, and disclosures

Question 13

What is the definition of market value?

Answer 13

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

Question 14

What are the bases of value?

Answer 14

Defined in IVS 04
-market value
-market rent
Investment value
Equitable value
Synergistic value
Liquidation value

Question 15

What is the definition of market rent?

Answer 15

Estimated amount for which an interest in real property should be leased on the valuation date between a willing lessee and lessor in an arms length transaction after proper marketing which both parties acted correctly

Question 16

How can you find comparable evidence? What’s the GN

Answer 16

Comparable evidence in real estate valuation 2019
Cat a direct conparables
Cat b market data
Cat c other sources

Question 17

What is fair value?

Answer 17

Price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date

Question 18

What are yields

Answer 18

Measure of return

Question 19

What are the valuation applications? VGPA

Answer 19

1 inclusion in final accounts
2 for secured lending
8 real property interests
10 material uncertainty

Question 20

How is the profits method calculated?

Answer 20

Net profits (income - expenditure) capitalised at an appropriate used

Question 21

When is the red book isn’t used? 5 exceptions name 4

Answer 21

Internal
Statutory function
Agency purposes
Negotiation and litigation
Giving evidence as expert witness

Question 22

What are the 6 steps for comparable evidence?

Answer 22

Search and select comps

Confirm and verify details

Assemble comps in schedule

Adjust comps using hierarchy

Analyse comps to form opinion

Report value and prepare file note

Question 23

What is Cat B on the hierarchy and provide examples

Answer 23

General market data/secondary data

Indices
Historic ecidence
Demand and supply data
Investment data

Question 24

Name examples of cat C evidence

Answer 24

Evidence from other real estate types and locations

Interest rates, stock market

Question 25

Which yield is used in a residual site valuation?

Answer 25

All risks yield… be prepped to name definition

Question 26

What’s the simple two step methodology for DRC method ?

Answer 26

Value of land in its existing use

Add current cost of replacing the building plus fees less depreciation and deterioration

Question 27

What is the guidance note for ESG in valuation?

Answer 27

Sustainability and ESG in commercial property valuation and strategic advice 3rd edition 2021

Question 28

What’s the typical margin of error for a commercial property valuation

Answer 28

+/- 10%

Question 29

What’s the current SDLT rates for non resi?

Answer 29

£0-£150,000 Nil
£150,000 - £250,000 2%
£250,000+ 5%