Valuation - Level 1 Flashcards
(325 cards)
1
Q
Tell me what are the 5 methods of valuation.
A
Profits Contractors Investment Comparable Residual
2
Q
Tell me about how you would value a building using the profits method of valuation.
Give an example
A
TBC
3
Q
Tell me about how you would value a building using the Contractors method of valuation.
Given an example
A
TBC
4
Q
Tell me about how you would value a building using the Investment method of valuation.
Given an example
A
TBC
5
Q
Tell me about how you would value a building using the Comparable method of valuation.
Given an example
A
TBC
6
Q
Tell me about how you would value a building using the Residual method of valuation.
Given an example
A
TBC
7
Q
What is PI Insurance (PII)?
A
Provides financial cover in the event client suffers a financial loss as a result of a breach of professional duty.
eg. Neglect, omission or error
8
Q
Why do surveyors need PII?
A
Protects from financial loss from their own funds.
RICS requirement
9
Q
Tell me about the RICS requirements in relation to PII.
A
Must be made on an ‘each & every claim basis’
minimum levels.
Stets out maximum levels of uninsured excess
Provides minimum run off periods
Must cover past and present employees, partners & directors
10
Q
What is run off cover?
A
Cover once a company has ceased trading or individuals have left.
Runoff terms depend on the typos of contracts firms/individuals worked on.
Underhand contracts = 6 years
Contracts executed as deeds = 12 years
11
Q
What is the Red Book?
A
The Red Book contains: Mandatory rules Best Practice Guidance Related Commentary. For ALL members undertaking valuation work.
12
Q
Why does the Red Book exist?
A
To improve consistency and transparency in the valuation approach across the globe.
Provides public confidence that valuation undertaken by RICS Registered Valuer is consistent with international valuation standards
13
Q
Tell me about a factor which may impact value.
A
TBC
14
Q
What is your duty of care as a surveyor when undertaking a valuation?
A
TBC
15
Q
Why is independence and objectivity important when valuing?
A
TBC
16
Q
Is there a separate UK Red Book?
A
TBC
17
Q
When was the Red Book last updated?
A
TBC
18
Q
Does this differ to when IVS were last updated?
What changes were made?
A
TBC
19
Q
Which do you follow - the latest IVS or the Red Book Global?
A
TBC
20
Q
Which sections of the Red Book are mandatory and which are advisory?
A
TBC
21
Q
What does PS1-2/VPS1-5/VPGAs relate to?
A
TBC
22
Q
What type of advice does the Red Book cover?
A
TBC
23
Q
If you provide preliminary advice / draft valuation report, what should you state in writing to your client?
A
TBC
24
Q
What type of valuations might be relied upon by a third party?
A
TBC
25
Tell me what the definition of MR/MV/investment value/fair value?
TBC
26
What is the difference between an assumption and a special assumption?
Assumption: where it is reasonable for the valuer to accept that something is true without the need for specific investigation.
e.g. Assume land not contaminated or no history of flooding
Special Assumption: supposition that is taken to be true and accepted as fact even though it is not. Which must be agreed in writing.
27
What sources of information would you consider when preparing a valuation report?
TBC
28
If you have previously valued an asset, do you need to make any additional disclosures and what might they be?
TBC
29
If your firm is too small to have a rotation policy or valuation panel, what else can you do to ensure objectivity?
TBC
30
When might a conflict of interest exist in relation to a valuation instruction?
TBC
31
What must be included in your terms of engagement / valuation report?
TBC
32
What is a restricted valuation service and can you provide one?
TBC
33
How do you deal with limitations on inspection or analysis?
TBC
34
Can you revalue a property without inspecting?
| What RICS guidance relates to the use of comparable evidence?
TBC
35
What is an internal valuer?
TBC
36
Can an external valuer provide an internal purposes valuation?
TBC
37
What happens if market conditions change between the valuation date and report date?
TBC
38
Is special value from a special purchaser reflected in MV?
TBC
39
Where does the definition of fair value come from?
Does this differ from MV?
TBC
40
When is fair value used?
TBC
41
What are the 3 approaches under VPS5?
TBC
42
What is the Valuer Registration Scheme?
TBC
43
Are there any instances where certain sections of the Red Book may not apply?
TBC
44
What are these and which sections don’t apply?
TBC
45
What is the basis of value under UK GAAP FRS 102?
TBC
46
What is a SORP?
TBC
47
When would you use EUV?
TBC
48
What is the definition of EUV?
TBC
49
What additional criteria apply to secured lending valuations?
TBC
50
What information should you specifically request for a secured lending valuation?
TBC
51
What is a regulated purpose valuation?
TBC
52
What additional disclosures must be made for a regulated purpose valuation?
TBC
53
What is the basis of value for a statutory valuation?
TBC
54
What might a statutory valuation relate to?
TBC
55
What is the definition of the statutory basis of valuation?
TBC
56
What is a yield?
TBC
57
What is a Net Initial Yield?
TBC
58
What is a reversionary yield?
TBC
59
What is an equated yield?
TBC
60
What is an equivalent yield?
TBC
61
How would a yield reported from auction differ from a Net Initial Yield?
TBC
62
What purchaser’s costs do you deduct from a valuation?
TBC
63
How would you value a property in uncertain market conditions - does the Red Book give any guidance?
TBC
64
How could you value a long leasehold interest?
TBC
65
How does a term and reversion and DCF differ?
TBC
66
What is the difference between a growth explicit and a growth implicit yield?
Give examples of each of these types of yield.
TBC
67
How would you value an under/over rented investment property?
TBC
68
When would you use a dual rate investment calculation?
TBC
69
Where can you find yield evidence from?
TBC
70
What is the hierarchy of evidence?
TBC
71
What would you do if comparable evidence was limited?
TBC
72
What is NPV?
TBC
73
What is IRR?
TBC
74
What is a term and reversion?
TBC
75
What is a hardcore and topslice?
TBC
76
What is a Discounted Cash Flow (DCF)?
TBC
77
What is a short-cut DCF?
TBC
78
When would you use a DCF?
TBC
79
What are the advantages of a DCF?
TBC
80
What are the disadvantages of a DCF?
TBC
81
What is a YP/PV/YP in perpetuity?
TBC
82
What is marriage value?
TBC
83
When would you include an element of hope value in a valuation?
TBC
84
How would you value a ransom strip?
TBC
85
How does market value differ to investment value/fair value?
TBC
86
What is a dual capitalisation rate and when would you use one?
TBC
87
Is the profits/DRC method used for specialised or specialist property?
TBC
88
What type of properties would you use the profits method for?
TBC
89
When would you use the profits method?
TBC
90
What is intangible goodwill?
TBC
91
What is turnover / gross profit / net profit?
TBC
92
What are the steps to providing a profits valuation?
TBC
93
What is Fair Maintainable Turnover?
TBC
94
What is a Reasonably Efficient Operator?
TBC
95
Does the assessment of the REO include personal goodwill and trading potential?
TBC
96
What is personal goodwill?
TBC
97
What is trading potential?
TBC
98
How do you calculate the tenant’s proportion of rent in a profits valuation?
TBC
99
What is EBITDA?
TBC
100
What is Fair Maintainable Operating Profit?
TBC
101
How do you calculate the divisible balance?
TBC
102
What accounts information would you want to review for a profits valuation?
TBC
103
Do RICS provide any guidance on RLVs or valuing development property?
.
104
What is an RLV?
What is a development appraisal?
How do they differ?
.
105
How else can you value development land?
.
106
What is the basic process of undertaking a RLV/development appraisal?
.
107
What does a development appraisal show?
.
108
What are the key things you need to consider when appraising / inspecting a development site?
.
109
What else should you consider?
.
110
Tell me about your due diligence when undertaking a development appraisal.
.
111
What sources of information do you use when undertaking a
| development appraisal?
.
112
How can you assess development potential?
.
113
What is GDV/NDV?
.
114
How do you calculate GDV?
.
115
What do development costs include?
.
116
Where can you source build costs from?
.
117
What are typical finance costs?
.
118
What would you apply finance costs to and on what basis?
.
119
What is an S curve?
.
120
What do holding costs typically include?
.
121
How do you typically calculate developer’s profit?
.
122
What are some typical inputs (and %/£) in a RLV?
.
123
What other criteria might be assessed in terms of performance
measurement for a RLV?
.
124
What are the advantages/disadvantages of a RLV?
.
125
What is included in the development programme?
.
126
What is CIL?
.
127
What is S106?
.
128
What are the differences between CIL and S106?
.
129
What is CIL charged on?
.
130
What is a Monte Carlo simulation?
.
131
What is a sensitivity analysis?
How do you carry out a sensitivity analysis?
.
132
What variables might you change and why?
.
133
What factors affect sensitivity of a development appraisal?
.
134
Tell me about your understanding of incorporating affordable housing
into development appraisals.
.
135
Tell me about software you have used to provide a RLV.
Give me a limitation of this software.
.
136
What RICS guidance relates to the valuation of development property?
.
137
What is viability?
.
138
When would a cost approach be used?
.
139
What type of buildings would a cost approach be used for?
.
140
What is the supposition that a DRC is based upon?
.
141
What are the 3 components of the cost approach?
.
142
How do you assess the value of the land?
.
143
How do you assess Gross Replacement Cost?
.
144
What costs would you consider within GRC?
.
145
What would you do if the building could be replaced with a modern equivalent?
.
146
How would you deal with depreciation/obsolescence?
.
147
What types of obsolescence are there?
.
148
What are the three ways to deal with depreciation?
.
149
Is the cost approach a market valuation?
.
150
How might onerous lease terms, e.g. restrictive user, break clause, impact upon capital or rental value?
.
151
What liabilities may be created through valuation?
.
152
What is a liability cap and when would one be used?
.
153
Explain why the RICS are carrying out an Independent Valuation Review.
Who is leading this?
.
154
Explain what you understand by the term, margin of error.
.
155
Explain your understanding of K/S Lincoln v CBRE Hotels (2010).
.
156
Explain the precent set in Hyde and another v Nygate and another (2021) in relation to the valuation of high-profile development sites.
.
157
RESIDENTIAL SPECIFIC QUESTIONS
RESIDENTIAL SPECIFIC QUESTIONS
158
What is leasehold enfranchisement?
.
159
How does it differ for flats and houses?
.
160
What is the basis of valuation?
.
161
What is the basic procedure of leasehold enfranchisement?
.
162
What are current mortgage rates (on a BTL mortgage)?
..
163
How have they changed over the past few years?
.
164
What are current LTV ratios?
.
165
How could you value an HMO using the investment method?
.
166
What were you specifically looking for in relation to the HMO use?
.
167
How can you establish if a property is an HMO?
.
168
What are the minimum rooms sizes for an HMO?
.
169
What is statutory overcrowding?
.
170
What legislation relates to this?
.
171
Tell me about any other legislative requirements relating to HMOs you are aware of.
.
172
What planning use do HMOs fall into.
.
173
Is there generally a premium attributable to HMO use over and above value as single family house?
.
174
Why did you use an investment method of valuation?
.
175
What is an Article 4 direction?
.
176
How might gross and net yields differ for HMOs?
.
177
What RICS guidance are you aware of relating to HMO valuation?
.
178
Was there any UK-specific guidance you also complied with?
.
179
What category of buy-to-let valuation does a HMO fall within?
.
180
What are some of the broader issues facing the HMO sector?
.
181
Tell me about the regulation of the HMO sector.
.
182
How can rental incentives impact on HMO valuation?
.
183
What are guaranteed rents / cash backs in lieu of rental income and how can these impact upon value?
..
184
How can Market Rent impact upon the underwriting of a loan?
.
185
How have you commended upon any limitations to accuracy of your HMO valuations?
.
186
How can maintenance costs impact upon valuation and what does the Red Book say about these for HMOs?
.
187
When is it reasonable to adopt the income approach when valuing HMOs under the Red Book?
.
188
What additional considerations do you need to make for category 3
scenarios?
.
189
What is a lifetime mortgage/home reversion/sale and rent back/home
purchase plan?
.
190
What are the Red Book requirements in relation to these?
| What is shared ownership/shared equity scheme?
.
191
How would you value a shared ownership / shared equity scheme
property?
.
192
What is a trustee mortgage valuation?
.
193
What legislation relates to this?
.
194
What is affordable/market rent?
.
195
What is your role in relation to advising a lender client?
.
196
Tell me about the requirements in relation to your terms of engagement / inspection.
What is the basis of value?
.
197
What factors may have a material impact on value?
.
198
What assumptions / special assumptions have you made in relation to this?
.
199
What is reinstatement cost and when would you be asked to provide it?
.
200
How would you calculate it?
.
201
How would you deal with suspected hidden defects?
.
202
How would you treat incentives?
.
203
Tell me about the application of the RICS Residential Mortgage
Specification in relation to a specific purpose, e.g., re-inspection or
valuation without internal inspection.
.
204
Where would you find the RICS Residential Mortgage Specification?
.
205
What are the 3 categories of BTL investments?
.
206
Have you valued a historic building?
.
207
What RICS guidance were you aware of?
.
208
Can you tell me a key principle of this guidance?
.
209
How do you reflect the historic nature of a building in your valuation advice?
.
210
What type of RICS surveys include a valuation?
.
211
What level of valuation advice does a Level 2 Home Survey include?
.
212
What guidance does the RICS provide in relation to this?
.
213
What is the basis of valuation in this type of report?
.
214
What assumptions are made in this type of report?
.
215
What else do you need to include in relation to your valuation?
.
216
Tell me about the RICS guidance relating to the valuation of individual new-build homes.
.
217
What is the new build premium?
.
218
How would a valuation of new build home differ to a second hand home?
.
219
Tell me about how you have applied this guidance to a new build valuation.
.
220
What is a key principle of this document?
.
221
Tell me about your use and understanding of AVMs.
Does the RICS provide any guidance on this?
.
222
What is an AVM?
.
223
What is an advantage and a disadvantage of using an AVM?
.
224
Give me an example of an AVM you have used.
.
225
Have you valued a residential property purpose built for renting?
..
226
What RICS guidance are you aware of in relation to this?
.
227
What are the key principles?
.
228
What are the three key pieces of legislation which have impacted the UK residential market (and purpose built valuation)?
.
229
What valuation considerations would you take into account when valuing a purpose built for renting property?
.
230
What is the difference between a gross and net yield in this respect?
.
231
What factors influence yields?
.
232
What residential operating expenses would you need to take into account?
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233
What is Net Operating Income?
.
234
How would you calculate it?
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235
Have you valued a BTL / HMO property?
.
236
What RICS guidance are you aware of in relation to this?
What are the key principles?
.
237
What key factors might affect the impact on the market of a large release of new build property?
.
238
Can ‘hope value’ be considered in valuations falling under UK Appendix 10?
.
239
If Market Value is assessed prior to or during construction, should the
valuation reflect the evidence and market at the date of valuation or an assumed completion date?
.
240
Is there a set discount for a new build premium?
.
241
What do RICS say about sales incentives?
.
242
Should you reflect sales incentives in your valuation?
.
243
Where would you find details of incentives?
.
244
What are some of the ways that a home can be offered at a reduced
price?
.
245
For houses with restrictions on occupancy, e.g. by income or job type, what is a typical discount used in the market?
.
246
What is a new build warranty?
.
247
How long would a typical warranty last for?
.
248
If a property was built in the last 10 years and does not have a
professional certificate or guarantee/warranty, would this affect value?
.
249
What are the two special assumptions relating to Projected Market Value
(PMV) and when would you adopt PMV?
.
250
What are some of the types of home finance product?
.
251
Who further regulates valuations for home finance products?
.
252
What are the key differences between a lifetime mortgage and a
conventional mortgage?
.
253
Would the amount of mortgage debt to be redeemed at the end of a lifetime mortgage term be less or more than that of a conventional
mortgage?
.
254
What is home reversion?
.
255
What is sale and rent back?
.
256
What is a home purchase plan?
.
257
What are the bases of value for a registered social landlord’s housing stock for secured lending purposes?
.
258
What is a statutory valuation?
.
259
Who is responsible for Council Tax valuations?
.
260
What Council Tax bands exist in England?
.
261
What is the basis of value for Council Tax valuations?
.
262
What assumptions are made in a Council Tax valuation?
.
263
What is the Right to Buy?
.
264
What legislation relates to Right to Buy?
.
265
When might a lender instruct a drive-by valuation?
.
266
What is the impact of the Rentcharges Act 1977?
.
267
Until 22 August 2037, how should rentcharges be dealt with?
.
268
Within what general distance of a dwelling might Japanese Knotweed have a material impact on value?
.
269
Do RICS publish any guidance on leasehold reform?
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270
What right did the Leasehold Reform Act 1967 introduce?
.
271
What is the definition of a house under the Leasehold Reform Act 1967?
.
272
What are the qualification criteria to acquire the freehold of a house?
.
273
How long is a ‘long tenancy’?
.
274
Which section are the bases of valuation set out in?
.
275
What does the Section 9 (1) basis of valuation comprise?
.
276
What does the Section 9 (1A) basis of valuation comprise?
.
277
What does the Section 9 (1C) basis of valuation comprise?
.
278
Which is the most favourable basis of valuation?
.
279
How is a claim to acquire a freehold started?
.
280
What is the main impact of the tenant’s notice?
.
281
How long does a landlord (reversioner) have to reply to the tenant?
.
282
If a landlord intends to reoccupy or redevelop, what Sections can they
rely on?
.
283
If the parties cannot agree on a price, where is the matter referred to?
.
284
What is marriage value?
.
285
What is hope value?
.
286
How is marriage value calculated?
.
287
What is the deferment rate?
.
288
What right did the Leasehold Reform, Housing and Urban Development Act 1993 introduce?
.
289
What is the basis of a new lease for a flat under the 1993 Act?
..
290
What is the basis of valuation in Schedule 13 for the new lease premium under the 1993 act?
How long can a lease be extended for?
.
291
Is a premium payable upon the grant of an extended lease?
.
292
What are the additional qualification criteria if the long leaseholder of a house wishes to extend their lease (rather than acquire the freehold)?
.
293
What are the ways to calculate a modern ground rent?
.
294
What precedent was set in the Sportelli v Cadogan Estate (2008) case?
.
295
How is the generic rate in Sportelli calculated?
.
296
Does a leaseholder have to pay the landlord’s reasonable professional costs?
.
297
What valuation approach should be used to assess the value of the
freeholder’s loss (or landlord’s diminution in value)?
.
298
When does marriage value generally become payable?
.
299
What is collective enfranchisement?
.
300
What does the collective enfranchisement price under Schedule 6 include?
.
301
What is the capitalisation rate?
.
302
What is the Delaforce (1970) effect?
| Explain your understanding of Sloane v Mundy and Reiss v Ironhawk Ltd.
.
303
Explain the impact of Cadogan Square Properties Ltd v Earl Cadogan and Cadogan v Erkman.
.
304
What is an adverse differential?
.
305
What is leasehold relativity?
.
306
Explain what you understand in relation to the issue of 'down valuation.
.
307
What RICS guidance relates to residential leasehold properties and secured lending valuation?
.
308
What principles from this are you aware of?
.
309
What sections of the Red Book and the UK National Supplement should this guidance be read alongside?
.
310
What length of unexpired lease term does the guidance relate to?
.
311
Why does it not relate to unexpired lease lengths below this?
.
312
What factors might affect the valuation of a leasehold property according to the Guidance Note?
.
313
What assumptions might be made in this type of secured lending
valuation?
.
314
What special assumption might be agreed and why, with the lender
client?
.
315
What methods are available to value a leasehold property and when/why might you adopt each?
.
316
When would you use a leasehold relativity graph?
.
317
What would you use a magnet / plumb bob / spirit level for during an inspection?
.
318
How would you value a property affected by Japanese Knotweed?
.
319
What does the legal case of Ryb v Conways (2019) say about the valuation of property affected by Japanese Knotweed?
.
320
What valuation approach does the RICS recommend is taken when
valuing property is affected by Japanese Knotweed?
.
321
What guidance sets this approach out?
.
322
How can a NIY of zero be achieved?
.
323
In a scenario where rents are static and the capital value increases, would you expect yields to increase or decrease?
.
324
What impact does tenure/supply/location/immediate environment/
structural condition/ specification/energy efficiency have on value?
.
325
What is the current version on the Red Book (global)?
.
