What are the 5 methods of valuation
Market approach
Residual
Profits
DRC
Investment
When would you use residual
Used when valuing development, redevelopment and refurbishment properties or assets
Definition of market rent
The rental value of assets as at the valuation date between a willingly leasee and a willingly lessor at an arms length transaction with sufficient marketing
When would you use the investment method?
When valuing an investment property for example of property receiving a rent
When would you use the residual method?
When valuing an asset or liability for development, redevelopment or refurbishment purposes
What is an assumption?
Something that as at the valuation date you assume to be correct and confirm with the client for example contamination
What is a special assumption?
Something at the time of the valuation may not be factually correct, but for the valuation you assume to be correct for example valuing a property with vacant possession.
What is the definition of market value?
An amount at which an asset or a liability should be exchanged as at the valuation date between a willing buyer and willing seller at arms length transaction after proper marketing
What types of valuation are governed by the Redbook?
Probate valuation
Tax planning valuation
Stock taking valuations
Valuations for transfer purposes
What guidance were in the Red book tells you what must be included in valuation report?
Part four of the global standards valuation 2025 Red book includes the valuation technical and performance standards VPS and VPS six governs the minimum requirements for valuation reports
What is part three of the Red book?
Part three at the RCS professional standards PS they are mandatory worldwide standards.
PS1 compliance with standards and practice statements where written evaluation is provided
PS2 ethics competency objectivity and disclosure
Please explain VPS and name all six
Valuation technical performance standards are mandatory set of minimum requirements which every Redbook valuation should follow
VPS1terms of engagement
VPS2 basis of value assumption and special assumption
VPS3 valuation approach and method
VPS4 inspection investigations and records
VPS5 valuation models
VPS6 valuation reports
What is part five of the valuation standards?
Valuation practice applications, VPGA the sector specific and purpose specific guidance they are advised during not mandatory and best practice
For the valuation for the building at first farm what method did you use? And how did you arrive at the yield to use?
For the valuation of the buildings are used investment method as the buildings were an investment property to my client. To determine the yields used, we looked at the level of risk in reletting the property.
When did the RICS valuation global standards Redbook become effective?
January 2025
What method would you have used if the buildings at first farm had redevelopment potential?
We would use the residual method fact checking against both the investment method and method
in evaluation for transfer purposes, what tax is this required for?
Purposes the tax we are evaluating is capital gains tax
In transfer valuations, what is the valuation date? And are there any other dates that you might be asked for your valuations for CGT?
The date as at the transfer
Might be asked to do 1982 valuation
What relief are there under these types of valuations?
There is both rollover and hold over relief. There is also private residence relief and Business asset disposal relief available.
Why might you be asked to do a 1982 valuation rather than the date of transfer?
1982 is the base line for CGT valuations properties purchased prior to 1982 capital gains tax to be calculated as at 1982
if your client requested a high figure for the valuation, what would you do?
Your duty as a professional to your firm and the RICS prohibits you from taking such actions. The RICS global standards mandatory to follow
Why is the valuation required for the 10 year charge at Haisley?
Evaluation is required for tax purposes as trust subject periodic charges
What is the basis of valuation for a 10 year charge?
The valuation is based on open market value provided it was sold with vacant possession. Assumptions and special assumptions should be used if the property is not vacant.
What discounts could you see? Applied to properties without vacant possession and how would you go about calculating these?
The discount relates to the level of security the tenancy has over the land. Using the knowledge of my senior colleagues we applied a 5% discount for land under an FBT and between a 40% to 50% discount for land under an AHA depending on the succession rights
