1
Q
How did the decision in Hart v Large affect PII?
A
Sued for not making the correct observations as a building surveyor.
Emphasis on surveyors to have adequate PII for these situations.
2
Q
Where in your valuation report do you state any limitations on liability?
A
This would be stated up front in the terms of engagement.
3
Q
What is the SAAMCO cap?
A
Legal principle that limits the scope of a professional’s liability for damages to the extent of the losses directly attributable to their advice or actions
4
Q
Is there a separate Red Book UK National Supplement?
What was changed in the last update to the UK National Supplement?
A
Yes the National Supplement contains additional guidance specific to the UK such as on taxation.
Last update - Mandatory Valuer Rotation Policy: This introduces a maximum period of 5 years before the rotation of an individual. 10 years for a firm.
5
Q
Which do you follow - the latest IVS or the Red Book Global?
A
You would follow the Red Book.
This incorporates latest IVS.
6
Q
Tell me what the definition of Market Value?
A
MV - The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing where the parties had each acted knowledgeably, prudently and without compulsion.
7
Q
What are the 3 approaches under VPS5?
A
Market approach
Income approach
Cost approach
8
Q
What is a SORP?
A
A SORP (Statement of Recommended Practice) is a set of guidelines and best practices issued to provide detailed recommendations on accounting and reporting
9
Q
What purchaser’s costs do you deduct from a valuation?
A
Purchaser’s costs are the expenses that a buyer would typically incur in the process of acquiring the property.
Legal and land agent.
10
Q
What is IRR?
A
It’s a financial metric that measures the profitability of an investment. It’s the discount rate at which the net present value (NPV) of an investment becomes zero.
In other words, it’s the rate at which the investment’s expected cash inflows equal its initial cash outflows (breaks even).
11
Q
When would you use a DCF?
A
You would use a DCF if you have a cashflow forecast, in particular if you might have variable income.
They are good for comparing two investment opportunities
12
Q
What are the advantages of a DCF?
A
Allows a detailed valuation to occur over a specific hold period.
Accounts for the time value of money.
Can be more detailed than a simpler valuation model but the assumptions need to accurate.
13
Q
What is marriage value?
A
Arises from the combination of two or more assets to create a new asset that has a higher value than the sum of the individual assets.
i.e. a leaseholder buying the freehold would increase the value of their interest.
14
Q
How would you value a property in uncertain market conditions - does the Red Book give any guidance?
A
Valuer should always state the date and draw attention to how values change over time.
‘After proper marketing’ allows market conditions to be considered.
If there are changes between the valuation date and the date of report, the valuer should draw attention to this.
15
Q
When would you include an element of hope value in a valuation?
A
Hope value can be considered as part of a development appraisal in which the subject is anticipating a change of planning use for example on a greenfield site.
16
Q
How would you value a ransom strip?
A
The value of the ransom strip comes from the uplift in value from the adjacent land.
This may involve highest and best use / the market value of the developed land.
Apply the 1/3 rule
1/3 to the landowner
1/3 to the developer
1/3 to the ransom strip owner
17
Q
What is a yield?
A
A yield is simply the annual return on an investment expressed as a percentage.
It can be calculated by dividing the rental income by the purchase price (and multiplying this by 100).
18
Q
What is the margin of error for a valuation?
A
in Dunfermline Building Society vs CBRE - the ruling of this stated that 15% margin of error is acceptable.
19
Q
Talk me through PS1
A
Compliance with standards where a written valuation is provided
States the madatory applications, i.e that it must follow VPS
There are exceptions in PS1 which allow valuers to bypass some of the more formal Red Book standards.
eg internal valuations not for a third party.
20
Q
What is market value?
A
The estimated amount for which a property should exchange on the date of valuation, between a willing buyer and a willing seller in an arms length transaction after proper marketing, wherein the parties had each acted knowledgeably, prudently and without compulsion.
21
Q
What is market rent?
A
The estimated amount for which a property or a space within a property should let on the date of valuation between a willing landlord and a willing tenant in an arm’s length transaction after proper marketing, wherein both parties each had acted knowledgeably, prudently and without compulsion.
22
Q
What is hierarchy of evidence?
A
Relative weights attached to the consideration of comparable evidence. The established hierarchy includes: Open market transaction, rent review and lease renewal, third party determination (expert, arbitration, courts), lease and buy back, inter company transaction.
23
Q
What is Red Book valuations?
A
A document that incorporates international valuation standards, recognized globally as one of the most rigorous sets of standards for valuation, detailing mandatory practice for RICS Members undertaking valuation services.
24
Q
What does the Red Book valuation report include?
A
Inspection, Title, Condition, Services, Planning, Environmental Matters, Name of the client, Purpose of the valuation, Subject of the valuation, Interest to be valued, Type of the property and how it is used by the client, Basis or bases of valuation, Date of valuation, Status of the valuer and disclosure of any previous involvement, Currency that has been adopted where appropriate, Any assumptions, special assumptions and any special instructions or departures from the Red Book procedures, Extent of the valuer’s investigations, Nature and source of information to be relied upon by the valuer, Any consent or restrictions on publications, Any limits or exclusion of liability to third parties, Confirmation that the valuation will be undertaken in accordance with the Red Book standards, Opinion of value in words and figures, A statement of valuation approach adopted, Signature and date of the report.
25
What are the five methods of valuation?
Market approach (Comparable), Income approach (Investment, implicit income capitalisation method, Explicit DCF, residual, Profit), Cost approach (Depreciated replacement costs).
26
When is the Profit method used?
When valuing properties whose value is dependent on their capacity to produce income from the business trading whilst occupation of the property such as care homes, hostels, and petrol stations.
27
What is Investment value or worth?
The value of an asset to the owner or a prospective owner for individual investment or operational objectives.
28
What is Sensitivity analysis/testing?
The investigation of how a valuation varies with a change in the value of any of the inputs into the valuation. Basic sensitivity analysis assesses each input separately or in pairs.
29
How do you choose the appropriate valuation method?
Consider the appropriate bases of value, the respective strengths and weaknesses of the possible valuation approaches and methods, the appropriateness of each method in view of the nature of the asset, and the availability of reliable information needed to apply the method(s).
30
When should the investment approach be used?
When the income-producing ability of the asset is the critical element affecting value from a market participant perspective, and reliable projections of the amount and timing of future income are available for the subject asset.
31
What is the difference between Market Value and Investment value?
Investment value can differ from market value due to market mispricing of assets or segments/sectors. Market value is what you need to pay, while investment value is what it is worth.
32
How is the Profit Method applied?
The profits method involves establishing fair maintainable operating profit (FMOP) based on fair maintainable turnover (FMT) and using a market-based profit multiplier to convert FMT into a capital value.
33
What is a DCF?
A valuation model that seeks to determine the value of real estate investment property by examining its future net income or projected cash flow from the investment and discounting that cash flow to arrive at an estimated current value.
34
What is a discount rate?
A discount rate is used to derive the present value or net present value of the expected future cash flows, commonly the real estate’s target or expected rate of return.
35
What is Internal rate of return (IRR)?
The rate of interest at which all future cash flows will be discounted so that the net present value of those cash flows, including the initial investment, is equal to zero.
36
What is the difference between property risk and property valuation uncertainty/variation?
It is possible to have a very certain valuation of a very uncertain and risky property asset. A market valuation is based on transaction evidence.
37
What is a Category A comparable?
Direct comparable - completed transaction on a near identical property.
38
What is a Category B comparable evidence?
General market data that provides guidance - historic evidence from published sources.
39
What is a Category C comparable?
Other sources of information, transactions of different property types, or other background data.
40
What is restricted information / desk top Val?
When a valuer is instructed to undertake a valuation on the basis of restricted information or without physical inspection.
41
What must valuers verify when on inspection?
Check that the information being relied upon for the valuation is professionally adequate for its purpose.
42
What should now be an integral part of the valuation approach + reasoning?
ESG + sustainability.
43
What is fair value under IFRS3?
The price that would be received to sell an asset or paid to transfer liability in an orderly transaction between market participants at the measurement date.
44
When is fair value required and who adopts it?
Under International financial reporting standards and by the international accounting standards board.
45
How many valuation practice guidance (VPGA) are there?
10
46
What are VPGAs?
VPGA1 - financial statements
VPGA2 - secured lending
VPGA8 - Real property interest
VPGA10 - Material uncertainty
47
What does VPGA8 cover?
Inspection and investigation with a focus on specific environmental and sustainability factors.
## Footnote
This may include direct valuation (storm/flood), indirect (resilience), and transitional (regulatory change).
48
How should material uncertainty be expressed in a report according to VPGA10?
Clearly drawn attention to and comment on any issues resulting in a material uncertainty (risk surrounding the asset).
49
What does the RICS Valuation Global Standard (UK National Supplement 2023) set out?
Specific requirements for members on the application of RICS valuation global standards within the UK.
50
What is included in the RICS UK supplement 2023 document?
Mandatory professional standards
Mandatory UK valuations Technical + performance standards
UK valuation practice guidance
51
What VPGA applies to valuing residential property?
VPGA11
52
What does VPS3 cover?
Valuations relied upon by third parties who have not commissioned the valuation and are not subject to monitoring (e.g., takeovers, mergers).
53
What are mandatory rotations?
Max period - 10 years before rotation of valuer (multiple engagements)
Max single engagement - 5 years
Max 5 years for individual responsible valuer
3 year break
54
Summarise the RICS professional standard: sustainability + ESG in commercial property valuations + strategic advice 2021.
Provides advice on relevant sustainability characteristics and considerations + risk when analyzing comps.
How sustainability considerations should be reflected in valuations.
55
What is marriage value?
Created via the merger of interest (physical or tenurial).
You must undertake a valuation before and after to work out the marriage value.
56
Where can you find information about rights of light?
RICS Guidance note 2016
RICS consumer Guide to Rights of light April 2022
57
What are rights of light?
ROL arises after 20 years of uninterrupted enjoyment of light without consent granted by an easement - damages can be awarded if breached.
58
What is a special buyer?
A particular buyer for whom a particular asset has a special value due to an advantage arising from ownership that would not be available to others. The special value reflects this.
59
What is a Red Book valuation?
A formal opinion of value that can be relied upon by an instructing party.
60
What is the Red Book?
The Red Book contains mandatory rules, best practice guidance and related commentary for all members undertaking valuation work across the globe.
60
Who can carry out Red Book Valuations?
Registered valuers under the Valuer Registration Scheme.
61
Why was the Red Book created?
To improve consistency and transparency in valuation approach across the globe.
62
What is on the front cover of the RICS Valuation - Global Standards?
RICS Logo, IVSC Logo, Title of document, Effective from date, Red spherical globe.
63
What are the different sections of the Red Book?
1. Introduction
2. Glossary
3. PS - Professional Standards
4. VPS - Valuation Technical and Performance Standards
5. VPGA - Valuation Practice Guidance Applications
6. International Valuation Standards.
64
What are the Professional Standards?
PS 1 - Compliance with standards where a written valuation is provided.
PS 2 - Ethics, competency, objectivity and disclosures.
65
What is PS 1 of the Red Book?
PS 1 - Compliance with standards and practice statements where a written valuation is provided. Looks at application - when a valuation needs to be Red Book Global compliant. Details the 5 exemptions.
66
What is PS 2 of the Red Book?
PS 2 - Ethics, competency, objectivity and disclosures. Members must act in accordance with 5 RICS Global and Ethical Standards and be bound by the RICS Rules of Conduct for Firms and Members. Valuer must act objectively and independently - apply professional scepticism.
67
What types of valuations are excluded from the Red Book?
Statutory, Agency, Internal, Negotiation/Litigation, Expert Witness.
68
Which sections of the Red Book are mandatory?
Professional Standards, Valuation Technical and Performance Standards, International Valuation Standards.
69
Are the exemptions excluded from the mandatory sections?
They are excluded from the mandatory Valuation Technical and Performance Standards. Still have to adhere to the Professional Standards.
70
Are you still liable for valuation advice that’s provided orally?
Professional Standards should still be adhered to. Just because it’s oral, doesn’t mean its provided without liability.
71
What are the Valuation Technical and 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.
72
VPS 1 - What is included with your standard Terms of Engagement?
In accordance with VPS 1:
1. ID & Status of Valuer
2. ID of Client
3. ID of other users
4. The property
5. Currency
6. Purpose of valuation
7. Basis of Valuation
8. Valuation date
9. Nature and source of information to be relied upon
10. All assumption and special assumptions
11. Format of the report
12. Restrictions on use
13. Confirmation that it will be undertaken in accordance with IVS.
14. Fee
15. Firm registration and CHP
16. Compliance
17. PII Caps.
73
VPS 2 - why must valuers inspect?
To verify the necessary information being relied upon for a valuation to ensure the information is professionally adequate for its purpose.
74
VPS 2 - are desktop reports Red Book compliant?
Yes - unless for one of the exemptions.
75
VPS 2 - What factors must a valuer consider when undertaking a desk-top valuation?
1. Must be agreed in writing in the Terms of Engagement
2. Must disclose possible valuation implications in writing
3. Must consider whether it is reasonable with regard to the purpose of valuation
4. Must refer to the restriction in the report.
76
VPS 2 - can you conduct a re-valuation of a property and not inspect?
Yes you can, only if you’re satisfied that there have been no material changes to the property or the nature of its location since the previous report. Must confirm this in the terms of engagement.
77
What is VPS 3 of the Red Book?
This is relating to Valuation Reports and covers what should be included within a report.
78
VPS 3 - can you give preliminary (draft) valuation advice?
Yes, however it must be:
• marked as a draft, subject to completion of the final report
• marked for internal purposes only
• stated that it cannot be relied upon and can’t be published.
79
VPS 3 - can you discuss the valuation report with the client prior to issuing?
Yes you can, however, you must not be influenced by the client in any way. Any information given by the client in the discussion, must be stated within the report.
80
Where are the definitions in the Red Book?
VPS 4 - Basis of value, assumption and special assumptions.
81
VPS 4 - Define an assumption?
An assumption is where it is reasonable for the valuer to accept that something is true without the need for specific investigation.
82
VPS 4 - Define a special assumption?
A special assumption is a supposition that is taken to be true and accepted as fact, even though it is not true. A special assumption must be agreed with a client in writing at the commencement of an instruction.
83
VPS 4 - how many bases of value are there?
6: Market Value, Market Rent, Fair Value, Investment Value, Equitable Value, Liquidation Value.
84
VPS 4 - Define Market Value?
The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.
85
VPS 4 - Define Market Rent?
The estimated amount for which an interest in real property should be leased on the valuation date between a willing lessor and a willing lessee on appropriate lease terms in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.
86
VPS 4 - Define Fair Value?
The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
87
VPS 4 - Define Investment Value?
The value of an asset to a particular owner, or prospective owner for individual investment or operational objectives.
88
VPS 5 - what are the three valuation approaches?
1. Income Approach (Investment, Residual & Profits)
2. Cost (DRC)
3. Market (comparable).
89
What are the relevant Valuation Practice Guidance Applications?
VPGA 2 - Valuation of interests for secured lending
VPGA 8 - Valuation of real property interests
VPGA 10 - Matters that may give rise to material valuation uncertainty.
90
What is VPGA 1 of the Red Book?
Valuation for inclusion in financial accounts. Fair value will be adopted for all IFRS adopted accounts. Prescribed 'performance standards' must be adhered to.
91
What is VPGA 2 of the Red Book?
VPGA 2 - Valuations for Secured Lending. Details how to deal with conflicts of interest for secured lending valuations. Reporting procedures - additional information is required for loan security reports.
92
What is VPGA 8 of the Red Book?
VPGA 8 - Valuation of Real Property Interests. Covers inspections and investigations, with particular emphasis on environmental constraints and sustainability issues.
93
What is VPGA 10 of the Red Book?
VPGA 10 - Matters which give rise to Material Uncertainty. Valuation report must not be misleading, comment on issues resulting in material uncertainty, standard caveat should not be used.
94
VPGA 10 - What is the material uncertainty clause?
Material uncertainty clause is used where the level of uncertainty is expected to be higher than normal circumstances. The advice to use this clause has now been lifted, but it is still important to ensure that the uncertainty is assessed on a case by case basis.
95
VPGA 10 - Can a lender still rely on a report with a material uncertainty clause?
Yes it can still be relied upon, however less certainty and a higher degree of caution should be attached when having regard of the report.
96
What is Part 6 of the Red Book?
The International Valuation Standards.
97
IVS - What are general standards?
'General standards' - set requirements for all valuations, of any asset and for any purpose.
98
IVS - What are asset standards?
'Asset standards' - provides requirements relating to specific types of assets. Must be followed in conjunction with the general standards.
99
What are the recent 2020 updates to the Red Book?
• now known as the Red Book Global
• effective 31 January, however it is now not dated in order to allow for regular updates
• PS1 'written' now means any valuation conveyed by paper, or electronic means on in the form of recorded media.
• VPGA 8 reinforce the importance of considering current and historic land uses in the context of Sustainability when valuing property.
100
What other RICS information is key to UK valuation?
RICS Valuation Global Standards: UK national supplement: published 2018, effective January 2019. Contains 18 VPGAs, most advice is advisory guidance.
101
What is the purpose of the RICS Valuation - Global Standards (UK National Supplement) 2018?
To make it easier to read and more user-friendly. Clear advice on what is and isn't mandatory. New UK VPGAs included for the valuation of central government assets, local authority assets and registered social housing provider's assets.
102
What are the UK VPGAs?
1. Valuation for financial reporting
2. Valuation for registered social housing providers' assets for financial statements
3. Valuation for charity assets
4. Valuation for commercial secured lending purposes
5. Valuation for residential mortgage purposes
6. Valuation of CGT, IT, SDLT and ATED.
103
What is the commercial lending supplement for the Red Book?
Red Book UK National Supplement - VPGA 10 valuation for commercial secured lending purposes.
104
What are the proposed changes to the Red Book?
Proposed to be revised in January 2022. ESG has been added to the Glossary. VPS 1: Stressing still needing ToE for exemptions. VPGA 8: sustainability issues can be a consideration for investors, insurers and lenders.
105
Can you name some of the IVS general standards?
IVS 104 - Data and Inputs
IVS 102 - Basis of Value
106
Can you name some of the IVS asset standards?
IVS 300 - Plant and Equipment | IVS 410 - Development Property.
107
Where do you find information on the valuation methods?
IVS 105 - Valuation Approaches and Methods.
108
What is the latest edition of the RICS Valuation Global Standards?
RICS Valuation- Global Standards (Red Book) effective from 31st January 2022
109
What parts make up the Red Book? (6 parts)
Introduction
Glossary
Professional Standards (PS1 &PS2)
Valuation Technical and Performance Standards (VPS1-5)
Valuation Practice Guidance Applications (VPGA1-10)/( UK VPGA 1-17)
International Valuation Standards (IVS, Summary of changes)
110
What does the Red Book set out?
Sets out valuation profession, technical and performance standards
Ensures that valuations undertaken by RICS Members are consistent and objective
111
What is PS1 & PS2?
PS1: Compliance with standards
where a written valuation is
provided
PS2: Ethics, Competency,
Objectivity and Disclosures
112
What does VPS refer to?
Valuation Technical and Performance Standards
113
What are VPS 1- VPS 5? (TIRBAM)
VPS 1: Terms of Engagement
VPS 2: Inspections, Investigation and Records
VPS 3: Valuation Report
VPS 4: Bases of Value and
Assumptions
VPS 5: Approaches and Methodology
114
What does VPGA refer to?
Part 5 (Valuation Applications)
115
What are VPGA 1 - 10?
Valuation for:
-VPGA 1: Inclusion in Financial Reporting
- VPGA 2: Secured Lending
- VPGA 3: Businesses & Business Interests
- VPGA 4: Individual trade related properties
- VPGA 5: Plant & Equipment
- VPGA 6: Intangible Assets
- VPGA 7: Personal Property (arts/antiques)
- VPGA 8: Real Property Interests
- VPGA 9: Portfolios
- VPGA 10: Matters that may give rise to material valuation uncertainty
116
What else forms a core component of the Red Book?
The International Valuation Standards (IVS)
117
Discuss the recent changed made to RICS Valuation - Global Standards ‘Red Book’ (2022)?
Terms of reference must be clear and unambiguous in that valuations are RGB or not
Sustainability and ESG Factors- Valuers should have regard for the relevance and significance and should form approach and reasoning
118
Can you give some of the changes that have been made within IVS?
Extended Glossary
List of Core Principles added to Introduction
Wording changes to IVS 101, 104 & 105
119
What is the main objective of the ‘Red Book’?
To promote confidence and
provide assurance to clients that a valuation undertaken by a RICS registered valuer will be to the highest professional standard
120
What are the main benefits of Global Valuation Standards?
They are financially acceptable
Reduces risk
Standards comparable on global basis
121
What are the benefits of Global Valuation Standards to clients?
Consistency in approach in approach (creditable valuations)
Transparency (clarity)
122
The Red Book was devised to establish… (CCT)?
Consistency
Confidence
Transparency
in valuation practice
123
Give examples of the differing Asset Standard in the International Valuation Standards (IVS)?
Development Property IVS 410
Real Property Interests IVS 400
Inventory IVS 230
Plant & equipment IVS 300
124
For RICS members is compliance with the Red Book mandatory?
Yes
125
When does a valuation have to be Red Book complaint?
Mandatory for all valuations expect 5 circumstances
126
What are the 5 exceptions to using the Red Book Global VPS1-5?
During negotiation/ligation
Valuer is performing statutory function
Internal Valuation Purposes
Agency work for disposal/acquisition instruction
Evidence for Expert Witness
127
VPS 1- What is included with Terms of Engagement as a minimum requirement of a Valuation Report?
Indentification and Status of Valuer
Client
Other intended users
Assets to be valued
Currency
Purpose of Valuation
Basis of Value
Extent of investigation
Nature and Sources of Information
Assumptions and Special Assumptions
Format of Report
Restrictions of Use
Red Book Global/IVS compliance
Fee Basis
Complaints Handling Procedure
Statement that report may be monitored by RICS
PI Liability
128
Who is the Red Book primarily aimed at?
RICS Members undertaking valuations
129
What does the Bases of Value refer to?
The fundamental measurement assumptions of a valuation
130
What are the Bases of Value?
Market Value
Market Rent
Investment Value
Fair Value
Equitable Value
Liquidation Value
131
Define Market Value?
The estimated amount for which an asset or liability should exchange
On the valuation date
Between a willing buyer and willing seller
In an arms length transaction
After proper marketing
Where the parties had each acted knowledgeably, prudently and without compulsion
132
Define Market Rent?
The estimated amount for which an interest in a real property should be leased for
On the valuation date
Between a willing lessor and willing lessee
On appropriate lease terms
In an arms length transaction
After proper marketing
Where the the parties had each acted knowledgeably, prudently and without compulsion
133
Define Fair Value?
The price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date
134
Define Investment Value?
The value of an asset to a particular owner based on individual investment or operational value
135
Provide examples of a Conflict of Interest?
Acting for Buyer and Seller
Valuing property previously valued for another client
Valuing for a lender, where advice is given to the borrower
136
Valuation is a fast changing profession due to?
Technology
Sustainability
Global Standards and recognition
137
What does ESG refer to?
Environmental, Social, Governance
It is the criteria that establishes the framework for assessing the impact of sustainability and ethical practices of a company on it’s financial performance
138
What are the IFRS ?
International Financial Reporting Standards
Set out by International Accounting Standards Board to achieve universal accounting principles
139
The Global Red Book recognises 3 international standards. What are they?
IVS: International Valuation Standards
IES: International Ethics Standards
IPMS: International Property Measurement Standards
140
Are Professional Standards (PS1 & PS2) mandatory?
Yes for all Valuers providing written valuations
141
VPS3 - Valuation Reports. What makes up a report?
Hamilton Road and Hardengreen
Indentification and status of valuer
Client
Purpose of Valuation
Asset to be valued
Basis of Value
Valuation Date
Extent of Investiagtion
Nature and source of information
Assumptions and Special Assumptions
Consent and publication restrictions
Red Book Compliance
Valuation approach and reasoning
Valuation figure
Commentary on market uncertainty
Limitations on liability
142
Discuss the time line of a Valuation instruction?
Receive Instruction
Check Competence
Check Conflict of Interest
TOE (signed)
Gather information
Inspect and Measure
Draft Report
Finalised and sign report
Report to client
Issue invoice
File away securely
143
Can you issue draft Valuation Advice?
Yes
Must be marked as Draft and for internal purposes only
Must be discussed with client and valuer cant be influenced
144
Is there room for margin of error in valuations?
Yes
Typically 10% either way
145
Under VPG2 what is considered previous involvement?
Any involvement within past 2 years with borrower
146
Can you explain the purpose of the RICS Valuation – Global Standards (Red Book)?
Provides framework to ensure that all RICS-regulated valuations are undertaken with consistency, transparency, and professionalism.
147
How do the IVS (International Valuation Standards) influence UK valuation practice?
148
What is the role of Valuation Practice Statements (VPS) in Red Book-compliant valuations?
149
How does IVS 410 (Development Property) apply to your work?
150
How do RICS professional standards such as ‘Valuation of Development Property’ guide development appraisals?
151
What are the main drivers that impact property value?
152
How do market conditions influence development valuations?
153
How do planning constraints affect valuation assumptions?
154
How does government policy or economic climate affect value?
155
Can you explain the difference between capital and rental valuation methods?
156
How did you calculate the residual valuation of the Holyport site?
157
How did you determine the Gross Development Value (GDV) for Holyport?
158
How did you account for build costs, professional fees, marketing, and finance in the valuation?
159
What assumptions did you make regarding profit levels?
160
How did you apply IVS 104 (Data and Inputs) in your valuation?
161
How did you cross-check your residual valuation with the comparable method?
162
What sites did you use as comparables, and why were they appropriate?
163
How did you present special assumptions, such as planning permission, in your report?
164
How did you conduct sensitivity analysis, and what were the key findings?
165
How did the valuation influence client decision-making on site acquisition or appraisal?
166
How did you calculate the GDV using the Market Approach for Cobham?
167
How did SHMA and recent approvals influence your proposed housing mix?
168
How did you gather comparable sales data, and how did you adjust for new-build premiums?
169
How did you apply £/sqft values by property typology?
170
How did you cross-check your GDV assumptions with the Sales Director?
171
How did your valuation inputs feed into the wider viability appraisal?
172
How did you ensure that the valuation was evidence-based and consistent with RICS standards?
173
How do you decide when to use residual valuation versus market/comparable approaches?
174
How do you account for abnormal costs or site-specific risks in your valuations?
175
How do you incorporate planning obligations, such as S106 or CIL, into development valuations?
176
How do you adjust valuations for timing, phasing, or market trends?
177
How do you ensure transparency and consistency in presenting valuation reports?
178
How do you manage client expectations regarding valuation assumptions and outcomes?
179
How would you deal with a site with uncertain planning permission in your valuation?
180
How do you reconcile differing valuation results when using multiple approaches?
181
How has your understanding of development valuation evolved through on-the-job experience?
182
What lessons have you learned from completing valuations for residual and market appraisals?
183
How do you keep up to date with RICS standards and valuation best practice?
184
Can you describe a situation where your valuation assumptions significantly influenced a development decision?
185
How do you ensure your valuation work aligns with the client’s commercial and strategic objectives?
186
The appraisal notes comparables had limited relevance — what specific adjustments do you make when comparables are scarce?
187
Explain how you incorporated finance / interest into your cashflow — what rate did you apply and why?
188
Show how your IRR / ROCE metrics (or similar) influence a developer’s decision to proceed — reference figures in your cashflow if asked.
189
Why did you cross-check the residual value against internal comparables at ~£70k/plot and how robust is that check?
190
How would you revise the valuation if a survey revealed significant contamination requiring a major remediation cost? Use your sensitivity table as a basis.
191
How do you distinguish between a valuation for internal/landowner update purposes and a formal market valuation (what additional steps would you take)?
192
Where would you find info on special assumptions?
Appendix C of Valuation of Development Land.
C2
193
What other special assumptions are there?
Development land with existing buildings - Vacant Possession
For greenfield site adjacent to existing settlement and identified for potential release
New Build Resi - Finished to good standard
194
Greenfield Release special assumption
For greenfield site adjacent to existing settlement and identified for potential release.
* Has VP
* Property has Planning Permission
195
Assumptions on Abnormals?
Assumption that there are no abnormal ground conditions, archaeological remains, hazardous or deleterious materials or organic growth, such as Japanese knotweed or other invasive
species, present that might adversely affect the present or future occupation, development or value of the property
196
What is a Special Assumption?
A condition or fact that the valuer assumes to be true for the purpose of the valuation
They should be specific to the situation.
197
Why £210 psqft?
This was a high level assumption at this stage. Calculated and based on similar sites. Based on Estimator Instructuion at later stage. Technical Review.
198
How do you know Company’s standard pricing – how is this calculated?
System for early stage / high level appraisals. Calculates assumed build cost based on previous scheme and incorporates current build cost market.
199
Why is contingency built in to build cost?
The contingency is generally for the build costs.
Company standard is to build contingency into build cost.
Normally equates to Between 5% and 10%. As it is all pre-assumed and factored in it is more simple.
Appropriate especially for the stage in the project.
200
What possible unforeseen costs were there?
Could be related to site abnormals.
Costs during the build.
More bespoke product/design introduces greater level of risk through the build process.
201
What was the CIL requirement?
Just over £5,000,000
202
How was this indexed?
Using BCIS All-in Tender Price Index (TPI) – Published quarterly.
203
What is the process for Indexing?
Work out Monthly/Quarterly/Yearly Rate (whatever most appropriate)
Then use the multiplier which is based on 1 + the rate calculated.
Times the result by your original figure.
LPA’s generally have a breakdown on their Developer Contributions SPD
204
How does Stamp Duty vary from Resi to Commercial?
205
What appraisal assumptions could change?
206
What is a sensitivity analysis?
207
What potential abnormal costs were there?
208
Why are residual valuations sensitive to changes in assumptions? How?
209
What was the residual land value?
£13,569,521.
210
How did you verify with known transactions if there were not many comparable sites?
There were know comparable sites from both internal and external transactions similar enough for a cross checking exercise.
Though reliance on these alone would not have been reliable. I cross checked to ensure the general tone of value was the same.
211
What is IVS 410?
IVS 410 is a professional standard by the RICS that provides guidance for valuers in the valuation of development property. It is part of the International Valuation Standards (IVS) framework, which is a global standard for the valuation of real estate assets.
212
Which Val methods are normally undertaken in the case of development property?
* the market comparison approach
* the residual method
As stated in IVS 410 paragraph 40.1
213
What is Material valuation
uncertainty (MVU)?
Covered in VPGA 10.
Uncertainty in a valuation that falls outside generally expected uncertainty (ie. planning permission)
214
How did you arrive at the sales rate?
Input from Sales Director
215
Valuation Approaches / Methods
Income Approach
Cost Approach
Market Approach
**5 Methods under **
Comparable
Investment
Profits
DRC
Residual Method
216
Holyport - Did you allow for Finance Costs?
217
What is the difference between an assumption and special assumption in valuation?
An assumption is likely to be true at the date of valuation whereas a special assumption is something that specifically differs from reality at the valuation date
218
What are the constraints of relying on assessing GDV on a £ psf basis?
Accuracy of comparable data
Misrepresentation of data if not applied correctly
219
Valuer Registration Scheme (VRS)
RICS members undertaking Red Book valuations must join the Valuer
Registration Scheme (VRS).
Extra level of quality assurance - ensure consistent standards.
220
Key points under PS2?
Professional and Ethical Standards
Independence, Objectivity, Confidentiality
Separation between advisers
Public interest disclosures
RICS APC Planning and Development
flashcards
Decks in class (24)
# Cards
-
ETHICS167
-
CASE STUDY142
-
CLIENT CARE54
-
COMMUNICATION & NEGOTIATION61
-
HEALTH AND SAFTEY73
-
ACCOUNTING42
-
BUSINESS PLANNING29
-
CONFLICT RESOLUTION36
-
DATA MANAGEMENT73
-
DIVERSITY EQUITY & INCLUSION27
-
INCLUSIVE ENVIRONMENTS35
-
SUSTAINABILITY74
-
DEVELOPMENT APPRAISALS266
-
DEVELOPMENT PROJECT BRIEFS71
-
LEGAL REGULATORY51
-
MEASUREMENT55
-
P&D MANAGEMENT130
-
SPATIAL PLANNING87
-
SURVEYING AND MAPPING23
-
VALUATION221
-
MASTERPLANNING AND URBAN DESIGN52
-
HOUSING STRATEGY AND PROVISION138
-
DOCUMENTS55
-
UNKNOWN ANSWERS25
