You mention in your case study Market Appraisals – was this a Red Book valuation?
No, Market Appraisals are exempt from VPS 1-5 but PS 1 & 2 still apply.
Are there any cases where valuations do not have to comply with the Red Book?
There are five cases where VPS 1-5 do not apply:
- For Agency of Brokerage
- For supporting expert witness work
- For purely internal only purposes where the valuation will not be passed to a third party
- To support with Litigation
- For a statutory purpose
What are the requirements of VPS1 – Terms of Engagement?
The list of items that must be included in the ToE
It essentially states in opening that the ToE as well as the list should convey a clear understanding of the valuation requirements and process and should be couched in terms that can be read and understood by someone with no prior knowledge of the subject asset, nor of the valuation process.
List of items which must be in ToE
- Identification and status of the valuer
- Identification of the client
- Identification of any other users
- Identification of the asset or liability being valued
- The purpose of the valuation
- The date of valuation
- Valuation currency
- Nature and extent of the valuers work
- The firms complaints handling procedure
- Any limit on liability
- Details of assumptions or special assumptions
- Nature and sources of the evidence supporting the valuation
- The basis for which the fee will be charged
- Format of the report
- Statement that compliance with the VPS standards may be subject to RICS monitoring
- Restrictions on use, distribution or publication
- Confirmation that the valuation will be undertaken in accordance with IVS
How do you value properties under say an AHA 1986 tenancy?
If the tenant is entitled to succession you would capitalise the rent in perpetuity.
If no succession, you would use an Investment method, to calculate the net present value of the right to receive the income over the term. With AHA tenancies if the tenant was not eligible for succession then you would likely use life tables to calculate the likely term remaining and use an appropriate multiplier to capitalise the income and then apply a reversion using the present value of £1.
What is the definition of Market Value?
The estimated amount for which an asset or liability would exchange on the date of valuation between a willing buyer and a willing seller at an arms length transaction after all proper marketing and where both parties acted prudently, knowledgably and without compulsion.
What is the IHT / CGT definition of Market Value?
“the price which the property might reasonably be expected to fetch if sold in the open market at that time, but that price must not be assumed to be reduced on the grounds that the whole property is to be placed on the market at one and the same time.”
What is a Freehold?
is An Estate in fee simple absolute in posession or the permanent and absolute tenure of land or property with freedom to dispose of it at will.
What makes a good comparable?
COMPARABLE EVIDENCE IN REAL ESTATE VALUTIONS
Category A – direct comparables
This category relates to all types of relevant transactional comparable evidence including:
• contemporary, completed transactions of near-identical properties for which full and accurate information is available; this may include data from the subject property itself
• contemporary, completed transactions of other, similar real estate assets for which full and accurate information is available
• contemporary, completed transactions of similar real estate for which full data may not be available, but for which enough reliable data can be obtained to use as
• similar real estate being marketed where offers may have been made but a binding contract has not been completed and
• asking prices (see 4.1.4 above).
Category B – general market data
This category relates to data that can provide guidance rather than a direct indication of value including:
• information from published sources or commercial databases; its relative importance will depend on relevance, authority and verifiability
• other indirect evidence (e.g. indices)
• historic evidence and
• demand/supply data for rent, owner-occupation or investment.
Category C – other sources
There is also a wide range of data that might provide broad indications of value
• transactional evidence from other real estate types and locations, and
• other background data (e.g. interest rates, stock m
What are the requirements of being a registered valuer?
You must register on the VRS, pay the annual fee of (£120) per annum, have taken valuation to level three in your APC and complete an annual return describing the types of properties and value of the properties valued in that year.
What is your firms conflicts of interest procedures? How do you check for conflicts?
Firstly, when I receive a new instructions I would add it to the email that goes around the firm, this is looked at by all agents to check any conflicts – I also check this list daily. I would also look on our online database of clients to ensure there was no conflict.
What is an assumption vs a special assumption?
An assumption is something that has a basis in fact, a special assumption is something that you know not to be factual that you are required to assume anyway – such as assuming that planning permission that is in place has actually not been granted.
What are the Basis of Value?
What is the full name of the Red Book?
RICS Valuation – Global Standards (31st January 2020)
What is the definition of Fair 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.
What is the defnition of Investment Value?
the value of an asset to a particular owner or prospective owner for individual investment or operational objectives.’
What is the VRS?
Valuation Registration Scheme, all valuers need to register on this scheme.
What is the name of the Blue Book?
RICS UK Residential Real Estate Agency (2017)
What is covered under PS 1 & 2
Professional Statement 1 covers where a written valuation is provided, compliance with international valuation standards, exceptions to VPS 1-5, no departures from PS 1 &2.
Professional Statement 2 covers Ethics, Competency, Objectivity and Disclousures. All valuers must be suitably qualified, must not be conflicted or have any other thread to objectivity. Also covers previous involvements, fees, ToE, responsibility for the valuation.
What are the Methods of Valuation?
Depreciated Replacement Cost
What disclousures are required under PS 2?
• the relationship with the client and previous involvement
• rotation policy
• time as signatory
• proportion of fees.
What is the typical “agricultural” value of a farmhouse assigned by HMRC for IHT purposes
70% market value, leaving a 30% taxable element.
What would be included in an outline valuation report?
Purpose of Valuation
The Valuer (experience and qualification)
Interest to be valued
Date of valuation
Inspection of holding/ extend of investigation
Limitations on inspection
Basis of value
Amount of valuation
Restrictions on use
Confirmation that the valuation has been undertaken in accordance with the IVS
Comment on material uncertainty
Limitations on liability agreed
Sign and date