What are the Core Principles of Valuation?
- Ethics
- Competency
- Compliance
- Basis of Value
- Date of Value
These principles guide valuers in maintaining public trust and ensuring quality in valuation assignments.
What does Ethics in valuation entail?
- Integrity
- Objectivity
- Impartiality
- Confidentiality
- Competence
- Professionalism
Valuers must adhere to these ethical principles to promote and preserve public trust.
What is required for Competency in valuation?
Valuers must have the technical skills and knowledge required to appropriately complete the valuation assignment
Competency ensures that the valuation is accurate and reliable.
What must valuers disclose under Compliance?
Published valuation standards used for the assignment
Compliance with these standards is crucial for the credibility of the valuation.
What is the Basis of Value in valuation?
Valuers must select and follow the appropriate basis (or bases) of value for the assignment
The basis of value must be defined or cited.
What is the Date of Value?
The date that is the basis of the analyses, opinions, or conclusions in the valuation
Valuers must disclose this date along with their valuation.
What is the purpose of Statutory Due Diligence for Valuations?
To check non-material matters that could impact valuation
This includes checking items like asbestos registers and environmental matters.
What are some examples of non-material matters to check during statutory due diligence?
- Asbestos register
- Environmental matters
- EPC – MEES compliance
- Fire safety
- Legal title and tenure
- Public rights of way
- Planning history
These factors can influence the valuation process.
What does the RICS Valuation – Red Book UK national supplement (2023) provide?
Specific requirements and guidance for valuations under UK jurisdiction
It applies the RICS Valuation – Global Standards to UK valuations.
What is the basis of value for public sector property according to UK VPGA 6?
Existing Use Value
This differs from fair value as defined by IFRS.
What should be integrated into the valuation approach according to UK VPGA 10?
Sustainability and ESG (Environmental, Social, Governance) matters
These factors are increasingly important in valuation reasoning.
What are the Valuation Technical and Performance Standards (VPS)?
Mandatory standards for completing valuations
They ensure consistency, objectivity, and transparency in the valuation process.
What is outlined in VPS 1 - Terms of Engagement (TOE)?
- Identification of valuer
- Identification of client(s)
- Purpose of valuation
- Basis(es) of value
- Valuation date
- Format of the report
These terms are crucial for clarity and understanding in the valuation process.
What are the four bases of value according to VPS 2?
- Market value
- Market rent
- Investment value
- Fair value
Each basis serves a different purpose in valuation.
What are the five methods of valuation based on three principal approaches?
- Comparable (market)
- Residual (mix)
- Investment (income)
- Profits (income)
- DRC / Contractor’s (cost)
These methods are used to determine the value of properties based on different criteria.
What is the importance of inspections in valuation?
To verify information for the valuation to be professionally adequate
Inspections ensure the accuracy of the valuation process.
What does VPS 5 cover regarding valuation models?
Valuation modelling can involve advanced numerical and statistical practices
This includes the use of advanced technology and automation.
What are the minimum reporting requirements outlined in VPS 6?
- Valuation approach and reasoning
- Valuation figures
- Date of valuation
- Market commentary
These requirements ensure transparency and clarity in valuation reports.
What is the Comparable Method in valuation?
- Search and select comparables
- Verify comparables
- Adjust comparables
- Analyse comparables
- Prepare file with evidence
This method relies on market data to establish value.
What is the DRC – Contractor’s Method used for?
Specialist properties where market evidence is limited
Examples include stadiums, docks, and schools.
What is the Profits Method in valuation?
- Establish FMT from audited accounts
- Deduct operational costs
- Capitalise FMOP by YP
This method is trade-related and used for properties like pubs and hotels.
What does the Investment Method focus on?
Income producing properties where rental income is capitalised
This method considers factors like rental growth and lease terms.
What is a years purchase?
A multiplier that converts annual income into capital value
It reflects the number of years an income would take to pay back the capital invested.
What is the Residual Method in valuation?
- Calculate Gross Development Value (GDV)
- Less Total Development Costs (TDC)
- GDV - TDC = Site Value
This method combines aspects of cost, income, and market approaches.
