Redbook Global Standards

Question 1

What does “PS” stand for?

Answer 1

Professional Standard

Question 2

What does “VPS” stand for?

Answer 2

Valuation Technical & Performance Standard

Question 3

What does “VPGA” stand for?

Answer 3

Valuation Practice Guidance Application

Question 4

What is PS1?

Answer 4

Compliance with the Redbook and relevant regualtions.

Question 5

What is PS2?

Answer 5

Ethics, Competency, Objectivity, and Disclosures.

i.e.: A valuer must be competent and suitably qualified with appropriate experience.

Question 6

What is VPS1 (Global Redbook)?

Answer 6

Minimum Terms of Engagement

Question 7

What are the Minimum Terms of Engagement?

Answer 7

1. Identify Valuer & Client
2. Identify indended users
3. Purpose: extent of investigation
4. Basis of valuation and valuation date
5. Assumptions and special assumptions
6. Fees, complaints procedure
7. Compliance statement

Question 8

What is VPS2 (Global Redbook)?

Answer 8

Inspections and Investigations

Question 9

What must RICS Redbook valuations consider during inspections and investigations?

Answer 9

1. Situation and character of property
2. Dimensions and area
3. Easements and covenants
4. Construction, age, and state of repair

Question 10

What is VPS3 (Global Redbook)?

Answer 10

Minimum Contents of Valuation Reports

Question 11

What must go into an RICS Redbook Valuation Report?

Answer 11

1. Identification of parties and users (VPS1)
2. Purpose of valuation
3. Identity of asset or liability being valued
4. Basis of value
5. Method of valuation
6. Valuation date
7. Assumptions and Special Assumptions
8. Date of Report
9. Extent of investigation
10. Valuation approach and reasoning
11. Nature and sources of information relied upon
12. Amount of the valuation
13. Date of report
14. Commentary on any material uncertainty
15. Limitations of liability agreed

Question 12

What is VPS4 (Global Redbook)?

Answer 12

Bases of Value, Assumptions and Special Assumptions

Question 13

What are the Bases of Value?

Answer 13

1. Market Value
2. Market Rent
3. Investment Worth
4. Equitable Value
5. Synergistic Value
6. Liquidation Value
7. Fair Value

Question 14

What is the definition of Market Value?

Answer 14

The estimated amount for which an asset or liability should exchange for on the valuation date between a willing buyer and a willing purchaser in an arm’s length transaction after proper marketing, where both parties have acted knowledgeably, prudently, and without compulsion.

Question 15

What is the definition of Market Rent?

Answer 15

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

Question 16

What is the definition of Investment Worth?

Answer 16

The value of an asset to a particular owner or prospective owner for individual or operational objectives.

Question 17

What is the definition of Fair Value? (IFRS)

Answer 17

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

Question 18

What is the definition of Equitable Value?

Answer 18

The estimate price for the transfer of an asset or liability between identified, knowledgeable, and willing parties that reflects the respective interests of those parties.

Question 19

What is the definition of Synergistic Value?

Answer 19

The result of the combination of two or more assets where the combined value is more than the sum of the separate values.

Question 20

What is the value of Liquidation Value?

Answer 20

The amount that would be realised when an asset or group of assets are sold on a piecemeal basis, taking into account the costs of disposing of those assets.

Question 21

What is an Assumption?

Answer 21

A supposition that is taken to be true, based on reasonable facts that are evident at the date of valuation and where the valuer does not have to undertake specific investigation in order to prove that it is true.

Question 22

What is a Special Assumption?

Answer 22

An assumption which assumes facts that differ from those actual facts existing at the valuation date or that would not typically be made by a market participant in a transaction at the valuation date.

Question 23

What is an example of a Special Assumption?

Answer 23

E.g. a plot of land with will have a 4-bedroom dwelling built on it and that the construction will be to an exceptional standard.

Question 24

What is an example of an Assumption?

Answer 24

e.g. that a property is serviced by a mains water supply where the valuer is not aware of any private water supply.

Question 25

What is VPS 5 (Global Redbook)?

Answer 25

Valuation Approaches and Methods

Question 26

What are the Valuation Approaches?

Answer 26

1. Market 2. Income 3. Cost

Question 27

What is the 'Market' approach?

Answer 27

The comparison of an asset with similar assets.

Question 28

What is the 'Income' approach?

Answer 28

The capitalisation or conversion of present and predicted income to produce a single current capital value.

Question 29

What is the 'Cost' approach?

Answer 29

Whereby the value is based on the economic principle that a purchaser will pay no more for an asset than the cost to obtain one of the same utility by purchase or construction.

Question 30

What are the Methods of Valuation?

Answer 30

1. Comparable Method 2. Investment Method 3. Profits Method 4. Residual Method 5. Depreciated Replacement Costs Method

Question 31

What is the Comparable Method?

Answer 31

Where appropriate market evidence is used to compare the asset being valued against similar assets.

Question 32

What is the Investment Method?

Answer 32

Where the value of the asset is dependent on the income potential.

Question 33

What is the Residual Method?

Answer 33

The valuation of a potential development which determines the residual sum after a development budget. i.e. How much would someone be willing to pay for the development opportunity?

Question 34

What is the Depreciated Replacement Costs Method?

Answer 34

Where the cost to replace the asset with a contemporary construction used for the same purpose is calculated before deductions are made for obsolescences (physical, functional, economic). i.e. Used to find the value for an asset for which there is no market or comparable evidence.

Question 35

What is the Profits Method?

Answer 35

Where the rental value is determined based on the profit made by the tenant's occupation of the premises. i.e. used where there is a lack of comparable evidence, often where there is an element of monopoly.

Question 36

What is Category A comparable evidence?

Answer 36

Direct Comparables / Direct Transactional Evidence

Question 37

What is Category B comparable evidence?

Answer 37

General Market Data i.e. provides guidance rather than a direct indication of value from a published source or historic evidnece.

Question 38

What is Category C comparable evidence?

Answer 38

Other Sources e.g. transaction evidence from other property types and locations or other data.

Question 39

What makes a good comparable?

Answer 39

- Comprehensive information - Recent transaction - Identifiable - Arm's length transaction - Consistent with local market practices - Very similar or identical to property being valued

Question 40

What details should a Valuer record from comparable evidence?

Answer 40

- Address - Type of property - Tenure and Occupation - Brief description - Lease terms if applicable - Floor areas - Source of information - Date and method of verification - Transaction type and date - Parties involved - Value and any additional incentives

Question 41

Can you outline the Comparable Method process?

Answer 41

1. Search & Select 2. Confirm & Verify 3. Analyse 4. Assemble 5. Analyse and form value 6. Report