Red Book

Question 1

What is the Red Book Global?

Answer 1

• Red book is used to build consistency, transparency, confidence so that users of valuation services are confident with the valuation of an RICS member
• Red Book comprises of Global addition and UK National Supplement
• Includes the international valuation standards in the second part of the Red Book

Question 2

Key changes to Red Book Global?

Answer 2

• Written valuation now includes electronic format and automated valuation models
• Professional scepticism must be applied when considering evidence
• Importance of discussing sustainability and environmental matters when valuing interests in real estate
• VPGA 8 sustainability should only be reflected in value where market evidence indicates

Question 3

What is a registered Valuer:

Answer 3

A registered valuer is a regulated and qualified professional can conduct a Red Book valuation

Question 4

What does the Red Book say constitutes a written valuation?

Answer 4

All forms of communication other than purely oral. This includes automated valuation models

Question 5

What does the Red Book say about oral valuations?

Answer 5

Oral advice is still liable to negligence claims therefore it is stated that the Red Book should still be adhered to

Question 6

What does the Red Book say about professional scepticism?

Answer 6

You should exercise scepticism. This is applying a questioning mind and critically assessing evidence relied upon

Question 7

What is meant by valuation approach and by valuation method?

Answer 7

Valuation method refers to the procedure or technique used to calculate the value. Valuation approach is the overall manner in which a valuation task is undertaken

Question 8

Material uncertainty?

Answer 8

Material change in circumstance causing uncertainty which means less weight is attached to evidence. VPGA 10. This must be excluded from the market commentary

Question 9

Inherent material uncertainty?

Answer 9

This is general market risk which is assumed to always be present

Question 10

Material uncertainty forum?

Answer 10

Meeting of members to discuss the need for material uncertainty in valuation. This is judgement and not mandatory for valuers

Question 11

When is it appropriate to include material uncertainty?

Answer 11

Down to valuers discretion

Question 12

What is a working group?

Answer 12

Panel of RICS expert who discuss valuation matters in certain subject e.g. development appraisal

Question 13

What does Red Book state about sustainability?

Answer 13

Must reflect in valuation if evidence shows. If not must be recorded regardless. This is included in VPGA 8

Question 14

What is sustainability?

Answer 14

Meeting the needs of today without compromising future generations

Question 15

Natural environmental constraints?

Answer 15

Subsoils, rivers, radon

Question 16

Non-natural environmental constraints?

Answer 16

Contamination

Question 17

What does PS1 say about VPS 1-5?

Answer 17

That they are mandatory

Question 18

What is basis of value?

Answer 18

Market value, market rent, existing use value, investment value, fair value

Question 19

What is special value?

Answer 19

Value over and above what the market would pay to reflect a special purchaser

Question 20

Marriage value?

Answer 20

Value which can be achieved by the combination of 2 or more assets or interests

Question 21

What are assumptions?

Answer 21

Something reasonable to assume without the verification of facts

Question 22

What are special assumptions?

Answer 22

Something that would not particularly be assumed by a market participant

Question 23

What is a projected value?

Answer 23

Assumed value likely to be achieved in the future

Question 24

What is investment value?

Answer 24

Worth to an individual person

Question 25

Do you need a terms of engagement if there is an SLA?

Answer 25

There is still a requirement for terms of engagement even if there is an SLA e.g. DRRS

Question 26

When must terms of engagement be issued?

Answer 26

Prior to taking on work, should not be sent on the same day as sending out the valuation report

Question 27

What sections contain inspection in the Red Book?

Answer 27

VPS2 and VPGA8

Question 28

What should be captured on inspection?

Answer 28

Age, construction, dimensions, locality, environment, state of repair, fixtures and fittings, environmental and sustainability conditions, date, weather, eligible notes

Question 29

Does a Red Book valuation require an inspection?

Answer 29

Depends on the necessity and proportionality of your instruction

Question 30

Should the client share the report with a third party?

Answer 30

Must be redacted by us to see if any information is confidential or might compromise a client

Question 31

Who must sign the report?

Answer 31

The person responsible for the valuation

Question 32

What part of measurement guidance applies to all properties?

Answer 32

Part 1 of Property Measurement 2nd edition which outlines the need for a scale, date of measurement, method used, annotations etc to be noted on the document

Question 33

What must be contained in a valuation report?

Answer 33

Must cover all matter discussed in the terms of engagement e.g. identification of site, purpose, method used, and information relied on

Question 34

What does a signing signatory need to demonstrate?

Answer 34

Taking accountability and responsibility for the valuation and being able to defend the figure if challenged

Question 35

What should happen if market change has occurred since valuation date?

Answer 35

Valuer should draw attention to this

Question 36

What must you do when writing a draft report?

Answer 36

Prior agreed with client, state opinion is provisional and subject to change, use draft watermark

Question 37

What is valuation reasoning?

Answer 37

Process at how the figure was arrived at. All key inputs must be recorded and evidence to support them

Question 38

What is the structure of the National Supplement?

Answer 38

PS1 Compliance VPS 1-3 terms of engagement VPGA 1-18

Question 39

What does the 2020 Red Book say about valuing development property for secured lending?

Answer 39

Valuer must apply a minimum of 2 valuation methods

Question 40

What are the 4 bases of value for Red Book global

Answer 40

Market Value Market Rent Investment value Fair value

Question 41

What is investment value

Answer 41

The worth of an asset to a particular owner

Question 42

What is fair value

Answer 42

The price to be received in order to sell an asset in an orderly fashion

Question 43

Name the key terms included in a terms of engagement form and where you would find these

Answer 43

VPS1 and includes: ``` o Identification of valuer o Identification of client o Identification of asset o Identifying users o Reason for instruction o Basis of valuation o Date of valuation o Assumptions or special assumptions made o Material uncertainty? o Basis on which fee is agreed ```

Question 44

Where is it stated that members must have regard to IPMS?

Answer 44

VPS2

Question 45

What preliminary checks will need to be undertaken before undertaking work for a client

Answer 45

- Are you competent enough to take on the work - Is there a conflict of interest - Will PII cover any potential claim for damages - Identify the site and purpose of valuation - Identify any special assumptions with the client - Agree on extent of inspection - Will this be a written valuation

Question 46

What desktop due diligence checks would you undertake when conducting a valuation?

Answer 46

Past records, planning, flood map, coal map, google street view and a remote risk assessment