Valuation

Question 1

Tell me what the 5 methods of valuation are.

Answer 1

1. Comparable
2. Investment
3. Residual
4. DRC
5. Profits

Question 2

Tell me about how you would value a building using the profits/contractors/investment/comparable/residual method of valuation.

Answer 2

• Comparable - Comparable evidence is researched and selected on basis of similarity to subjects eg type, size, condition etc. Adjustments are then made to the sales to account for differences and a value is picked
• Investment - The investment method involves assessing market rent and a market based yield. The rent is then capitalised using the yield to establish the capital value.
• Residual - Involves establishing the GDV of a development. Development costs and profit are then deducted to establish the land value.
• DRC - Involves assessing the cost to replace the land and the building with a modern equivalent, including all associated costs and then making appropriate deductions for depreciation and obsolescence.
• Profits - Involves establishing fair maintainable operating profit (FMOP) capable of being generated by a reasonably efficient operator. This is based upon assessment and analysis of fair maintainable turnover. A market based profit multiplier is then used to convert FMT into a capital value.

Question 3

How do you decide which valuation method to apply?

Answer 3

It depends on what type of property you are valuing

Question 4

When and why would you use one of these methods?

Answer 4

• Comprable method - Used for straight forward properties were there is comparable evidence
• Residual method - used for development properties
• Profits method - used for properties where the major value component of the property is driven by the profitability of the business that occupies the building
• Investment method - used from investment properties that are held for their income stream
• DRC - used where there is no active market for the asset being valued due to the specialist nature of the property

Question 5

What is a years purchase multiplier?

Answer 5

Multiplier used to convert income to capital value

Question 6

Give me an example of a good covenant and how this might impact a valuation.

Answer 6

• Tesco - lower yield applied

Question 7

What level of PII cover does your firm have?

Answer 7

£10,000,000

Question 8

How would you distinguish limitations on liability in your valuations?

Answer 8

Liability cap

Question 9

Where in your valuation report do you state any limitations on liability?

Answer 9

Terms and conditions

Question 10

What relevance does Hart v Large have on your valuation practice?

Question 11

What aspect of Hart v Large allowed the judge to award damages without applying the SAAMCO cap?

Question 12

What is the SAAMCO cap?

Question 13

Under the SAAMCO cap, is a valuer liable for losses due to a downturn in the market?

Question 14

Under the SAAMCO cap, is a valuer’s liability usually limited to the overvaluation on the valuation date?

Question 15

What would you do if you received a notice of a PII claim from a client or their solicitor?

Question 16

Is there a difference between being negligent when undertaking a survey/valuation and providing negligent advice?

Question 17

What is the Red Book?

Answer 17

Set of standards published by RICS that contain mandatory rules, best practise guidance and related commentary for all members undertaking valuations of an asset

Question 18

Why does the Red Book exist?

Answer 18

Promote and support high standards in valuation delivery worldwide

Question 19

Tell me about a factor which may impact value.

Answer 19

Size

Question 20

What is your duty of care as a surveyor when undertaking a valuation?

Question 21

To whom do you owe this duty of care?

Question 22

Why is independence and objectivity important when valuing?

Question 23

Is there a separate UK Red Book?

Answer 23

There isn’t a separate UK Red Book. There is an additional UK Supplement that sits alongside the Global Red Book.

Question 24

What is the UK valuation guidance called?

Answer 24

RICS Valuation - Global Standards - UK National Supplement

Question 25

Why does the UK guidance exist?

Answer 25

Provides specific information on UK matters

Question 26

When was the Red Book last updated?

Answer 26

Global - 2022 UK - 2019

Question 27

Does this differ from when IVS were last updated?

Answer 27

The IVS were updated in 2022 as well, the Red Book was updated to incorporate these updates

Question 28

What changes were made?

Answer 28

* IVS changes incorporated * Articulating in more detail the need for clear unambigous and documented terms of engagement when members apply and exceptions to VPS 1-5, under PS1 section 5 exceptions * More detailed commentary on matters relating to sustainability/resilience and ESG * Improving and/or clarifying some of the existing Red Book Global text in light of feedback, experience and evolving needs

Question 29

Which do you follow - the latest IVS or the Red Book Global?

Answer 29

The Red Book incorporates IVS, so both

Question 30

Which sections of the Red Book are mandatory and which are advisory?

Answer 30

**Mandatory** * PS 1 & 2 * VPS 1 - 5 **Advisory** * VPGAs

Question 31

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

Answer 31

**Professional Standards** * PS 1 - Compliance with standards where a written valuation is provided * PS 2 - Ethics, competency, objectivity and disclosures **Valuation Technical & Performance Standards ** * VPS 1 - Terms of engagement (scope of work) * VPS 2 - Inspections, investigations and records * VPS 3 - Valuation reports * VPS 4 - Bases of value,assumptions and special assumptions * VPS 5 - Valuation approaches and methods **Valuation Practise Guidance Applications ** * VPGA 2 - Valuation of interests for secured lending * VPGA 8 - Valuation of real property interests * VPGA 9 - Identification of portfolios, collections and groups of properties * VPGA 10 - Matters that may give rise to material valuation uncertainty

Question 32

What type of advice does the Red Book cover?

Question 33

If you provide preliminary advice / draft valuation report, what should you state in writing to your client?

Question 34

What type of valuations might be relied upon by a third party?

Question 35

Tell me what the definition of MR/MV/investment value/fair value?

Question 36

What is the difference between an assumption and a special assumption?

Question 37

What sources of information would you consider when preparing a valuation report?

Question 38

If you have previously valued an asset, do you need to make any additional disclosures and what might they be?

Question 39

If your firm is too small to have a rotation policy or valuation panel, what else can you do to ensure objectivity?

Question 40

When might a conflict of interest exist in relation to a valuation instruction?

Question 41

What must be included in your terms of engagement / valuation report?

Question 42

Where is this covered in the Red Book?

Question 43

What is a restricted valuation service and can you provide one?

Question 44

How do you deal with limitations on inspection or analysis?

Question 45

Can you revalue a property without inspecting?

Question 46

What RICS guidance relates to the use of comparable evidence?

Question 47

What is an internal valuer?

Question 48

Can an external valuer provide an internal purposes valuation?

Question 49

What happens if market conditions change between the valuation date and report date?

Question 50

Is special value from a special purchaser reflected in MV?

Question 51

Where does the definition of fair value come from?

Question 52

Does this differ from MV?

Question 53

When is fair value used?

Question 54

What are the 3 approaches under VPS5?

Question 55

What is the Valuer Registration Scheme?

Question 56

Are there any instances where certain sections of the Red Book may not apply?

Question 57

What are these and which sections don’t apply?

Question 58

What is the basis of value under UK GAAP FRS 102?

Question 59

What is a SORP

Question 60

When would you use EUV?

Question 61

What is the definition of EUV?

Question 62

What additional criteria apply to secured lending valuations?

Question 63

What information should you specifically request for a secured lending valuation?

Question 64

What is a regulated purpose valuation?

Question 65

What additional disclosures must be made for a regulated purpose valuation?

Question 66

What is the basis of value for a statutory valuation?

Question 67

What might a statutory valuation relate to?

Question 68

What is the definition of the statutory basis of valuation?

Question 69

Is this the same for all statutory valuations?

Question 70

What is a yield?

Answer 70

* Used to describe the quality of an investment * Expressed as a percentage between income receieved from an investment and its capital value

Question 71

What is a Net Initial Yield?

Answer 71

* Type of income yield * Initial income divided by purchase price * Reflects purchasers costs * Common market measure of investment performance

Question 72

What is a reversionary yield?

Answer 72

* Used in term and reversion valuations * Used to capitalise the reversionary income

Question 73

What is an equated yield?

Answer 73

* Internal rate of return of a growth explicit cash flow

Question 74

What is an equivalent yield?

Answer 74

* Single yield that can be used to capitalise both the term and reversionary incomes

Question 75

How would a yield reported from auction differ from a Net Initial Yield?

Question 76

What purchaser’s costs do you deduct from a valuation?

Answer 76

* Agent fees * Legal Fees * LBTT

Question 77

When do you deduct purchaser’s costs from a valuation?

Answer 77

At the end of an investment valuation

Question 78

How would you value a property in uncertain market conditions - does the Red Book give any guidance?

Question 79

How does a term and reversion differ to a DCF?

Answer 79

Term and reversion is growth implicit whereas a DCF is growth explicit

Question 80

What is the difference between a growth explicit and a growth implicit yield?

Answer 80

* Growth implicit - reflects all of the subjects risks and rewards * Growth explicit -

Question 81

Give an example of a growth implict and explicit yield

Answer 81

* Growth implicit - ARY

Question 82

How would you value an under/over rented investment property?

Answer 82

* Under rented - term & reversion * Over rented - hardcore/topslice

Question 83

When would you use a dual rate investment calculation?

Answer 83

When the return of capital is calculated at a lower rate than the return on capital

Question 84

Where can you find yield evidence from?

Answer 84

* Databases * Corporate Publications * IPF

Question 85

What is the hierarchy of evidence?

Answer 85

* Category A - direct transactional evidence * Category B - general market data providing guidance rather than a direct indication of value, such as evidence from published sources, commercial databases, indices, historic evidence, demand/supply data * Category C - other sources, such as transactional evidence from other property types and locations and other relevant background data

Question 86

# **** What would you do if comparable evidence was limited?

Answer 86

Use the next best thing and make adjustments

Question 87

What is NPV?

Answer 87

Discounted (present) value of a cashflow

Question 88

What is IRR?

Answer 88

Measure of an investment’s profitability over it’s lifetime

Question 89

What is a term and reversion?

Answer 89

* Type of investment valuation used for under rented investments * Done by capitalising the rent passing until the point at which it reverts back to market rent (next lease event). Reversionary rent is capitalised in perpetuity but deferred from now unitl point it is received. Two values are then added together.

Question 90

What is a hardcore and topslice?

Answer 90

* Type of investment valuation used for over rented investments * Done by capitalising the contract rent in perpetuity and the top slice (incremental rent), which is the difference between profit rent and market rent, is capitalised in perp but deferred until the next lease event. These two values are then added together.

Question 91

What is a Discounted Cash Flow (DCF)?

Answer 91

Form of growth explicit investment value

Question 92

What is a short-cut DCF?

Question 93

When would you use a DCF?

Answer 93

* Comparable evidence is scarce * Unusual property

Question 94

What are the advantages of a DCF?

Question 95

What is a YP/PV/YP in perpetuity?

Question 96

What are the disadvantages of a DCF?

Question 97

What is marriage value?

Question 98

When would you include an element of hope value in a valuation?

Question 99

Can you include hope value in a secured lending / mortgage valuation?

Question 100

How would you value a ransom strip?

Question 101

How does market value differ to investment value/fair value?

Question 102

What is a dual capitalisation rate and when would you use one?

Question 103

Is the profits/DRC method used for specialised or specialist property?

Question 104

What type of properties would you use the profits method for?

Question 105

What type of properties would you use the DRC method for?

Question 106

When would you use the profits method?

Question 107

What is intangible goodwill?

Question 108

What is turnover / gross profit / net profit?

Question 109

What are the steps to providing a profits valuation?

Question 110

What is Fair Maintainable Turnover?

Question 111

What is a Reasonably Efficient Operator?

Question 112

Does the assessment of the REO include personal goodwill and trading potential?

Question 113

What is personal goodwill?

Question 114

What is trading potential?

Question 115

How do you calculate the tenant’s proportion of rent in a profits valuation?

Question 116

What is EBITDA?

Question 117

What is Fair Maintainable Operating Profit?

Question 118

How do you calculate the divisible balance?

Question 119

What accounts information would you want to review for a profits valuation?

Question 120

Do RICS provide any guidance on RLVs or valuing development property?

Question 121

What is an RLV?

Question 122

What is a development appraisal?

Question 123

How do they differ?

Question 124

How else can you value development land?

Question 125

What is the basic process of undertaking a RLV/development appraisal?

Question 126

What does a development appraisal show?

Question 127

What are the key things you need to consider when appraising / inspecting a development site?

Question 128

What else should you consider?

Question 129

Tell me about your due diligence when undertaking a development appraisal.

Question 130

What sources of information do you use when undertaking a development appraisal?

Question 131

How can you assess development potential?

Question 132

What is GDV/NDV?

Question 133

How do you calculate GDV?

Question 134

What do development costs include?

Question 135

When do you apply VAT when assessing development costs?

Question 136

Where can you source build costs from?

Question 137

What are typical finance costs?

Question 138

What would you apply finance costs to and on what basis?

Question 139

What is an S curve?

Question 140

What factors influence the decision to use an S curve when applying finance costs?

Question 141

Is there a quick rule of thumb which can be used when applying finance costs?

Question 142

What do holding costs typically include?

Question 143

How do you typically calculate developer’s profit?

Question 144

What are some typical inputs (and %/£) in a RLV?

Question 145

What other criteria might be assessed in terms of performance measurement for a RLV?

Question 146

What are the advantages/disadvantages of a RLV?

Question 147

What is included in the development programme?

Question 148

What is CIL?

Question 149

What is S106?

Question 150

What are the differences between CIL and S106?

Question 151

What is CIL charged on?

Question 152

What is a Monte Carlo simulation?

Question 153

What is a sensitivity analysis?

Question 154

How do you carry out a sensitivity analysis?

Question 155

What variables might you change and why?

Question 156

What factors affect sensitivity of a development appraisal?

Question 157

ell me about your understanding of incorporating affordable housing into development appraisals.

Question 158

Tell me about software you have used to provide a RLV.

Question 159

What RICS guidance relates to the valuation of development property?

Question 160

Give me a limitation of this software.

Question 161

What is viability?

Question 162

When would a cost approach be used?

Question 163

What type of buildings would a cost approach be used for?

Question 164

What is the supposition that a DRC is based upon?

Question 165

What are the 3 components of the cost approach?

Question 166

How do you assess the value of the land?

Question 167

How do you assess Gross Replacement Cost?

Question 168

What costs would you consider within GRC?

Question 169

What would you do if the building could be replaced with a modern equivalent?

Question 170

How would you deal with depreciation/obsolescence?

Question 171

What types of obsolescence are there?

Question 172

What are the three ways to deal with depreciation?

Question 173

Is the cost approach a market valuation?

Question 174

How might onerous lease terms, e.g. restrictive user, break clause, impact upon capital or rental value?

Question 175

What liabilities may be created through valuation?

Question 176

What is a liability cap and when would one be used?

Question 177

Explain why the RICS are carrying out an Independent Valuation Review. Who is leading this?

Question 178

Explain what you understand by the term, margin of error.

Question 179

What caselaw relates to margins of error?

Question 180

Explain your understanding of K/S Lincoln v CBRE Hotels (2010).

Question 181

Explain the precent set in Hyde and another v Nygate and another (2021) in relation to the valuation of high-profile development sites.

Question 182

How can a NIY of zero be achieved?

Question 183

n a scenario where rents are static and the capital value increases, would you expect yields to increase or decrease?

Question 184

What does heterogenous mean in terms of comparable evidence?

Question 185

What does the term 'tone of value' mean to you?

Question 186

What does the Court of Appeal decision Scullion v BOS (Trading as Colleys) tell you about a mortgage valuer’s liability?

Question 187

What are current mortgage rates (on a BTL mortgage)?

Question 188

How have they changed over the past few years?

Question 189

What are current LTV ratios?

Question 190

How could you value an HMO using the investment method?

Question 191

What were you specifically looking for in relation to the HMO use?

Question 192

How can you establish if a property is an HMO?

Question 193

What are the minimum rooms sizes for an HMO?

Question 194

What is statutory overcrowding?

Question 195

What legislation relates to this?

Question 196

Tell me about any other legislative requirements relating to HMOs you are aware of.

Question 197

What planning use do HMOs fall into

Question 198

Is there generally a premium attributable to HMO use over and above value as a single family house?

Question 199

Why did you use an investment method of valuation?

Question 200

What is an Article 4 direction?

Question 201

How might gross and net yields differ for HMOs?

Question 202

What RICS guidance are you aware of relating to HMO valuation?

Question 203

Was there any UK-specific guidance you also complied with?

Question 204

What category of buy-to-let valuation does a HMO fall within?

Question 205

What are some of the broader issues facing the HMO sector?

Question 206

Tell me about the regulation of the HMO sector.

Question 207

How can rental incentives impact on HMO valuation?

Question 208

What are guaranteed rents / cash backs in lieu of rental income and how can these impact upon value?

Question 209

ow can Market Rent impact upon the underwriting of a loan?

Question 210

How have you commended upon any limitations to accuracy of your HMO valuations?

Question 211

How can maintenance costs impact upon valuation and what does the Red Book say about these for HMOs?

Question 212

When is it reasonable to adopt the income approach when valuing HMOs under the Red Book?

Question 213

What additional considerations do you need to make for category 3 scenarios?

Question 214

What is a lifetime mortgage/home reversion/sale and rent back/home purchase plan?

Question 215

hat are the Red Book requirements in relation to these?

Question 216

What is shared ownership/shared equity scheme?

Question 217

How would you value a shared ownership / shared equity scheme property?

Question 218

What is a trustee mortgage valuation?

Question 219

What legislation relates to this?

Question 220

What is affordable/market rent?

Question 221

hat is your role in relation to advising a lender client?

Question 222

What liability do you have to the borrower when advising a lender client?

Question 223

Does this vary depending on whether the valuation is disclosed by the mortgagee?

Question 224

ell me about the requirements in relation to your terms of engagement / inspection.

Question 225

What is the basis of value?

Question 226

What factors may have a material impact on value?

Question 227

What assumptions / special assumptions have you made in relation to this?

Question 228

What is reinstatement cost and when would you be asked to provide it?

Question 229

How would you calculate it?

Question 230

How would you deal with suspected hidden defects?

Question 231

How would you treat incentives?

Question 232

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.

Question 233

Where would you find the RICS Residential Mortgage Specification?

Question 234

What are the 3 categories of BTL investments?

Question 235

Have you valued a historic building?

Question 236

What RICS guidance were you aware of

Question 237

Can you tell me a key principle of this guidance?

Question 238

How do you reflect the historic nature of a building in your valuation advice?

Question 239

hat type of RICS surveys include a valuation?

Question 240

What level of valuation advice does a Level 2 Home Survey include?

Question 241

What guidance does the RICS provide in relation to this?

Question 242

What is the basis of valuation in this type of report?

Question 243

What assumptions are made in this type of report?

Question 244

What else do you need to include in relation to your valuation?

Question 245

Tell me about the RICS guidance relating to the valuation of individual new-build homes.

Question 246

What is the new build premium?

Question 247

How would a valuation of new build home differ to a second hand home?

Question 248

Tell me about how you have applied this guidance to a new build valuation.

Question 249

What is a key principle of this document?

Question 250

Tell me about your use and understanding of AVMs.

Question 251

Does the RICS provide any guidance on this?

Question 252

What is an AVM?

Question 253

What is an advantage and a disadvantage of using an AVM?

Question 254

ive me an example of an AVM you have used.

Question 255

ve you valued a residential property purpose built for renting?

Question 256

What RICS guidance are you aware of in relation to this?

Question 257

What are the key principles?

Question 258

What are the three key pieces of legislation which have impacted the UK residential market (and purpose built valuation)?

Question 259

What valuation considerations would you take into account when valuing a purpose built for renting property?

Question 260

What is the difference between a gross and net yield in this respect?

Question 261

What factors influence yields?

Question 262

What residential operating expenses would you need to take into account?

Question 263

What is Net Operating Income?

Question 264

How would you calculate it?

Question 265

Have you valued a BTL / HMO property?

Question 266

What RICS guidance are you aware of in relation to this?

Question 267

When was it last updated and what changes were made?

Question 268

What are the key principles?

Question 269

How might the release of a large number of new build properties impact the local market?

Question 270

Can ‘hope value’ be considered in valuations falling under UK Appendix 10?

Question 271

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?

Question 272

Is there a set discount for a new build premium?

Question 273

What do RICS say about sales incentives?

Question 274

Should you reflect sales incentives in your valuation?

Question 275

Where would you find details of incentives?

Question 276

When and why would you review a UK Finance Disclosure of Incentives Form?

Question 277

hat are some of the ways that a home can be offered at a reduced price?

Question 278

or houses with restrictions on occupancy, e.g., by income or job type, what is a typical discount used in the market?

Question 279

What is a new build warranty?

Question 280

How long would a typical warranty last for?

Question 281

If a property was built in the last 10 years and does not have a professional certificate or guarantee/warranty, would this affect value?

Question 282

What are the two special assumptions relating to Projected Market Value (PMV) and when would you adopt PMV?

Question 283

What are some of the types of home finance product?

Question 284

Who further regulates valuations for home finance products?

Question 285

# 1. What are the key differences between a lifetime mortgage and a conventional mortgage?

Question 286

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?

Question 287

What is home reversion?

Question 288

What is sale and rent back?

Question 289

What is a home purchase plan?

Question 290

What are the bases of value for a registered social landlord’s housing stock for secured lending purposes?

Question 291

What is a statutory valuation?

Question 292

Who is responsible for Council Tax valuations?

Question 293

What Council Tax bands exist in England?

Question 294

What is the basis of value for Council Tax valuations?

Question 295

What assumptions are made in a Council Tax valuation?

Question 296

What is the Right to Buy?

Question 297

What legislation relates to Right to Buy?

Question 298

When might a lender instruct a drive-by valuation?

Question 299

What is the impact of the Rentcharges Act 1977?

Question 300

Until 22 August 2037, how should rentcharges be dealt with?

Question 301

Within what general distance of a dwelling might Japanese Knotweed have a material impact on value?

Question 302

How could a mortgagee seeking remedy from a defaulting borrower serve a valid notice?

Question 303

Explain what you understand in relation to the issue of 'down valuation'.

Question 304

What does the legal case of Ryb v Conways (2019) say about the valuation of property affected by Japanese Knotweed?

Question 305

What valuation approach does the RICS recommend is taken when valuing property is affected by Japanese Knotweed?

Question 306

What guidance sets this approach out?

Question 307

What is the House Price Index and how would you use it when valuing a residential property?

Question 308

What are some of the key drivers of demand for housing?

Question 309

How would you assess and report on condition in an investment valuation?

Question 310

How could a S106 agreement affect the valuation of a new build home?

Question 311

How would you analyse a part-exchange comparable?

Question 312

What is a neighbourhood in terms of residential valuation and why do you need to understand this concept?

Question 313

When analysing comparable evidence, how would you apply the concept of adjusted value?

Question 314

What residential design features do you consider add value in your locality?

Question 315

Tell me why terms of engagement are important.

Question 316

What checks do you undertake before accepting a valuation instruction?

Question 317

How do you ensure you know who your client is when undertaking a valuation instruction?

Question 318

Are there any additional requirements when undertaking a valuation in which the public has an interest or third parties may rely?

Question 319

Are there any additional requirements for loan security valuations?

Question 320

Talk me through an example of when you have agreed terms of engagement with a client.

Question 321

What are the key elements included within terms of engagement?

Question 322

What does the Red Book say about terms of engagement?

Question 323

What does the Red Book say about inspections?

Question 324

What does the Red Book say about reporting requirements?

Question 325

What are the differences between a desktop and a full valuation report?

Question 326

Tell me about how you ensure that information relied upon in your valuation is appropriate and reliable?

Question 327

Tell me about your valuation at Cove?

Question 328

How did you select and analyse the comparables?

Question 329

At Hayfield Crescent, how did you source comparables for the non- traditional property? Was this difficult if there is a marketability issue?

Question 330

At South Anderson Drive, how did you find comparables relating to the proposed extended house? Talk me through your selection, analysis and conclusion?

Question 331

ave you used any other methods of valuation?

Question 332

At Mayfield Gardens, how did you advise the lender client with relation to the proposed works? How was this evidenced?

Question 333

AT the development opportunity in Newmachar, talk me thought how the client took on board the provided advice?

Question 334

Did the two methods of valuation support?

Question 335

At the new build home in Bucksburn, discuss why the property was valued as second hand and how this impacted your reasoned advice?

Question 336

How would you usually carry out a new build valuation?

Question 337

How would you analyse the comparables and advise the client of MV?

Question 338

Can you talk me through your level 2 examples? ## Footnote Summary of Experience

Answer 338

* Home Report in Cove - Captured various details during inspection such as floor area, accommodation, level of finish and condition. Used online database to find comparables for property, conducted analysis and reached a value. * Home Report in Hayfield Crescent - property was a 'Tee-Beam'. Property was formally defective and still faces heavily restricted lending. Purchaser was most likely going to have to be a cash purchaser and this would need to be reflected in value. When searching for comparables I ensured I selected properties of similar construction and branched out to other PRC properties such as Whitson Fairhurts. * Valuation on South Anderson Drive - client was looking to extend and renovate property and wanted to know value on completion of works. Client provided me with various pieces of data such as plans and specifications. When searching for comparables I looked for ones that reflected the properties increased floor area and level of finish.

Question 339

What are your level 3 examples? ## Footnote Summary of Experience

Answer 339

* MVR in Mayfield Gardens - Valuation was for short term finance and applicant was planning to carry out works to property. Lender provided me with scope of works and asked for current market value and market value on completion of works. Also requested we comment on works provided. Advised the lender that the works did allow for a slight uplift in value, they didnt allow for a massive uplift in value. * Development Valuation in Newmachar - Valuation of a development oppurtunity as client was looking to sell it. Site had planning permission to convert agricultural shed into two semi detached dwellings. Conducted a residual valuation and then used a comparable valuation at end to cross check residual value. * MVR in Bucksburn - Valuation of new build property. Lender requested that we value property as second hand which differs from other lenders that request value as new. As purchase price was for property as new, the value as second hand was lower. I advised the lender that the value reflected the property if it was sold on the second hand market and was therefore lower than the purchase price. Advised the lender than if the value was to be as new-build, it would likely be higher than second hand.

Question 340

When would each method of valuation be employed? ## Footnote Valuation - Level 1

Answer 340

* Comprable method - Used for straight forward properties were there is comparable evidence * Residual method - used for development properties * Profits method - used for properties where the major value component of the property is driven by the profitability of the business that occupies the building * Investment method - used from investment properties that are held for their income stream * DRC - used where there is no active market for the asset being valued due to the specialist nature of the property

Question 341

Can you tell me the basics of each method of valuation ## Footnote Valuation - Level 1

Answer 341

* Comprable method - involves gathering sales of similar properties that have similar characteristics to the one being valued. You then carry out an analysis of the comparables and make adjustments to reflect differences. * Residual method - Involves establishing the GDV of a development. Development costs are then deducted to establish the land value. * Profits method - Involves establishing fair maintainable operating profit (FMOP) capable of being generated by a reasonably efficient operator. This is based upon assessment and analysis of fair maintainable turnover. A market based profit multiplier is then used to convert FMT into a capital value. * Investment method - The investment method involves assessing market rent and a market based yield. The rent is then capitalised using the yield to establish the capital value. * There are two traditional methods used that vary depending on if the property is under or over rented. For over rented properties, a hardcore and topslice is applied. For under rented a term and reversion is used. * DRC - Involves establishing the cost of land, build costs to replace the asset with a modern equivalent and then making an allowance for deterioation and obscelence

Question 342

What are some reasons for a valuation to be required? ## Footnote Valuation - Level 1

Answer 342

* Pre-sale * Marketed sale * Loan security * Taxation * Seperation * Financial planning

Question 343

What is the most recent version of the Red Book and its UK counterpart? ## Footnote Valuation - Level 1

Answer 343

* Global - 31 January 2022 * UK - 14 January 2019

Question 344

What parts of the Red Book are mandatory? ## Footnote Valuation - Level 1

Answer 344

* PS 1-2 * VPS 1 - 5

Question 345

Can you tell me the parts of the Red Book that apply to your area of practise? ## Footnote Valuation - Level 1

Answer 345

**Global** * VPGA 2 - Valuation of interests for secured lending * VPGA 8 - Valuation of real property interests * VPGA 9 - Identification of portfolios, collections and groups of properties * VPGA 10 - Matters that may give rise to material valuation uncertainty **UK** * UK VPGA 10 - commercial secured lending * UK VPGA 11 - valuation for residential mortgage purposes * UK VPGA 12 - valuation of residential property for miscallaneous purposes * UK VPGA 13 - residential secured lending guifance for other related purposes including RICS HomeBuyer Services * UK VPGA 15 - valuations for CGT, IHT, SDLT & ATED

Question 346

What is the most recent version of the Comparable Evidence guidance? ## Footnote Valuation - Level 1

Question 347

What are some key principles of the Comparable Evidence guidance? ## Footnote Valuation - Level 1

Question 348

What are the bases of value listed in the Red Book? ## Footnote Valuation - Level 1

Answer 348

* Market Value * Market Rent * Investment value (worth) * Fair value

Question 349

What is Market Rent? ## Footnote Valuation - Level 1

Answer 349

Market Rent is the estimated amount for which an interest in real property should be leased on the valuation date between a willing lessor and willing lesee on appropriate lease terms in an arm's length transaction, after proper marketing and where the parties had each acted knowledgeable, prudently and without compulsion

Question 350

What is Market Value? ## Footnote Valuation - Level 1

Answer 350

Market Value is the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and willing seller in an arm's length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion

Question 351

Why are councils externally insulating non-trads? ## Footnote Inspection - Level 2

Answer 351

* Poor thermal efficiency

Question 352

How would you handle clients money? ## Footnote Ethics, Rules of Conduct & Professionalism - Level 1

Question 353

Is there a maximum amount of cash you can accept? ## Footnote Ethics, Rules of Conduct & Professionalism - Level 1

Question 354

Tell me about your valuation at Cove? ## Footnote Valuation - Level 2

Question 355

How did you select and analyse the comparables? ## Footnote Valuation - Level 2

Question 356

At Hayfield Crescent, how did you source comparables for the non- traditional property? Was this difficult if there is a marketability issue? ## Footnote Valuation - Level 2

Question 357

At South Anderson Drive, how did you find comparables relating to the proposed extended house? Talk me through your selection, analysis and conclusion? ## Footnote Valuation - Level 2

Question 358

Whats a 'Tee-Beam'? ## Footnote Valuation - Level 2

Question 359

How would you value the 'Tee-Beam' if there were no comparables? ## Footnote Valuation - Level 2

Question 360

What are the issues associated with 'Tee-Beams'? ## Footnote Valuation - Level 2

Question 361

Can you give me an example of a Special Assumption? ## Footnote Valuation - Level 2

Question 362

At Mayfield Gardens, how did you advise the lender client with relation to the proposed works? How was this evidenced? ## Footnote Valuation - Level 3

Question 363

At the development opportunity in Newmachar, talk me thought how the client took on board the provided advice? ## Footnote Valuation - Level 3

Question 364

Did the two methods of valuation support? ## Footnote Valuation - Level 3

Question 365

At the new build home in Bucksburn, discuss why the property was valued as second hand and how this impacted your reasoned advice? ## Footnote Valuation - Level 3

Question 366

How would you usually carry out a new build valuation? ## Footnote Valuation - Level 3

Question 367

For the development in Newmachar, how did you get your build costs, developers profit etc? ## Footnote Valuation - Level 3

Question 368

What RICS guidance relates to the valuation of new builds? ## Footnote Valuation - Level 3

Question 369

What are some key principles from the new build guidance? ## Footnote Valuation - Level 3

Question 370

What would you do if the Special Assumption a client asks you to provide isn't realistic?

Question 371

How would you determine construction costs?

Question 372

What are the deficiencies of residual valuations?

Question 373

What are the sources of funding? And cost?

Question 374

How much developers profit? What are the options for estimating this?

Question 375

What is difference between development appraisal and residual valuation?

Question 376

You state a value after repairs at £90,000 but the quotations for repairs total £15,000 which is £5,000 more than expected. Would you adjust value?

Question 377

If you were asked to value a repossessed property what might you be asked for? (Projected Market Value)

Question 378

What is hope value? How would you quantify it? When would you report it or not report it?

Question 379

How would you report the value a property with development potential/hope value or planning permission in a Home Report?

Question 380

How would you value a property with cladding/balcony/spray foam insulation/Japanese knotweed?

Question 381

# **

Question 386

How do you adjust a valuation for new build incentives?

Question 387

Lender requires a transcript and the comparisons are not suitable, what do you do?