VALUATION Flashcards Preview

Valuation > VALUATION > Flashcards

Flashcards in VALUATION Deck (44)
Loading flashcards...
1

What are the 3 types of comparable

1) direct transactional evidence
2) General market data
3) Data from other property types and other locations

2

What is comparable evidence

Item of information used during a valuation to support the value of another similar item

3

What is the investment method

Capitalisation of rental evidence to find the capital value of an asset

4

What is a yield

How much annual return you are likely to receive in comparison to the capital value of the property

5

How is residual value calculated

GDV - (cost + profit)

6

How is viability calculated

GDV - (Cost + profit + cost of land)

7

What are the stages of depreciated replacement cost

1) market value of land
2) BCIS cost of rebuilding
3) include professional fee and finance cost
4) Deductions for obsolescence
5) Final adjustment
6) Stand back and look
7) Decapitalise to find rent

8

Name the 3 types of obsolescence

1) Economic, due to changing economic conditions and demand

2) Physical, to reflect ware and tear created from the premises

3) Functional, removing areas that were needed to accommodate a process no longer needed

9

When is a DRC method used

Market with no comparable evidence and is not occupied in the pursuit of profit

10

When is a profits method used

Used where there is some form of monopoly due to type or use of property

11

How do you value using the profits method

1) Establish fair maintainable trade of a reasonably efficient operator

2) calculate fair maintainable profit by deducting expenditure (wages and operating cost) and costs

3) capitalise fair maintainable operating profit by an all risks yield

4) to find rent net profit is split by the divisible balance in order to find the rent a landlord would charge. Net profit is found by deducting expenses for the business

12

What are the five methods of valuation

Comparable
Investment
Profits
Residual
Depreciated replacement cost

13

What types of valuation are exempt from a Red Book report

Agency
Statutory
Expert witness
Advocate
Internal valuation

14

Under what section of the global standards contains valuation report writing

VPS3

15

What do you need to do first when taking on a valuation instruction

1) Check you are competent enough to take on the work
2) Check for any conflicts of interest
3) Issue terms of engagement
4) Due diligence check to see that no material matters will impact value e.g. flooding, asbestos etc.

16

Are you liable for oral advice given

Yes

17

What is the hierarchy of evidence for leased properties

1) Open market sale
2) Lease renewal
3) Rent review
4) Third party determination
5) Sale and Lease back
6) inter company transaction

18

When is the investment method of value used

Where there is an income stream to value

19

What is years purchase

number of years required for an assets income to yield its purchase price

20

How is market rent defined in VPS 4

The estimated amount for which an interest in real property should be leased 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 and where the parties had each acted knowledgeably, prudently and without compulsion.

21

What sections of the Red Book are mandatory for members?

PS 1-2 and VPS 1-5

22

Which section of the VPS provides standards for report writing?

VPS 3

23

What forms of valuation are exempt from the Red Book?

Agency, statutory purpose, expert witness, advocate, internal purposes

24

What is a yield?

The return on an investment based on the annual rent in comparison to the capital value of the property

25

What does the present value formula indicate?

The PV formula is used to reflect the time value of money

26

How is an investment approach to valuation conducted?

Capitalisation of rental incomes over a term and reversion.

27

When would you use an investment method?

Typically used where a tenant is providing the landlord with an investment return on his capital cost

28

When would you use a DRC method of valuation?

Market with no comparable evidence and is not occupied in the pursuit of profit

29

What is a reasonably efficient operator?

An operator that conducts their business in a manor expected of the average occupier of such a unit.

30

What are the stages of a comparable valuation

-Search for comps
-Analyse rate per m2
-Collate evidence in matrix or schedule
-Adopt common measurement for comparison
-Form opinion of value
-Stand back and look