What 3 steps to take before a valuation
- Competence
- Independence
- Terms of Engagement
What are the 5 methods of valuation
- Comparative Method
- Investment Method
- Profits Method
- Residual Method
- DRC (contractors) Method
What are the THREE valuation approaches set out in IVS 105?
Income - Investment, Residual, Profits
Cost - DRC
Market - Comparative
What are the six steps when collecting comparable evidence?
- Search and select comparables (agent’s boards, online databases)
- Confirm / verify information with a party directly involved in the transaction
- Assemble comparables in a schedule
- Interpret comparables using hierachy of evidence
- Analyse comaprables to form an opinion of value
- Report value and prepare file note
What is the RICS Professional standard guidance for comparable evidence
RICS Comparable evidence in real estate valuation, 2019
What are the three category’s of evidence outlined in RICS Comparable evidence in Real Estate Valuation, 2019?
Category A: direct comparables
Category B: general market data
Category C: other sources
What does the Hierarchy of evidence for direct comparables involve?
- Completed transactions of near- identical properties for which full accirate info is available (can include subject prop)
What is the hierarchy of general market data
- Info from published sources or commercial databases
- Historic evidence
Indirect info or data for rent, investment
What is the hierarchy of other sources
- Transactional evidence from other RE types and locations
Other background data (interest rates, stock market movement)
When would you use the investment method of valuation
When there is an income stream to value (rent)
How does the conventional investment method work?
Rent received (MR) X Years Purchase = Market Value
When would you use a Term and Reversion Method and how does it work?
- Used for Under rented properties(Reversionary investments)
- Term capitalised until rent review / lease expiry and an initial yield
- Reversion to MR valued into perpetuity at reversionary yield
What is and when would you use the Hardcore / Topslice (layer) method
- Overrented propertyes
What is the structure of the red book?
1) Introduction
2) Glossary
3) PS1 - Compliance with Standards
PS2 - Ethics
4) VPS (Valuation technical and professional standards)
5) VPGA (Valuation practice guidance applications)
6) IVS (International valuation standards)
What do each VPS Mean
VPS 1 - Terms of Engagements
VPS 2 - Inspection
VPS 3 - Valuation reports
VPS 4 - Basis of value
VPS 5 - Valuation approaches and methods
When are valuations not required to be red book compliant?
1- Expert Witness
2- Internal purposes
3- Negotiations or litigation
4- Statutory functions
5- Agency purposes for one or more assets
