Valuation

Question 1

What is a property valuation ?

Answer 1

An experts professional estimate of a property’s worth, considering location, size, condition and market average

Question 2

What is the RICS Red Book ?

Answer 2

Standards for Valuation
RICE Valuation - Global Standards 2024

Question 3

What is another governing standard for Valuations ?

Answer 3

The International Valuation Standards 2025

Question 4

What are the 5 Methods of Valuation ?

Answer 4

• Comparable Method
• Income Method
• Profit Method
• Residual Method
• Depreciated Replacement Cost Method

Question 5

What is Market Value ?

Answer 5

The estimated amount for which an asset should exchange for on the date of valuation between a willing buyer and willing seller in an arms length transaction in an open market.
- Reflects the supply and demand

Question 6

What is Fair Value ?

Answer 6

Estimated amount for which an asset would sell for in an “orderly transaction” between willing and knowledgable market participants at a specific time.
-Reflecting its true worth

Question 7

What is the Comparable Method of valuation ?

Answer 7

A valuation technique that uses comparable data of recent and similar transactions that are adjusted to reflect the subject property to determine an assets worth.

Methodology:
a. Find Comparables
b. Confirm/verify details
c. Place data in a table
d. Adjust comparables using hierarchy of evidence
e. Analyse comparables
f. Report value and prepare file note

Question 8

What is the Professional Standard often used when Comparable method is used

Answer 8

Comparable evidence in Real Estate Valuation 2019

Question 9

What is the Income/Investment Method of Valuation ?

Answer 9

It is a method of valuation that assesses rental values and a market based yield to determine a property’s capital value

Question 10

What is the basic formula for the income method of valuation

Answer 10

Rent Recieved x Years Purchase = Capital Value

Where Years purchase is 1/Yield.

Question 11

What are the two types of calculations used in an Income method of valuation ?

Answer 11

Term & Reversion
Hardcore and topslice

Question 12

What is Term and Reversion ?

Answer 12

Where passing rent is under market rent, so the market yield is lowered to reflect this. Then reversion is at market rent with a market yield

Question 13

What is Hardcore and topslice ?

Answer 13

Where passing rent is higher than market rent. The hardcore is the marker rent at market yield. The remaining rent is multiplied by an increased market yield

Question 14

What is the Residual Method of Valuation ?

Answer 14

A Valuation method used to estimate the value of land or property by deducting all development costs from the gross development value (GDV).

GDV - Total Development Costs (including developer profits = Residual Land Value

Question 15

What is GDV ?

Answer 15

Gross development value

The expected sale or rental income

Question 16

What is included in Total Development Costs in the residual method ?

Answer 16

Professional Fees
Financing Fee
Construction Costs
Marketing and Sales Costs
Developers Profit

Question 17

What is the Profit Method of Valuation ?

Answer 17

It assess properties like hotels, pubs or cinemas by capitalising the business’s earning potential.

Fair Maintainable Net Profit x Market based multiplier = Capital Value

Used for trade related properties where rental evidence is limited

Question 18

What is the depreciated replacement cost method of Valuatiom

Answer 18

A valuation method used on specialised properties where there is limited rental evidence