Valuation - Scarlett Flashcards
(36 cards)
What are some examples of special assumptions that might be included in a loan security valuation report?
- Vacant Possession
- Restricted Marketing Period
- Anticipation of physical change
- Anticipation of a new letting
- Existence of a special purchaser
What are the six bases of value?
- Market Value
- Market Rent
- Fair Value
- Investment Value - the value of an asset to a particular owner for individual investment
- Equitable Value
- Liquidation Value
What is Market Value?
The estimated amount for which an asset or liability should exchange at the valuation date between a willing buyer and willing seller in an arm’s length transaction, after proper marketing where both parties has acted knowledgeably, prudently and without compulsion.
What is Market Rent?
The estimated amount for which an interest in real property should be leased on the valuation date between a willing lessor and lessee on appropriate lease terms in an arm’s lease transaction, after proper marketing, where both parties had acted knowledgably, prudently and without compulsion.
What is fair value?
A basis of valuation carried out for accounting purposes which is required by the International Financial Reporting Standards.
‘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 difference between fair value and market value?
There is no material difference between the two. Fair Value is a defined term in the IFRS
What is discounted cash flow?
DCF is an investment method technique.
DCF Valuation involves projecting estimate cash flow over an assumed investment holding period, plus an exit value at the end of that period, usually arrived at an All Risks Yield basis. The cash flow is then discounted back to the present day at a discount rate (the desired rate of return) that reflects the perceived level of risk.
How has the RICS placed more of an emphasis on sustainability?
RICS Red Book Global Standards now explicitly mention the need to assess the relevance of sustainability factors in valuations, including energy efficiency, EPC ratings, and climate-related risks.
What is Hope Value?
The value arising from an expectation that future circumstances affecting the property may change.
E.g. the future prospect of securing planning permission for the development of land where no planning permission exists at the present time.
What is marriage value?
The merging of two interests. An additional element of value created by the combination of two or more interests where the combined value is more than the sum of the separate values.
Undertake a before and after valuation and calculate the level of marriage value created.
What are purchaser’s costs for a sale?
Agent fees - 1%
Legal Fees - 0.5%
Stamp Duty - 5%*
VAT - 20%
What are the SDLT brackets?
£0 - £150,000 - Nil
£150,000 - £250,000 - 2%
£250,000 - 5%
The brackets are different in England, Wales and Scotland depending on the government.
What is the investment purchasers costs?
Circa 6.8%
Define a special purchaser.
A party who’s interest in the property means it is of a higher value to them than in the open market. E.g. a tenant purchasing their freehold interest.
What is a Building Reinstatement Valuation?
Used for building insurance purposes.
It is the cost to reinstate
In a valuation TOE what additional things do you need to include?
Name and Status of valuer
Currency
Purpose of Valuation
Basis of Valuation (MR, MV)
Valuation Date
Special Assumptions
What is PII?
PII protects you against claims for loss or damage made by clients as a result of the impact of negligent services you provided.
What is the purpose of the Red Book?
To promote and support high standards in valuation delivery worldwide.
What are some exceptions from the Red Book?
Agency
Internal Purposes
If you want to undertake a valuation, which is an exception to the Redbook, what do you have to do?
It would need to be set out in the terms of engagement and report that your client has agreed that it is an exception.
What is an assumption?
An assumption is made where it is reasonable for the valuer to accept that something is true without need for specific investigation. Such as the property has all the relevant planning permission.
What is a special assumption?
A term used to describe an assumption which is factually untrue at the time of the valuation.
What are some examples of Special Assumptions?
Vacant possession.
Restricted Marketing Period.
Anticipation of a physical change.
Anticipation of a new letting.
Existence of a special purchaser.
Define Special Purchaser.
A party who’s interest in the property means it is of a higher value to them than in the open market.
