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APC - 2023 > Valuation > Flashcards

Valuation Flashcards

1
Q

Main methods to produce a valuation?

A

Comparable
investment
residual
development appraisal
profits
Depreciated replacement cost

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2
Q

Give a example for purpose of valuation?

A

Rating, accounts, landlord and tenant, functions, corporate, Real Estate, advice, relocating, or refurbishing

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3
Q

What does VPS stand for and what is it?

A

Valuation practice statements processes to follow

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4
Q

What does PS stand for?

A

Professional standards things to think about

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5
Q

What is the Redbook?

A

A set of global standards, which set out procedural rules and guidance for written valuations

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6
Q

Name of the red book?

A

RICS valuation -global standards, 20,22

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7
Q

What is the main aim of the new 2022 addition?

A

Sustainability and ESG and language clearer

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8
Q

What is the purpose of the red book?

A

Purpose = consistency, objectivity, transparency COT

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9
Q

Why was the Redbook updated?

A

International valuation standards update every two years

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10
Q

What are the main headings of the Redbook?

A

Professional standard one-compliance
Professional standard two – ethics and cornflakes.
Valuation practice statement one - terms of engagement
Valuation practice statement to-inspection.
Valuation practice statement three-reporting
Valuation practice statement for-basis of valuation.
Valuation practice statement five – valuation approach (new) 

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11
Q

What are the exceptions to read book?

A

Allies
Agency, litigation, internal, expert, witness, statutory
Value it does not need to follow VPS 1-5

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12
Q

What is an independent expert?

A

Used in rent review disputes to determine rent

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13
Q

What is an expert witness?

A

Any profession called to give evidence to the court of law, they have duty to the court

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14
Q

Valuation example, talk through VPS, one

A

VPS, one sets out minimum terms of engagement.
– identification and status of valuer.
-client.
– any other users?
- property name
-Purpose
– basis value.
– valuation date.
– extent of investigations.

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15
Q

What is the vps2 and contents?

A

Inspection.
Talks about reevaluation with no inspection.
Must record info.
Measurement.

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16
Q

What is the VPS3 and contents?

A

Valuation reports
Minimum headings 2022
– identify valuer.
-client and other users.
-purpose
– an asset
– basis value.
-valuation date.
– investigation extent.
-Date of report.
– restriction on use.
-valuation amount-

2022, sustainability and ESG should be integral part of the valuation approach and commentary

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17
Q

What is VPS 4?

A

Basis of value 2022 highlights need for clearly explained definitions
Market rent
Market value.
Investment value (worth).
Fair value.
Synergistic value.

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18
Q

What is market value?

A

Estimated amount an asset or liability should exchange on valuation date between willing, buyer, willing, seller arm’s-length transaction, proper marketing parties, acts, knowledgeably, prudently, and without compulsion

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19
Q

What is market rent?

A

Estimated amount interest in property least on valuation date between willing lessor willing lessee appropriate lease terms arm’s-length transaction problem, marketing parties, acted knowledgeably, prudently, and without compulsion

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20
Q

What is investment value?

A

Worth
Value of asset to owner for individual investment
Can be used with DCF

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21
Q

What is fair value?

A

Price received in a transaction,
Applied only to financial statements consistent with market value

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22
Q

What is synergistic value?

A

Two or more assets combined value more than the sum of the separate assets
Specific purchaser
Marriage value

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23
Q

What is a special assumption?

A

Special Assumption that differs from the norm and not usually made typically

Assume land as planning

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24
Q

What is an assumption?

A

Reasonable to assume true without investigation

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25
Q

What is the VPS5?

A

Valuation approach
Definition should be in valuation report and why approached this for client.
Market approach.
Income approach.
Cost approach.

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26
Q

What is the market approach?

A

Based on comparing property with similar property

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27
Q

What is an example of the market approach method

A

Comparable method

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28
Q

What is the income approach?

A

Capitalising present and predicted income to produce a single capital value

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29
Q

What is a method of the income approach?

A

Investment method.
Profits method.

30
Q

What is the cost approach?

A

Indication of value, using the principle that buyer will pay no more than another or to construct

31
Q

What is an example of the cost approach method

A

Residual method.
Depreciate replacement cost method.

32
Q

ESG and sustainability advice, paper name?

A

Sustainability and ESG in commercial property, valuation and strategic advice, 20,21

33
Q

What is included in sustainability and ESG in commercial property valuation and strategic advice?

A

Definitions of ESG and sustainability and role of valuer
How sustainability ties into whole process.


34
Q

What is the UK supplement read book called?

A

UK valuation standards-January 2019

35
Q

Talk through your valuation of Shirley Road

A

Property-vacant ground floor retail unit.
Purpose- rental value agency
Basis -market rent
Terms of engagement vps1
Method valuation - market approach.
Technique-comparable.
Advice to client good market ability and layout of property there will be interest in the property.

36
Q

Methods and ways to produce a valuation?

A

Comparable
Investment.
Residual and development appraisal.
Profits.
Depreciated replacement costs.

37
Q

Talk me through your message, the valuation in Rye

A

Looked at subject property.
Selected comparables and verified the information.
Analyse the comparable.
Put them in a table.
Valued the property
Assessed

38
Q

What is an adjustment?

A

Made to express the comparables in terms of the subject property, so poor location, attempt to say what it was sold for, if it was in the same position

39
Q

What would you have in a compatibles table?

A

Agreed, rent, area, price per area, date, transaction, specification, condition, location, layout, not adjustment

40
Q

Comparable evidence note? And contents?

A

Comparable evidence in real estate valuation, 2019
Comparable sources, hierarchy of evidence, recording, comparable evidence, comparable analysis

41
Q

Types of investment method and what you’re achieving?

A

Term and reversion, hard-core, DCF
Used when there is an income stream to value, rent is capitalised to produce capital value

42
Q

Profits method, key points

A

Three years accounts, fair, maintainable, trade, fair, maintainable operating profit

Rental – fair, maintainable, operating, profit, 50-50 landlord split

43
Q

Residual and development appraisal key points

A

Gross development value – all of the cost to develop including profit.
Residual = values side.

44
Q

Development appraisal overview

A

GDV – all cost to develop, including land, value equals developers profit

45
Q

Points to note in residual valuation

A

Planning applications section 106payments and CIL
Fees, 10% costs

46
Q

How to calculate the net effective rent?

A

Add income divide by lease length,
Include premiums rent, free period, stepped rents

47
Q

What is the hierarchy of rental evidence?

A

1 new, letting
2 lease renewal.
3 rent review
4 independent expert.
5 opinion.
6 the arbitration-court decisions.
7 asking rents

48
Q

What is the all risks yield?

A

Risk return growth

49
Q

What is gross initial yield?

A

Rent divided by price equals Capital value

50
Q

What is net initial yield

A

Add purchases costs to price, and divide by rent

51
Q

What is equivalent yield

A

 Average between term and reversion

52
Q

Name types of due diligence

A

Competent?
Conflict check.
Confirm instructions in writing.
Terms of engagement.
Asbestos
Contamination
Environmental matters.
Flooding
Title and tenure.
Planning

53
Q

Talk through valuation instruction beginning to end

A

1 receive instructions.
2 conflict and competence check
3 issue, terms of engagement signed, and returned.
4 due diligence pre-inspection check
5 inspect and measure
6 method evaluation
7 research market comps
8 analyse, comparable evidence
9 weight comparable is explain and justify
10 value property
11 draft report
12 check registered, valuer & sign off
13 issue, report and invoice
14 keep secure record six years

54
Q

Types of things that affect valuation

A

Bigger picture property economics.
In perfect opaque market.
Knowing market
Prime, yields and zone a.
Talk through calculations.

55
Q

Name a case law for surveyor, not looking after client

A

Negligence hart v large
Surveyor negligent in inspection didn’t find damp
Didn’t advise to get professional consultant certificate before purchase

56
Q

What is an expert witness?

A

Any profession that gives expert advice to court duty to court not client

57
Q

What is an independent expert?

A

Use for rent review, disputes determines rent

58
Q

What are the exceptions to the red book?

A

ALIES
Agency litigation internal expert witness statutory

Not follow vps 1-5

59
Q

What is an expert witness?

A

Any profession, the kids expert advice to court and has a duty to court

60
Q

What is an independent expert?

A

Rent review, disputes determines rent

61
Q

What is an arbitrator?

A

Third-party decision without court

62
Q

What is a special assumption?

A

Assumption that differs from the norm and not typically made such as planning granted for land assumed

63
Q

What is the current RVs uniform business rates?

A

0.499 less than 51,000.
0.512 More than 51,000

64
Q

When will the new rateable list published and what antecedent valuation date is it based off?

A

First of April 2023, first of April 2021

65
Q

Have new MEES regulations changed

A

Yes, all commercial buildings existing leases minimum EPC, E 1 April 2023

66
Q

What are the exemptions of MEES regulation compliance?

A

High cost - cost of implementing cheapest recommendation exceeds £3500
Seven-year payback exemptions. - expected savings, over seven years is less than the cost of installation
All improvements made exception - landlord implemented all improvements, up to total of 3500
Devaluation - independent surveyor advises improvement reduces market value by more than 5% 
New landlord, exemptions.

67
Q

What is biodiversity net gain? What act? What bng target and when?

A

Contributing to nature recovery whilst developing land.
Land in a better state than before development
Environment act 20,21, minimum 10% November 2023

68
Q

What is the bank of England base rate?

A

4.25% rising to 4.5%.

69
Q

What is inflation currently reported at?

A

10.1%

70
Q

What is the estimated increase in construction materials?

A

20%

APC - 2023 (10 decks)

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