Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

APC > Valuation 1 > Flashcards

Valuation 1 Flashcards

1
Q

What is the full title of the Red Book?

A

RICS Valuation Global Standards 2022

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

When did the current edition of the Red Book come into force

A

31 January 2022

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Who are the International Valuation Standards Council?

A

A non-profit organisation that acts as the global standard setter for the valuation profession, serving the public interest.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

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

A

RICS Valuation Global Standards (2020)
RICS Valuation Global Standards (2022)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is the purpose of the Red Book?

A
  1. Consistency, objectivity and transparency
  2. To assure users that valuation provided anywhere in the world is in accordance with the highest professional standards
  3. To provide a framework for uniformity and best practice
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is the purpose of the UK National Supplement?

A

Supplements the Red Book. Sets out specific requirements and guidance for valuations in the UK

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

To what valuations does the Red Book apply?

A

To all valuations except those listed as an exception.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What valuations are exceptions to the Red Book?

A
  1. Agency or brokerage work in anticipation of disposal and acquisition instructions
  2. Acting or preparing to act as an expert witness
  3. Performing statutory functions
  4. Purely for internal purposes
  5. Preparation for or during negotiations or litigation
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Can you name some valuations that are carried out for a statutory function?

A

Compulsory purchase orders, rating, leasehold & enfranchisement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is the difference between Valuation Technical and Performance Standards (VPS) and Valuation Practice Guidance – applications (VPGA)?

A

VPS (Valuation Technical and Performance Standards) = Mandatory
VPGA (Valuation Practice Guidance - Applications) = Advisory

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What are the possible consequences if a Valuer does not comply with a VPS?

A

RICS can get involved and issue disciplinary action

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What are the possible consequences if a Valuer does not comply with a VPGA?

A

It could be a contributory factor in a negligence case. E.g. can result in a party losing money. Buyer - valued at £2m when £1.5m. Seller - valued at £1.5m when £2m.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Describe how Departure from the Red Book mandatory requirements may be possible.

A

When it may be unsuitable in some purposes.
This must be agreed with the client and stated in:
1. The terms of engagement
2. Report
3. and publications.
Departures must be justified.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What information would you require from a telephone enquirer who asked: Can you do me a valuation?

A

What is it, where is it, type of valuation required, who is it for (eliminate conflict of interest), extent of investigations etc

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What do your Valuation Files contain?

A
  1. Conflict of interest checks
  2. Terms of Engagement
  3. Inspection note etc
  4. Planning, rating and environmental searches
  5. Comparables and analysis
  6. Valuation calculation with rationale
  7. Report (stating opinion of value)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What are the main contents of the Terms of Engagement for a Valuation?

A
  1. Identification and status of the valuer*
  2. Identification of the client(s)*
  3. Identification of any other intended users
  4. Identification of the asset(s) or liability(ies) being valued*
  5. Valuation (financial) currency
  6. Purpose of the valuation*
  7. Basis(es) of value adopted*
  8. Valuation date*
  9. Nature and extent of the valuer’s work - including investigations - and any limitations thereon*
  10. Nature and source(s) of information upon which the valuer will rely
  11. All assumptions and special assumptions to be made*
  12. Format of the report
  13. Restrictions on use, distribution and publication of the report
  14. Confirmation that the valuation will be undertaken in accordance with the IVS
  15. The basis on which the fee will be calculated*
  16. Where the firm is registered for regulation by RICS, reference to the firm’s complaints handling procedure, with confirmation that a copy will be made available on request
  17. A statement that compliance with these standards may be subject to monitoring under RICS’ conduct and disciplinary regulations.
  18. A statement setting out any limitations on liability that have been agreed.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

How would you respond to a request to value a property from a Pavement Assessment only?

A

Why only a pavement assessment?

18
Q

Please name the Red Book Global Bases of Value.

A
  1. Market Value
  2. Market Rent
  3. Investment Value
  4. Fair Value
19
Q

Please name the UK-Specific Bases of Value.

A
  1. Existing Use Value,
  2. Existing Use Value for Social Housing
  3. Value of plant and equipment
  4. Projected market value of residential
20
Q

What is the difference between a Basis of Value and a Method of Valuation?

A

Basis of Value = statement of fundamental measurement assumptions of a valuation

Method of Value = a technique used to arrive at the value of the appropriate basis of value

21
Q

Describe the Assumptions that are usually made in producing a valuation.

A
  1. Title
  2. Condition of buildings
  3. Services
  4. Planning
  5. Contamination and hazardous substances
  6. Environmental matters distinguishing between:
    (a) Natural environmental constraints
    (b) Non-natural constraints (contamination and hazardous
    substances).
    (c) Sustainability – assessing the implications for value
22
Q

What is a Special Assumption?

A

A special assumption is made by the valuer where an assumption either assumes facts that differ from those existing at the valuation date or that would not be made by a typical market participant in a transaction on that valuation date.

23
Q

Give three situations when it would be appropriate to make a Special Assumption.

A
  1. Planning consent has or will be granted
  2. Proposed development has been completed in accordance with a defined plan and specification
  3. The property has been changed in a defined way
  4. The property is vacant (when occupied at the valuation date)
  5. The property is let on defined terms (when vacant at the valuation date)
  6. That synergistic value is created where one or more parties has a special interest
24
Q

Define Market Value in your own words.

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 arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.

25
Q

What do consider Proper Marketing to be in the Market Value definition?

A

Where the asset has been exposed to the market in the most appropriate manner

26
Q

What is an Arm’s Length Transaction?

A

Neither party has a relationship

27
Q

What is Synergistic Value?

A

Synergistic Value is the result of a combination of two or more assets or interests where the combined value is more than the sum of the separate values.

28
Q

What is Marriage Value?

A

An additional element of value created by the combination of two or more assets or interests where the combined value is more than the sum of the separate values.

29
Q

What is a Special Purchaser?

A

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

30
Q

When is Market Rent not appropriate as a Basis of Value in providing a report on the rental value of a property and why not?

A

When undertaking a rent review.
Why? – Because the rent review clause determines how the rent should be reviewed and the actual assumptions and disregards are taken into consideration.

31
Q

When is Fair Value the appropriate valuation basis?

A

When undertaking valuations for financial reporting (Asset Valuations)

32
Q

What is a Regulated Purpose Valuation?

A

Regulated purpose valuations are valuations relied on by 3rd parties or there is a public interest who have not commissioned the valuation; for 5 purposes;
1. Financial statements
2. Stock Exchange listing
3. Takeovers & mergers
4. Collective investment schemes
5. Unregulated property unit trust.

33
Q

What is an Asset Valuation?

A

A valuation undertaken for financial reporting

34
Q

When is Existing Use Value the valuation basis?

A

When valuing owner occupied assets - owned by local or central government.

35
Q

What is the fundamental difference between Market Value and Existing Use Value?

A

Existing Use Value does not take into account any additional value that could be created through additional use

36
Q

When is DRC used in Asset Valuations?

A

Used to value specialized assets that rarely sell on the market except through the sale of the business itself. = Football stadium

37
Q

According to VPGA 10, what matters may give rise to material valuation uncertainty

A

The asset or liability may have characteristics that make it difficult to value (it may be unusual or even unique and/or potential planning permission)

Limited or restricted information

Disrupted markets (unforeseen financial, macro-economic, legal, political or natural events)

38
Q

Structure of Red Book

A

Part 1: Introduction
Part 2: Glossary
Part 3: Professional Standards (PS) - mandatory
Part 4: Valuation Technical and Performance Standards (VPS) - mandatory
Part 5: Valuation Applications (VPGA) - advisory
Part 6: International Valuation Standards (IVS)

39
Q

Name the Professional Standards

A

PS 1 Compliance standards where a written valuation is provided
PS 2 Ethics, competency, objectivity and disclosures

40
Q

Name the Valuation Technical and Performance Standards

A

VPS 1 Terms of engagement (scope of work)
VPS 2 Inspections, investigations and records
VPS 3 Valuation reports
VPS 4 Bases of value, assumptions and special assumptions
VPS 5 Valuation approaches and methods

APC (15 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions