Valuation 1 Flashcards
(40 cards)
What is the full title of the Red Book?
RICS Valuation Global Standards 2022
When did the current edition of the Red Book come into force
31 January 2022
Who are the International Valuation Standards Council?
A non-profit organisation that acts as the global standard setter for the valuation profession, serving the public interest.
What editions of the Red Book have been in effect during your APC training period?
RICS Valuation Global Standards (2020)
RICS Valuation Global Standards (2022)
What is the purpose of the Red Book?
- Consistency, objectivity and transparency
- To assure users that valuation provided anywhere in the world is in accordance with the highest professional standards
- To provide a framework for uniformity and best practice
What is the purpose of the UK National Supplement?
Supplements the Red Book. Sets out specific requirements and guidance for valuations in the UK
To what valuations does the Red Book apply?
To all valuations except those listed as an exception.
What valuations are exceptions to the Red Book?
- Agency or brokerage work in anticipation of disposal and acquisition instructions
- Acting or preparing to act as an expert witness
- Performing statutory functions
- Purely for internal purposes
- Preparation for or during negotiations or litigation
Can you name some valuations that are carried out for a statutory function?
Compulsory purchase orders, rating, leasehold & enfranchisement
What is the difference between Valuation Technical and Performance Standards (VPS) and Valuation Practice Guidance – applications (VPGA)?
VPS (Valuation Technical and Performance Standards) = Mandatory
VPGA (Valuation Practice Guidance - Applications) = Advisory
What are the possible consequences if a Valuer does not comply with a VPS?
RICS can get involved and issue disciplinary action
What are the possible consequences if a Valuer does not comply with a VPGA?
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.
Describe how Departure from the Red Book mandatory requirements may be possible.
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.
What information would you require from a telephone enquirer who asked: Can you do me a valuation?
What is it, where is it, type of valuation required, who is it for (eliminate conflict of interest), extent of investigations etc
What do your Valuation Files contain?
- Conflict of interest checks
- Terms of Engagement
- Inspection note etc
- Planning, rating and environmental searches
- Comparables and analysis
- Valuation calculation with rationale
- Report (stating opinion of value)
What are the main contents of the Terms of Engagement for a Valuation?
- Identification and status of the valuer*
- Identification of the client(s)*
- Identification of any other intended users
- Identification of the asset(s) or liability(ies) being valued*
- Valuation (financial) currency
- Purpose of the valuation*
- Basis(es) of value adopted*
- Valuation date*
- Nature and extent of the valuer’s work - including investigations - and any limitations thereon*
- Nature and source(s) of information upon which the valuer will rely
- All assumptions and special assumptions to be made*
- Format of the report
- Restrictions on use, distribution and publication of the report
- Confirmation that the valuation will be undertaken in accordance with the IVS
- The basis on which the fee will be calculated*
- 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
- A statement that compliance with these standards may be subject to monitoring under RICS’ conduct and disciplinary regulations.
- A statement setting out any limitations on liability that have been agreed.
How would you respond to a request to value a property from a Pavement Assessment only?
Why only a pavement assessment?
Please name the Red Book Global Bases of Value.
- Market Value
- Market Rent
- Investment Value
- Fair Value
Please name the UK-Specific Bases of Value.
- Existing Use Value,
- Existing Use Value for Social Housing
- Value of plant and equipment
- Projected market value of residential
What is the difference between a Basis of Value and a Method of Valuation?
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
Describe the Assumptions that are usually made in producing a valuation.
- Title
- Condition of buildings
- Services
- Planning
- Contamination and hazardous substances
- Environmental matters distinguishing between:
(a) Natural environmental constraints
(b) Non-natural constraints (contamination and hazardous
substances).
(c) Sustainability – assessing the implications for value
What is a Special Assumption?
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.
Give three situations when it would be appropriate to make a Special Assumption.
- Planning consent has or will be granted
- Proposed development has been completed in accordance with a defined plan and specification
- The property has been changed in a defined way
- The property is vacant (when occupied at the valuation date)
- The property is let on defined terms (when vacant at the valuation date)
- That synergistic value is created where one or more parties has a special interest
Define Market Value in your own words.
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.
