Red Book Terms

Question 1

Define an ‘Assumption?’

Answer 1

A supposition taken to be true. An assumption is made where specific investigation is not required by the valuer.

Question 2

Define the basis of value?

Answer 2

It is a measurement of the Assumptions of a Valuation

Question 3

What options can be used for the ‘valuation date?’

Answer 3

Valuation date could either be the date of the initial inspection or the date of the final report.

Question 4

What does DRC stand for and what does it mean?

Answer 4

Depreciated Replacement Cost.

It is one of the 5 methods of Valuation. It measures the cost of replacing an asset with its modern equivalent less deductions for physical deterioration.

Question 5

What is the ‘Equitable Value?’

Answer 5

The estimated price for the transfer of an asset/liability between
knowledgeable and willing parties.

Question 6

What is an ‘external Valuer?’

Answer 6

A Valuer who has no material links to the subject/client/agent they have been assigned to.

Question 7

What is an ESG Framework?

Answer 7

E - Environmental
S - Social
G - Governance

The 3 criteria are used to assess the ethical and sustainable nature of a business. ESG can impact the financial performance of a business.

Question 8

Define ‘Fair Value?’

Answer 8

‘The price that would be received to sell an asset, or paid to transfer a
liability, in a transaction between market participants at the
measurement date’

Question 9

What is the ‘Income approach?’

Answer 9

An approach which provides an indication of value by converting future cash flow into a single capital value.

Question 10

What is an Internal Valuer?

Answer 10

A valuer who is directly employed by the owner of the asset or a firm responsible for the owners accounts/finance.

Question 11

Define the ‘Market Approach?’

Answer 11

‘An approach that provides an indication of value by comparing the
subject asset with identical or similar assets for which price information is
available’

Question 12

Define Market Rent (MR)?

Answer 12

‘The estimated amount for which an interest in property should
be leased on the valuation date between a willing lessor and willing
lessee on appropriate lease terms in an arm’s length transaction, after
proper marketing and where the parties had each acted knowledgeably,
prudently and without compulsion.’

Question 13

Define Market Value (MV)?

Answer 13

The estimated amount 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’

Question 14

What is ‘Marriage Value?’

Answer 14

‘The additional element of value created when combining two or more assets, where the combined value outweighs the sum of the separate values’

Question 15

What are the 3 different types of RICS member?

Answer 15

1. Associate Member
2. Professional Member
3. Fellow Member

Question 16

Define ‘Special Assumption’

Answer 16

‘An assumption that either assumes facts that differ from the actual facts
existing at the valuation date or that would not be made by a typical
market participant in a transaction on the valuation date.’

Question 17

What is a Special Purchaser?

Answer 17

A situation where a particular buyer who has a special value associated with an asset because of specific advantages arising from its ownership.

Question 18

What should the Terms of Engagement cover?

Answer 18

1. Clients full name/address;
2. Valuers full name, firm and position in firm;
3. Valuers experience;
4. Set out the clients instructions and date of instruction;
5. Declaration of any conflicts of interest and how they are to be managed;
6. Clarify any Assumptions or Limitations in Investigations;
7. Any information provided by the client;
8. Basis/amount of the fee;
9. Highlight complaints handling procedure

Question 19

Define Valuation?

Answer 19

‘An opinion of the value of an asset or liability, on a stated basis, at a
specified date.’

Question 20

What does IVS stand for?

Answer 20

International Valuation Standards

Question 21

What does IPMS stand for?

Answer 21

International Property Measurement Standard

Question 22

Give an example of a Conflict of Interest?

Answer 22

E.g. Where you are acting for the buyer and the seller of a property or asset.

E.g. Acting for two or more parties competing for an opportunity