Valuation > Level 1 > Flashcards

Level 1 Flashcards

(43 cards)

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1
Q

What is the purpose of the RICS Valuation - Global Standards?

A

A set of global valuation standards created to achieve the highest standards and best practice in valuation.

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2
Q

What are the components of the RICS Valuation - Global Standards?

A

Part 1: Introduction
Part 2: Glossary
Part 3: PS (Professional Standards)
Part 4: VPS (Valuation, Technical and Performance Standards)
Part 5: VPGA (Valuation Practice Guidance Applications)
Part 6: VS (International Valuation Standards)

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3
Q

What are the benefits of using Argus?

A

Fast and easy to use
Eliminates human error through formulas on excel
Consistent results

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4
Q

What are the limitations of Argus?

A

Hidden features that are hard to audit
Expensive

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5
Q

True or False: Professional standards and valuation technical performance standards are mandatory.

A

True

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6
Q

Fill in the blank: Professional standards and valuation technical performance standards are _______.

A

MANDATORY.

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7
Q

Fill in the blank: RICS Practice Guidance is _______.

A

ADVISORY.

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8
Q

What do sustainability and ESG factors relate to in the context of valuation?

A

Definitions, inspections and valuations.

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9
Q

What is a key aspect of valuation evidence mentioned in the context of sustainability?

A

Commentary on future costs.

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10
Q

What types of flood risks are considered in property resilience valuations?

A

Direct flood risks or indirect property resilience.

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11
Q

What does PS stand for in the context of RICS Valuation Standards?

A

Professional Standards

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12
Q

What does VPS stand for in the context of RICS Valuation Standards?

A

Valuation, Technical and Performance Standards

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13
Q

What does VPGA stand for in the context of RICS Valuation Standards?

A

Valuation Practice Guidance Applications

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14
Q

What does VS stand for in the context of RICS Valuation Standards?

A

International Valuation Standards

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15
Q

What are the main changes from the previous Red Book Version according to RBG (2021)?

A

Made more accessible, removing repetition in accordance with Recommendation 13 from the Valuation Review. Also incorporated new standards covering automation and AI

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16
Q

What is the RICS Valuation – ‘Global Standards’?

A

A set of global valuation standards created to achieve the highest standards and best-practice in valuation

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17
Q

What are the main changes from the previous Red Book Version according to RBG (2021)?

A
  • Sustainability and ESG factors: definitions, inspections and valuations
  • Commentary on future costs, valuation evidence
  • Direct flood risks or indirect property resilience
  • Definitions and scope of valuations within IVS
  • Valuation for financial reporting
  • Terms of reference clarity
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18
Q

What are the components of the RBG?

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A
  • Part 1: Introduction
  • Part 2: Glossary
  • Part 3: PS (Professional Standards)
  • Part 4: VPS (Valuation, Technical and Performance Standards)
  • Part 5: VPGA (Valuation Practice Guidance Applications)
  • Part 6: IVS (International Valuation Standards)
19
Q

What are the benefits of using Argus?

Study These Flashcards
A
  • Fast and easy to use
  • Eliminates human error through formulas on excel
  • Consistent results
20
Q

What are the limitations of Argus?

Study These Flashcards
A
  • Hidden features that are hard to audit
  • Expensive
21
Q

What does PS1-2/VPS1-5/VPGAs relate to?

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A
  • PS1: compliance with standards and practice statements (exemptions from RB valuations)
  • PS2: Ethics, competency, objectivity and disclosures
  • VPS 1: Terms of Engagement
  • VPS 2: Inspections
  • VPS 3: Valuation Reports
  • VPS 4: Bases of value, assumptions and special assumptions
  • VPS 5: Valuation approaches and methods
22
Q

What does VPGA (Valuation Practice Guidance Applications) cover?

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A
  • Inclusion for financial accounts
  • Secured lending
  • Real property interests
  • Material uncertainty
23
Q

What RICS guidance outlines competency and what does it state?

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A

PS2 highlights that members must possess the necessary qualifications, ability, experience, and technical skills to execute a valuation in an objective, unbiased, ethical and competent manner.

24
Q

Are there any exceptions to the use of the RBG?

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A
  • Advice in preparation for litigation or negotiations
  • Statutory functions
  • Internal purposes
  • Agency or Brokerage work
  • Expert witness role
25
What should be done if undertaking a non-red book valuation?
Set out in the Terms of Engagement that the valuation will not form a Red Book valuation and the client has agreed to this.
26
What is a significant change regarding the Red Book/Supplement in 2023?
New UK National Supplement 2023 introduced a maximum single engagement period of 5 years, with a maximum of 10 years for firms across multiple engagements and a 3 year break.
27
What is the 2023 Practice Information on DCFs?
Providing definitions and advice on the use of DCFs in valuation, emphasizing that selection should depend on the appropriacy of its use.
28
What is the importance of impartiality in valuation?
Ensure in accordance with PS2 – Ethics and Objectivity; the valuer must think independently for a reasonable, unbiased valuation.
29
What is the RICS VRS?
Valuer Registration Scheme: regulatory monitoring scheme for valuers introduced in 2011 to improve valuation quality, self-regulate, and elevate the status of the profession.
30
What factors impact Market Rent?
* Location * Specification * Construction Size
31
How does Market Value differ from Market Rent?
Market Value is impacted by the same issues as Market Rent but considers covenant and income profiles when analyzing comparables.
32
What are the factors that impact value?
* Market Rent: Specification, Pitch/Prominence * Market Value: Income profile, Covenant, Lot Size
33
What are the 5 valuation methods?
* Comparative * Investment * Profits * Residual * Contractors (DRC – depreciating replacement cost)
34
How do the valuation methods differ from IVS (International Valuation Standards) 105?
IVS 105 sets out 3 valuation approaches: Income (Investment, residual, profits), Cost (DRC), Market (Comparable).
35
What are the different bases of value according to VPS4?
* Market Value: * Market Rent: * Fair Value: * Investment Value:
36
When is it appropriate to use the profits method?
Used when the value of a property depends upon its trade and profitability of the business rather than its physical properties, e.g., petrol stations, healthcare, and pubs.
37
What are the Valuation, Technical and Performance Standards?
VPS 1: Terms of Engagement VPS 2: Bases of Value, Assumptions and Special Assumptions VPS 3: Valuation Approaches and Methods VPS 4: Inspections & Investigations VPS 5: Valuation Models VPS 6: Valuation Reports
38
Definition of Market Value
Estimated amount for an asset/ liability should exchange on valuation date between willing buyer and seller in an arm's length transaction after proper marketing where the parties had each acted knowledgably and without compulsion
39
Definition of Market Rent
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 length transaction, after proper marketing with full knowledge and without compulsion
40
Definition of Fair Value
The price that would be recieved to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date
41
Definition of Investment Value
The value of an asset to a particular owner or prospective owner for an individual investment or operational objective
42
What is an assumption?
An assumption is made where it is reasonable for the valuer to accept that something is true withou the need for specific investigation or vertification
43
What is a special assumption?
Necessary to provide the client with the valuation required, must be expressly agreed and confirmed in writing with the client. Can only be made if reasonably regarded as realistic, relevant and valid for the particular circumstances of the valuation.
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