What’s the purpose of the RICS Red Book?
It supports high standards in valuation delivery worldwide and future proof practices in the public interest.
Key changes to the RICS Red Book?
Alignment with the new International Valuation Standard (IVS) Standard.
Mandatory element of ESG reporting.
Comment on the use of AI in valuations.
Reinforcement of keeping an audit trial.
What is part 3 of the red book?
RICS professional standards- mandatory
PS 1 and 2
What is PS1?
Compliance with standards and practice statements where a written valuation is provided.
What are the 5 exceptions of PS1?
Agency work
Internal purposes (no 3rd party reliance)
Statutory or regulation exceptions
Acting as an expert witness
Valuations for negotiation purposes
What is PS2?
Ethics, competency, objectivity and disclosures.
Members undertaking valuations must act in accordance with Rules of Conduct 2021.
The members must act with independence, objectivity and must identify or manage conflicts of interest.
Valuer should apply ‘professional specitcism’ when reviewing data and info before relying on it.
What’s part 4 of the red book?
Valuation technical and performance standards (VPS1-6)
What’s VPS 1?
Terms of engagement (scope of work)
What should be included in Red Book compliant terms of engagement?
Identification of responsible values
Name of client
Asset to be valued
Currency
Basis of value
Valuation date
Confirmation it’s in accordance with Red Book
Consideration of any ESG factors
What’s VPS 2?
Bases of value, assumptions and special assumptions
What are the 7 definitions of value?
Market value
Market rent
Fair value
Investment value
Equitable value
Synergistic value
Liquidation value
What’s definition of market value?
The estimated amount for which an asset or liability should exchange.
- on valuation date
- between a willing buyer and seller
- arms length transaction
- on appropriate lease terms
- after proper marketing
What’s definition of market rent?
The estimated amount for which an interest in real property should be leased.
- on valuation date
- between a willing lessee or lessor
- arms length transaction
- on appropriate lease terms
- after proper marketing
What’s 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.
RICS view that definition should be consistent with market value.
Investment value
The value of an asset to a particular owner or prospective owner for individuals investment or operational objectives.
May differ from MV.
What’s an Assumption?
A supposition taken to be true in the absence of the contrary.
What is special assumption?
An assumption that varies from the actual facts at the valuation date.
Must be agreed explicitly in writing with the client before reporting.
What’s VPS3?
Valuation approaches and methods
What’s VPS 4?
Inspections investigations and records
What’s VPS 5?
Valuation models
What’s VPS 6?
Valuation reports
What should a valuation report include?
Purpose of valuation
Valuation date
Assumptions and special assumptions
Confirmation that the valuation has been undertaken in accordance with IVS and/or RICS Red Book
Amount of the valuations
What is Part 5 of the RICS Red Book?
Valuation practice guidance applications
VPGAs
Not mandatory
