Valuation - Comparable Method

Question 1

Name the 5 methods of Valuation ?

Answer 1

1. Comparative Method
2. Investment Method
3. Profits Method
4. Residual Method
5. Depreciated Replacement Cost Method

Question 2

What’s the difference between and internal and external valuer ?

Answer 2

An internal valuer is employed by a company to value assets of a company for internal purposes.

An external valuer has no material links with the asset being valued.

Question 3

Name the 3 important steps needed when commencing a valuation instruction ?

Answer 3

1. Competence (Correct SUK)
2. Independence (no conflicts)
3. Terms of Engagement (confirmation of instructions)

Question 4

Give examples of ‘Statutory due diligence’ needed for valuations ?

Answer 4

Asbestos Reports
Business Rates
EPC rating
Flooding map (SEPA)
Fire safety compliance
Legal title
Planning History

Question 5

What is the Comparative Method of Valuation ?

Answer 5

The comparative method of valuation is the most widespread valuation method and is typically used to assess market value and market rent for both commercial and residential properties.

Question 6

When can the Comparative Method of Valuation be used?

Answer 6

When there is a good amount of comparable evidence in the form of rents, yields or sales.

Question 7

What is the Hierarchy of evidence ?

Answer 7

1. Open market transactions
2. Lease renewals
3. Rent reviews
4. 3rd party determinations
5. Sale and leasebacks
6. Inter company transactions

Question 8

How can a valuer find relevant comparable evidence ?

Answer 8

1. Inspect the area for marketing boards
2. Speak to local agents
3. Online/In house data bases

Question 9

Challenges surveyors may face when using the comparative method of valuation ?

Answer 9

Limited transactions
Lack of up to date evidence
Existence of a special purchaser

Question 10

Are there any RICS Guidance Notes on Comparable Evidence ?

Answer 10

Yes - Comparable Evidence in Real Estate (October 2019)

Question 11

Define ‘Comparable evidence’

Answer 11

‘Comparable evidence can be defined as ‘an item of information used during the valuation process as evidence to support the value of a similar property’.

Question 12

Comparable Evidence should be…(5 things)

Answer 12

1. Comprehensive (multiple)
2. Relevant
3. Recent
4. Verifiable
5. Consistent

Question 13

What are the RICS Guidance notes of Valuation ?

Answer 13

RICS Valuation –Global Standards
Effective from 31 January 2022