Valuation Flashcards

Question

What is Comparable Method?

Answer 1

Process of identifying & analysing comparable evidence to the real estate to be valued. Ideally more that one transaction - at least 3 but 5+ would be better Comparables must be: Very similar or identical Recent Arms length transaction Verifiable Consistent with local market practice Used in: Valuation of market rent & market value of commercial & residential property Farms & Farmland

Answer 2

Used where there is an income stream to value. Rental income is capitalised to produce a capital value An implied growth ratee is derived from the market capitalisation rate (yeild) Coventional Method - rent recieved/market rent x YP = Capital Value Term & Reversion - used for reversionary investments - under rented. Rental term is capitalised to next rent review @ inital yeild Reversion to market rent valued in perpituity @ reversionary yeild. Layer/hardcore method - used for over rented properties.

Answer 3

Introduces the concept of market value versus investment value measures the benefits of ownership to the current or prospective owner and recognising that these may differ from those of a typical market participant Used for: Income producing properties typically referred to as specialist properties i.e. Hotels, Golf Courses or Petrol Stations. Their value will depend on business profitability & trading potential also known as intangible goodwill

Answer 4

The development potential of land must be assessed i.e. Highest value use then the value of the finished scheme must be calculated (GDV) (based on Comparables) all development costs are then deducted from GDV inc. developers profit & finance costs. The output of this is the market value, valuer should be aware that the Market Value calculated can be very sensitive to the inputs used. Used for: Valuing land with development potential

Answer 5

Is based on the assumption that the market will pay no more for the existing property than the amount it would to buy an equivalent site plus the cost of constructing an equivalent building. Not a basis of valuation but a method of valuation - should not be used where there are market sales of comparable properties. Can be used to check the valuation against anther method Steps involved: Assessing cost to replace land & building with a modern equivalent inc. all associated costs before making appropriate deductions for depreciation & obsolescence Used for: Owner occupied/specialised property which is rarely sold on the open market i.e. Oil Refineries or Airports

Answer 6

Reasons: Secured Lending CGT, IHT & SDLT Matrimonial Matter - Divorce valuations Mortgages Compulsory Purchase - Statutory compensations Opinion of Value/market appraisal Financial Reporting internal purposes Basis: Familiar with - Market value But am aware of: Rental Value Investment value Fair Value

Answer 7

1. Clarify purpose of the valuation 2. Establish is request for the valuation is for a written valuation compliant with RICS Global Valuation Standards - Published December 2024 effective 31st Jan 2025 3. Asses if valuer is suitably qualified, experienced & knowledgeable to under the instruction 4. Check for CoI inline with RICS Professional Statement. 5. Check if any 3rd Parties or public will have an interest in the valuation 6. Check if valuation is one of the 5 accepted purpose which don't have to comply with the Valuation Professional Standards VPS1-2 RICS Global Valuation Standards publish December 2024 effective 31st January 2025 7. Check if firm has sufficient PII 8. Prepare ToB ensuring a signed copy is received & put on the file 9. Carryout desk top due diligence 10. Arrange Access

Answer 8

Location Condition/defects/hazardous materials Tenure Subject to tenancies Ownership - sole, more than one Designations - NVZ, ANOB, National Park Occupations Conditions - such as AoC Flood Risk RoW Overages Clauses Access, topography & land type Contamination ESG Factors

Answer 9

As outlined in the global RICS Rules of Conduct Appendix A: RICS Professional Indemnity Insurance Requirements (UK Version 10 with effect from 1st July 2024) RICS-regulated firms must ensure that all previous and current professional work is covered by adequate and appropriate professional indemnity cover that meets the standards approved by RICS Protects ensured Firms/surveyors from financial loss that cannot be met from their own resources Ensure that a client doesn't suffer a financial loss which the cannot met from the firm/surveyors own resources Based on Firms turn over: £10 million or less - the greater of 2.5% of the sum insured or £10,000 £10 million & 1 + above - No set limit

Answer 10

For the a secured lending valuation, lenders have varying types of valuation instruction letters which contain equally varied requirements depending on the lender Such as: Reinstatement value of the buildings for insurance purposes. Suitability as security within specific marketing peroid - eg 6 months for a secured lending valuation at East Allington Farm Commentary on the rental value

Answer 11

Instructions were received to provide a red book valuation for divorce proceedings by one of the parties. Adhered to RICS Conflicts of interest Professional Standard (Pub. March 2017 reissued July 2023) I confirmed the clients identity, their interest in the property & any involvement with any other relevant parties. Sent CoI email to all Rendells offices -asking if there was any reason why we should not undertake the valuation instruction - specifying a date for response It is a mandatory requirement that members must not provide advice or repsrenset a client where doing so would involve conflict or a significant conflict other than when all of those affected have provded informed consent or where doing so is in the interests of those affected, not prohibited by law and wont prevent the member form providing a competant diligent service to those who may be affected.

Answer 12

Agreed access I began with ensuring I was aware of my surroundings & any unexpected hazards Inspected the external areas noting access, what the areas were comprised, boundaries, parking etc. Evaluating any unusual factors which may affect value ie. the presence of Japanese Knotweed. Making note of the external elements of the buildings materials, condition etc. I then moved inside the building beginning in entrance hall & working through all ground floor rooms before moving to the first floor. Noting the features in each room and taking measurements in accordance with International Property Measurement Standards I noted the services

Answer 13

Critical component of property valuation & it is considered to be good practice Pt 4 VPS 4 Sets out the standards for such inspections To assess the property's condition, identify any potential issues and evaluate local factors which may significantly affect the properties values & which cannot be accurately assessed without the valuer being present. In order to sufficiently describe & explain the valuation & valuers opinion documentation must be maintained throughout the process, photographs/legible notes maintain an audit trail.

Answer 14

I have collated the following: Land Registry Title Register & Plan/s Flood risk information Radon Gas information/plans NVZ Information Any relevant planning applications/history Scale Plans of the property to be valued Site Identification plans (NTS) Photographs Any professional reports pertaining to the property The reason for collating this information for the appendices in a Reb Book Valuation is to support the commentary in the main report providing essential background info, transparency & evidence that justifies the valuation.

Answer 15

A valuation of a property subject for divorce proceedings. Established the purpose of the valuation Obtained details of the property - such as address, type, tenure. Verified identity of the client. Undertook CoI Check Established suitable knowledge & skill of valuer - In accordance with RICS Valuation Global Standards Prepared ToB in accordance with VPS1 of RICS Valuation Global Standards and obtained a signed copy for the file I conducted desk top research Arranged access and conducted a site inspection in accordance with Pt. 4 VPS4 I carried out market research to find suitable comparable evidence, evaluated & verified these. Analyzing these. Arrived at my valuation figure which was discussed with the supervising registered valuer. The report was reviewed and issued to the client and the clients solicitor.

Answer 16

HOWN HOUSE! Large 5 bedroom Victorian Property (Date Stone 1880) 3 stories Set in extensive gardens Accessed via private driveway Various outbuildings inc. Garage with studio above Field Shelter & stable building Open fronted storage building Range of agricultural buildings 33.42 acres of ring fenced permanent pasture & woodland. Date of Death 17th December 2023 OMV - £1,650,000 Agricultural Value £1,155,000 (30% considering antrobus case)

Answer 17

Being an IHT Valuation the property had to be valued at the Date of Death being 17th December 2023 & not current market value. (s1160 of IHT Act 84) Property was difficult to find comparables for due to varying range of buildings condition etc. I sourced comparables from our own comparable list, and searching other agents websites & auction websites verifying these by speaking to the agents. I sourced comps for land and land and buildings from other agents, auction websites & our own comparable list

Answer 18

Adjustments were made for size, location & condition The comparable evidence was not an exact match for the property and therefore adjustments were required to allow for the differences in the various factors which would affect the value.

Answer 19

The Market value is provided in accordance with s160 if the IHT Act 1984 - prices the property might reasonably be expected to fetch id sold on the open market at the time - with no restriction By virtue of that same Act s.116 the value attributable to the agricultural value - (assuming it was subject to restriction for ag use only) will benefit from 100% - this property was owner occupied from pre 10th March 1981 Therefore IHT is only payable on the difference between OMV at DoD & the ag value

Answer 20

I presented my valuation figures explaining my rationale & calculations for arriving at these figures. The RV considered my rationale and calculations reviewing my notes & chosen comparables and was in agreement. The valuation report was sent to aonther senior valuer within the firm for review and then signed by the RV who was idenfied on the ToB

Answer 21

The bank were aware of the conflict of interest as they referenced this in their initial email outlining the instruction It was detailed in the ToB signed by the client. However if they had not been aware I would have ensured informed consent was received from the Bank (our client) - as detailed in the RICS Professional Standard Conflicts of Interest Professional Statement

Answer 22

Measured the footprint of existing buildings & noted type of construction. I reinstatement costs were calculated using the CAAV Building Cost Schedule Found suitable comparable on schedule and multiplied cost/m2 x footprint of the building.

Answer 23

I made an assessment that the property would sell within 6 months of being marketed by speaking to the agents who i sourced comps from as asking how long a period of marketing they undertook ion the property

Answer 24

It didn't as it was considered that the property would sell within 6 months. If we didn't think this then this may have influenced the value, and we have factored this into the valuation

Answer 25

Yes for this type of property, but there a degree of uncertainty in the market due to the wider economic factors

Answer 26

Comparable Evidence for land let & winter building licenses

Answer 27

Comparable valuation. The property was jointly owned in equal undivided shares by the deceased and her sister. The deceased was in occupation of the property at the date of death with the sister's principal residence being in Scotland. After collecting, analysing & adjusting the appropriate comparable evidence, the value of the property was ascertained. The total value of the property was then halved to establish the value of the deceased share & then 10% was deducted from this figure for IHT purposes. As provided for by the VAO's Inheritance Tax Manual for a half share without rights of occupation as main residence a half share should be valued by taking the full value of the property and deducting 10% from the deceased share. This reflects the challenges associated with marketability and the potential difficulties in selling a half share especially of the surviving owner is not in occupation

Answer 28

I would politely decline the instruction. Be open & honest with the client and tell them that I don't have the requisite knowledge or expertise in valuing this type of specialist property necessary to carryout the valuation. I would refer them to a senior valuer within the firm to discuss the instruction.

Answer 29

Client wanted an opinion of the Fair Value of 29.5 acres of PP subject to AHA commenced 1983. one succession had taken place with one remaining. Assumed that the current tenant & successor will farm until death (based on Parry's life tables) Used investment method employing Term & reversion to ensure the calculation was structured correctly to reflect that the property being subject to an AHA was let a below FMRV. Established Market Value - using comparables Calculated Value Term 1 - capitalising net rent - rent x YP for duration of term Calculated value Term 2 - net rent x YP x PV Then calculate the value of reversion to market value - MV x PV for number of years till tenancy ends. Added these three figure together - to give freehold value STT. To calculate Fair Value - establish VPP = Freehold with VP - Freehold Value STT. Calculated 50% of VPP and add to freehold value STT.

Answer 30

RICS have updated the Redbook to: Reflect the changes to the latest version of IVS Incorporate changes from the RICS Valuation Review Future proof valuation practice - technology & ESG Help valuers provide the highest standard of service simplify and clarify guidance for valuers Build public trust in valuation provided by RICS Registered valuers

Answer 31

Comprises 3 pillars: Environmental - physcial characeritics of a building, policy & legilation or environmental risks ie flooding Social - relationship with surrounding community & social impact Governance - regulatory compliance,

Valuation Flashcards

(55 cards)