1
Q
Appendix Site Location Plan – Please can you confirm how you verified the red line site boundary, and that it was plotted in the right place.
A
2
Q
Which assumptions would you tweak and why, if you were to undertake the valuation today.
A
The Bank of England base rate was been reduced twice since the valuation so I would review this and likely to be reduced.
3
Q
Would the land be worth less today than it was when you valued it?
A
No, I would reduce the finance rate which would increase it’s value.
4
Q
What costs go into a BCIS costs – what does it / does it not allow for?
A
It does allow for:
Contingencies
Professional fees
external works
VAT
5
Q
How did you allow for the cost of building the garages?
A
6
Q
When comparing build costs to BCIS, did you make any allowances for the fact the borrowers build costs include garage construction costs but BCIS does not. What costs go into your 10% increase of build costs?
A
7
Q
How did you arrive at the level of profit that your residual landed on?
A
The level of profitability required by a developer is dependent on how they perceive the risks in undertaking the development. I used 20% on costs as this is market practice and reviewed what profit on GDV this produced as a check.
8
Q
When reporting on land comparables, which land comparable was the best comparable and why?
A
9
Q
How did you account for overhead cables in your appraisal?
A
The Borrower confirmed they have obtained a quote for the removal of the cable and for it to be put underground. The quote was £48,146 which I input into my appraisal
10
Q
Did you assess parking when looking at your comparables? Did you assess them on a like for like basis as your subject properties.
A
11
Q
Land comps – Price per plot vs price per acre basis. When would it be more appropriate to compare on a price per acre basis.
A
12
Q
Did the planning have any environmental benefits. E.g EV charging. How did you account for this in your appraisal.
A
13
Q
How did you show good client care throughout your instruction?
A
14
Q
What was the first thing you did before visiting the site? What is the first thing you did when you get to site? Where did you go, who did you see when you first visit a development scheme?
A
15
Q
How did you reflect the garages in the appraisal?
A
16
Q
Were the garages attached/detached. How did you go about reporting the areas garage. What did you refer to?
A
17
Q
How do you go about rebasing BCIS? What makes you decide what is more appropriate Build Cost from BCIS? What type of sample size were you looking at when getting to your BCIS. You used estate housing, what other options could you have used?
A
18
Q
Finance costs – how did you establish what the interest rate should have been?
A
19
Q
Is there anywhere you can go to look at where you can see what banks are lending at internally?
A
20
Q
Do you believe that comparing a year ago is appropriate consider economic condition?
A
21
Q
What is the purpose of COI checks? Are there any RICS guidance you would refer to?
A
22
Q
What was included in your Terms of Engagement?
A
23
Q
What is the IRR?
A
24
Q
What do you look for on the inspection?
A
25
What was the former use of the site?
26
What is the definition of GDV?
27
What makes a good comparable?
28
Explain the hierarchy of comparable evidence.
29
Why do you have to be careful of asking prices?
30
Do land registry report gross or net figures?
31
What document do you have regard to when valuing new build property?
32
What is a new build premium?
33
Do externals include abnormals in your mind?
34
How do you benchmark abnormals?
35
What do abnormals include?
36
What does the finance rate include?
37
What happens if the borrower can’t complete the site?
38
Do you comment on if the borrower can complete the site?
39
How do you protect yourself from a liability claim?
40
How would political instability affect the valuation?
41
Are development sites volatile?
42
What would you do if your RLV came out much higher or lower than the land comparables?
43
What was the date of your valuation?
44
What were the loan terms?
70% LTV on GDV
45
What loan to value ratio would you tend to expect?
50% - 70%
46
What is contained within your fee quote?
Conflict of interest confirmation
My fee + VAT
Basis of valuation
The property address
Expected date of work to be completed by
Client details
47
What is contained within your confirmation of instruction?
Confirms responsible valuer
Property address
Client details
Fees
Basis of value
48
Were there any onerous conditions to the planning?
No, I did not consider that any of the conditions were onerous
49
Had all the conditions been discharged?
50
Obligations to look after the road? And how did this impact your valuation?
Plot 1 would own the road with Plot 2 having ROW. It would involve minimal maintenance due to being tarmac and only providing access to Plot 2 and 41 Southview Road and therefore this did not impact the valuation.
51
What is included in all-in build costs?
52
What is best practice valuation methodology as per the RICS valuation of development property 2019?
53
Why did you use BCIS?
54
What are some of the weaknesses of BCIS?
55
What are the forms of finance available?
56
What are the 2 main methods of funding?
57
For what reasons does a developer need finance?
58
What are the 3 ways you could calculate finance rate?
59
What abnormal costs can occur?
60
What are the limitations to the residual method?
61
What was included within your report that is specific to Loan Security?
62
What does BCIS exclude?
63
Can you tell me why the lender wanted both values of MV?
64
What were the assumed timescales for the development?
65
What does the land registry record for new build premises?
66
Was the property serviced?
67
Where is GDV defined?
68
How did you formulate your fee quote? What would you have done differently if it had been a private individual?
69
What was the former use class?
70
What is the definition of new build premium?
71
Did you have sight of any RICS documents in regards to measuring land?
72
Was the road adopted?
73
Why did you ensure that your ToE was signed prior to starting the job?
74
What is the definition of the GDV?
75
What aspect of the Red Book did you refer to when preparing the Loan Security Valuation?
76
According to the RICS, why do new-builds have a premium?
77
Can you tell me about the areas and surrounding location of the property?
78
Can you have as many special assumptions as the client would like?
79
What is profit erosion?
The time, post completion, that the development could remain unsold until finance and holding costs reduce profit to zero.
80
What is IRR?
81
What is a typical IRR rate for a developer?
30%
82
What is the hierarchy of comparable evidence?
83
How important was the level of specification to determine GDV and can you explain elements of the specification?
84
What impact could a delayed or prolonged development period have on the MV (RLV)?
85
What changes would you make if you were to revalue the property today?
The base rate has been cut twice since my valuation so I would reduce this and I would review the build costs and sales rates.
86
What makes up your 8% professional fees and how was this split?
- Quantity Surveyor
- Project manager
87
Why did you feel that 8% for professional fees was appropriate?
88
Did you account for any abnormal costs?
The removal of the telephone post which was on site. The Borrower had obtained a quote from BT for this to be removed which was £48,146 which I included in my appraisal
89
Name 3 things you would change to reflect increased risk in your appraisal?
- Increase profit
- Increase the sales rate
- Increase the contingency
- Increase professional fees
- Increase yield
- Increase finance rate
90
What % of debt finance does Argus assume?
100%
91
Why did you include 5% contingency?
92
Why is your CIL input £33,430? It seems low.
93
What did you consider when selecting the finance rate?
- The base rate which was 4.5%
- Risk
- The developer purchasing the site
94
Why didn't you calculate the SDLT manually?
It is calculated from the RLV and in turn deducted from the RLV
95
Who is your client?
The bank
96
Why did you advise the property was suitable for loan security?
97
What did your SWOT analysis include?
98
You’ve talked about the units being constructed to a high specification. What is high specification?
High specification means being finished to a high standard with premium fixtures and advanced features.
Examples are:
- Bespoke handmade fitted kitchens
- Integrated waste disposal unit
- Worktop level double sockets
- Separate walk in shower
- Stream free mirrors
- Fixed wardrobes in bedrooms
- Intruder detector
99
When you sent your Confirmation of Instruction letter to the bank did you agree any limitations regarding the extent of your inspection?
100
You said you did not take any PPE. Do you only need PPE when inspecting an active development site?
101
For the redundant commercial building, did you gain access to this building?
No, as it was being demolished I did not internally it.
102
What was this building used for? What did you note about this building? Asbestos?
103
What impact could the presence of this building have on the site?
104
What did you note in terms of the access to the site?
There was an existing access road which the neighbouring house, 41 Southview Road had rights of access over. The Borrower confirmed the access to 41 Southview Road would be maintained.
105
Looking at the proposed development, I note the properties will share an access road. How was the developer going to deal with this in the conveyancing process?
Plot 1 would own the road and Plot 2 would have ROW over it.
106
You say that Plot 1 will own the access road. How did you account for this in your valuation?
I considered this however given it was a small road which would be a minimal cost for Plot 1 to maintain, it not impact my valuation.
107
What was the liability cap agreed?
33% of the GDV or £75m - whichever was lower
108
You say you carried out a COI check when you received the fee quote request. What else did you check?
109
Why did you commence work when signed Terms were given and not once the fee had been paid?
110
What was the purpose of the peer review?
111
Does your firm have any additional procedures for high risk valuations, such as a development appraisal?
112
What did you advise your client regarding 41 Southview Road having ROW over the site?
113
You say construction had not yet started. How might it have impacted your valuation if construction had started?
What would you advise about the marketability of a part-completed scheme and its impact on value?
114
The site was consistent with the Title Plan. What would you have advised if it wasn't consistent?
115
For your comparables, you consider both capital value and £ per sq ft. Why?
116
Why did you advise that smaller accommodation would result in a higher £ per sq ft?
117
The Borrower provided you with demolition costs. What would you have advised if the Borrower hadn't provided this cost?
118
What would you advise regarding an appropriate contingency and why?
119
Tell me about some of the key notes you would need to make whilst undertaking a site visit?
120
Did you check your RLV against the existing use value? Why / why not?
121
How much weight can you give to anecdotal evidence from local agents?
122
There are some large trees within close proximity of the properties. Did you provide any advice regarding this?
123
How did you account for the garages within your pricing and comparable analysis?
124
Did you advise if the shared access had an impact on value?
125
Tell me about how you phased the demolition works?
126
How did you arrive at the appropriate CIL costs?
127
Why did you advise on 20% profit on cost? Was this appropriate?
128
How did the market conditions impact the valuation?
129
Can you talk me through some the assumptions in your appraisal and why they were reasonable.
130
How did your appraisal compare to the land comparables?
131
What was the market like for properties over £1m at the valuation date?
132
What sales period did you allow for?
133
Build cost – you’ve noted very wide build cost range – you noted the two BCIS extremes – lower quartile and upper quartile so it’s to be expected the borrower’s costs would be within this range. If it’s high spec, then it’s probably not going to be lower quartile. What was the BCIS mean/median cost?
BCIS median including 10% added for externals was £270.
134
Can you tell me what cost items are included in BCIS please? What additional costs is it necessary to add?
135
Did you consider the purchase price for the site?
Yes, as per the RICS professional standard on Comparable Evidence in Real Estate Valuation, I recognised that my best comparable was the price the Borrower was purchasing the site for.
I contacted the selling agent who had sold the site off market to the borrower. They informed me that they had received 5 offers in total from developers. The highest offer was received £890,000 however the vendor accepted the Borrower's offer of £862,500 due to quicker timescales. The Borrower's purchase price aligned with my appraisal.
136
What could the absence of recent land sales indicate?
137
Was 20% profit on cost sufficient to reflect the market uncertainty?
The Borrower had provided me with their appraisal which accounted for 15% profit on cost. Due to the market conditions, I increased this to 20% and cross checked with the profit on GDV, which was 16%.
138
What risks did you highlight to the bank?
- Rising inflation had seen the Bank of England increase the base. The mortgage market had reacted by withdrawing some mortgage products for repricing and this would see mortgage costs increase.
- I highlighted the valuation was prepared against the backdrop of a challenging economic outlook.
- Uncertainty in the housing market with the market for high worth houses slowing
139
You say that new builds would have a premium. Why and what sort of premium would you expect?
Never been lived in
I would determine from local agents but 10-15% would be reasonable. I would also consider the RICS Guidance Note on ‘Valuation of Individual New Build Dwellings’ (2019)
140
What is the hierarchy of comparable evidence?
Category A (Direct Comparables)
- completed transactions of similar properties with full details
- completed transactions of similar properties with enough data present
- asking prices
Category B (General Market Data)
- historic evidence
- indices
Category C (Other Sources)
- evidence from other locations and types
141
Did you provide any key lender action points?
Yes, I recommended:
- The bank's solicitors are provided with a copy of my report
- The bank instruct a Monitoring Surveyor given the impact inflation has had no build costs recently
- The bank's solicitor clarifies the unregistered land to the rear of the site prior to the purchase
APC Valuation - TL
flashcards
Decks in class (15)
# Cards
-
Ethics62
-
Client care / Communication and negotiation9
-
Health & Safety23
-
Conflict avoidance, management and dispute resolution procedures6
-
Data Management / Business Planning / Accounting Principles & Procedures19
-
Diversity, inclusion and teamworking / Inclusive environments10
-
Sustainability5
-
Measurement38
-
Inspection39
-
Valuation46
-
Loan Security Valuation8
-
Development Appraisals61
-
Purchase & Sale51
-
Planning and development management43
-
Case Study141
