RICS APC T.M. Flashcards
Professional Standards P.S.
The parameters for compliance with the Red Book,
a) IVS;
b) RICS regulatory requirements;
c) Rules of Conduct
They comprise:
PS 1 – Compliance with standards where a written valuation is provided
(α) IVS, (β) International ethics standards (γ) International property measurement standards
PS 2 – Ethics, competency, objectivity and disclosures
E-C-O-D
Global Professional and Ethical Standards
I-H-T-R-R
1) Act with integrity
2) Always provide a high standard of service
3) Act in a way that promotes trust in the profession
4) Treat others with respect
5) Take responsibility.
RICS Rules of Conduct
P-A-C-T-T
1) Proportionality
2) Accountability
3) Consistency
4) Targeting
5) Transparency
What is a conflict of interest?
a situation in which the duty to act in the interests of a client in a professional assignment conflict
(a) with a duty owed to another client or party (a ‘Party Conflict’)
(b) with the interests of that same RICS member who is involved (an ‘Own Interest Conflict’)
(c) a ‘Confidential Information Conflict’.
When should you decline an instruction?
- If you are not competent – knowledge and experience
- Personal interest in transaction
- Irresolvable conflict of interest
- Refer them to the RICS ‘Seek a Surveyor’ scheme.
Why do you want to be a surveyor? Why do you want to be a member of the RICS? What are the benefits of being a member of the RICS?
1-S Status 2-R Recognition 3-M Market advantage 4-N Knowledge 5-N Network
IPMS1
residential buildings externally
The sum of the areas of each floor level of a building measured to the outer perimeter of external construction features, which may be reported on a component basis for each floor of a building
IPMS 2 – office
Office building internally
The sum of the areas of each floor level of an office building measured to the internal dominant face
IPMS 2 - Residential
whole residential buildings internally
The sum of the areas of each floor level of a residential building measured to the internal dominant face,
IPMS 3 – Office
exclusive basis to an occupier
The floor area available on an exclusive basis to an occupier, but excluding standard facilities and shared circulation areas, and calculated on an occupier-by- occupier or floor-by-floor basis for each building.
IPMS 3A:
exclusive basis to an occupier
Residential
an external measurement of the area in exclusive occupation – equates somewhat to GEA (gross external area)
IPMS 3B:
exclusive basis to an occupier
Residential
an internal measurement including internal walls, etc. – equates somewhat to GIA (gross internal area)
IPMS 3C
exclusive basis to an occupier
Residential
an internal measurement excluding internal walls, etc. – equates somewhat to EFA.
Bases of Value
1) MV Market value
2) MR Market rent
3) IV Investment value
4) FV Equitable value (Fair value)
5) SV Synergistic value
6) LV Liquidation value
Market Value
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
Investment Value - Worth
‘the value of an asset to a particular owner or prospective owner for individual investment or operational objectives.’
Fair Value – Equitable value
‘The price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date’ (IFRS 13)
Fair Value Vs Market Value
The fair value is used in reports where, the purpose of the valuation is financial reporting.
The end result may show some distinct variance from market value. This is because the IVS definition of fair value includes the phrase “that reflects the respective interests of those parties”. This means that one is not looking at the market as a whole, but at the specific circumstances of the two parties to the hypothetical transaction. So, in some cases the IVS-defined fair value can have a higher value than market value,
Market Value Breakdown
(a) “the estimated amount” the most probable price reasonably obtainable on the valuation date
(b) “an asset or liability should exchange” refers to the fact that the value of an asset or liability is an estimated amount rather than a predetermined amount or actual sale price. It is the price in a transaction that meets all the elements of the Market Value definition at the valuation date,
(c) “on the valuation date” requires that the value is time specific as of a given date.
(d) “between a willing buyer” refers to one who is motivated, but not compelled to buy.
(e) “and a willing seller” is neither an overeager nor a forced seller prepared to sell at any price, nor one prepared to hold out for a price not considered reasonable in the current market.
(f) “in an arm’s length transaction” is one between parties who do not have special relationship,
(g) “after proper marketing” means that the asset would be exposed to the market in the most appropriate manner. The only criterion is that there must have been sufficient time to allow the asset to be brought to the attention of an adequate number of market participants. The exposure period occurs prior to the valuation date,
(h) “where the parties had each acted knowledgeably, prudently” presumes that both the willing buyer and the willing seller are reasonably informed about the nature and characteristics of the asset, its actual and potential uses, and the state of the market as of the valuation date.
(i) “and without compulsion” establishes that each party is motivated to undertake the transaction, but neither is forced or unduly coerced to complete it.
Valuation approaches
- Market Approach: An approach based on comparing the subject asset with identical or similar assets for which price information is available, within an appropriate time horizon
- Income Approach: An approach based on capitalization of future cash flows, to produce a single current capital value
- Cost Approach: An approach based on the economic principle that a purchaser will pay no more for an asset than the cost to obtain one of equal utility whether by purchase or construction.
Premise of Value – Highest and Best Use
is the use that would produce the highest value for an asset, regardless of the actual current use.
The highest and best use may be its current when it is being used optimally.
The highest and best use must be
a) physically possible,
b) financially feasible,
c) legally allowed
d) and result in the highest value.
e) If different from the current use, the costs to convert an asset to its highest and best use would impact the value.
bases of value require the consideration of highest and best use. These bases of value include Market Value and Fair Value
What are the minimum requirements for reports?
1) Identification and status of the valuer
2) Identification of the client(s) AND of any other intended users
3) Purpose of the valuation
4) Identification of the asset(s) or liability(ies) valued
5) Basis(es) of value adopted
6) Valuation date
7) Nature and source(s) of the information relied upon
8) Assumptions and special assumptions
9) Restrictions on use, distribution and publication of the report
10) Confirmation that the valuation has been undertaken in accordance with the IVS
11) A statement setting out any limitations on liability that have been agreed.
Report only:
12) Date of report
13) Valuation approach and reasoning
14) Amount of the valuation or valuations
15) Commentary on any material uncertainty in relation to the valuation where it is essential to ensure clarity on the part of the valuation user
16) Extent of investigation
What are the differences from the terms of engagement?
1) Identification and status of the valuer
2) Identification of the client(s) AND of any other intended users
3) Purpose of the valuation
4) Identification of the asset(s) or liability(ies) being valued
5) Basis(es) of value adopted
6) Valuation date
7) Nature and source(s) of the information relied upon
8) Assumptions and special assumptions
9) Restrictions on use, distribution and publication of the report
10) Confirmation that the valuation will be undertaken in accordance with the IVS
11) A statement setting out any limitations on liability that have been agreed.
terms of engagement only:
12) Where the firm is registered for regulation by RICS, reference to the firm’s complaints handling procedure, with a copy available on request
13) A statement that compliance with these standards may be subject to monitoring under RICS’ conduct and disciplinary regulations
14) Valuation (financial) currency
15) Format of the report
16) The basis on which the fee will be calculated
- Customer procedure
a. Conflict of interest search
b. Announce we have a complains handling procedures
c. Regulated under RICS
d. TOE
