Tell me what the 5 methods of valuation are.
Comparative method
Investment method
Residual method
Profits method
Contractors (or depreciated replacement cost) method
Tell me about how you would value a building using the profits/contractors/investment/comparable/residual method of valuation.
Comparative method- used where comparable transaction evidence available, used to assess MR or MV
Investment method- income stream to value
Profits method- trade related specialist property eg hotel
Residual method- with dev potential. GD less dev costs/profit= MV
Contractors (Depreciated Replacement Cost) method: specialised , rarely sold property, market will pay no more than cost to buy equivalent site. cost to replace land, building with equiv
How do valuation methods and approaches differ?
Approaches:
Market
Income
Cost
How do you decide which valuation method to apply?
When and why would you use one of these methods?
What is a year’s purchase multiplier?
Give me an example of a good covenant and how this might impact a valuation.
What is Pl Insurance (PII)?
Professional indemnity insurance
Why do surveyors need PII?
ensure that if face a claim firm is protected from financial loss cant meet
The firm’s clients are protected from financial loss that a firm cannot meet
The firm or insured member is protected against the ‘consequences of its liability to pay damages to third parties for breaches of professional duty that it commits through its professional activities
Tell me about the RICS requirements in relation to PII.
policy min wording RICS Approved Minimum Policy Wording
indemnity limit, cover based on turnover of prior year
be fully retroactive
run off cover
How did the decision in Hart v Large affect PII?
The level of cover didnt meet the level of damages payable
What level of PII cover does your firm have?
1m
How would you distinguish limitations on liability in your valuations?
Statement identifying limitation cap in TOEs as required under VPS1 and within valuation report.
Where in your valuation report do you state any limitations on liability?
must be stated in report to reflect requirements of VPS6
What relevance does Hart v Large have on your valuation practice?
The Hart v Large case emphasises the importance for surveyors of:
Being clear and advising clients on the survey level and scope of inspection, limitations and caveats
Recommending justifiable further investigation
Considering whether any new information provided after inspecting or reporting affects their original advice, and updating their advice if it is justified to do so
What aspect of Hart v Large allowed the judge to award damages without applying the SAAMCO cap?
The critical finding of the trial judge was that Mr Large should have advised the Harts not to proceed with the purchase without a PCC/doing further investigations. This negligence was fundamental to whether the purchase should proceed and the defects later identified were ones which he had a duty to safeguard the Harts from.
Accordingly, damages were assessed as the full diminution in value of the property, including that caused by latent defects which Mr Hart could not have been expected to identify in his repor
What is the SAAMCO cap?
The SAAMCO principle can be used as a “tool” to determine the difference between losses arising from negligently provided information and losses arising from a transaction itself (which are usually greater). However, it is “not a rigid rule of law” and, if a case is incapable of achieving that determination (due to the specific facts of a case), then the principle will not necessarily be applied by the Court.
Under the SAAMCO cap is a valuer liable for losses due to a downturn in the market?
no
Under the SAAM CO cap is a valuer’s liability usually limited to the overvaluation on the valuation date?
What would you do if you received a notice of a PII claim from a client or their solicitor?
notify insurers asap
