1
Q
What is an ‘Internal Valuer’?
A
- Employed by the company to value the assets of the company/enterprise
- Valuation for internal use only
- No third-party reliance
2
Q
What is an ‘External Valuer’?
A
Has no material links with the asset to be valued or the client
3
Q
What are the 3 important first steps to undertake before commencing a valuation?
A
- Competence
- Independence
- Terms of Engagement (TOE)
4
Q
How can you confirm your competence?
A
Do you have the correct level of Skills, Understanding and Knowledge (SUK)? If not, refer to the ‘RICS Find a Surveyor’ service on the RICS website
5
Q
How can you confirm your independence?
A
Think first and then check for any conflicts or personal interests - who & why?
6
Q
What must be included in your Terms of Engagement (TOE)?
A
- Set out in writing your full confirmation of instructions to the client prior to starting work, and receive written confirmation of instructions.
- Confirm the competence of the valuer
- The extent and limitations of the valuer’s inspection must be stated
7
Q
Why is Statutory Due Diligence carried out for Valuations?
A
This is required to check that there are no material matters that could impact the valuation
8
Q
What could Statutory Due Diligence include for Valuations?
A
- Asbestos register
- Business rates/Council tax
- Contamination
- EPC Ratings
- Flooding
- Fire safety
- Health and safety compliance
- Highways
- Legal title and tenure
- Public rights of way
- Planning history and compliance
9
Q
What is included in the timeline of a valuation?
A
- Receive instruction
- Check competence
- Check independence so there are no conflicts of interest
- Issue TOE to the client
- Receive signed TOEs from the client
- Gather information (leases, TS, title documents)
- Desktop Due Diligence
- Inspect and measure
- Research market and assemble, verify and analyse comparables
- Undertake valuation
- Draft report
- Have the report vetted
- Finalise and sign the report
- Report to client
- Issue invoice
- Ensure valuation file is in good order for archiving
10
Q
What are the five methods of valuation?
A
- Comparative method
- Investment method
- Profits method
- Residual method
- Contractor’s method (Depreciated replacement cost)
11
Q
What are the three valuation approaches and methods outlined in IVS 105?
A
- Income approach - converting current and future cash flows into a capital value (i.e., Investment, Residual and Profits method)
- Cost approach - reference to the cost of the asset, whether by purchase or construction (i.e. DRC method)
- Market approach - Using comparable evidence available (i.e. Comparative method)
12
Q
What is the comparative method of valuation?
A
The comparative method is a valuation approach that determines value by comparing the property with recent, similar transactions and adjusting for differences in key attributes.
13
Q
What are the 6 steps of a comparative valuation?
A
- Search and select comparables
- Confirm/verify details and analyse headline rent to give net effective rent
- Assemble comparables in the schedule
- Adjust comparables using the hierarchy of evidence
- Analyse comparables to form opinion of value
- Report value and prepare file note
14
Q
What is the RICS document on comparable evidence called?
A
RICS Professional Standard: Comparable evidence in real estate valuation (2019) 1st edition
15
Q
What does the RICS Professional Standard: Comparable evidence in real estate valuation (2019) 1st edition outline?
A
This document outlines principles in the use of comparable evidence. It provides advice in dealing with situations where there is limited availability and evidence and sets out a non-prescriptive heierarchy of evidence noting that “the valuer should use professional judgement to assess the relative importance of evidence on a case-by-case basis.”
16
Q
What are the three categories outlined in the hierarchy of evidence?
A
- Category A - Direct comparables
- Category B - General market data
- Category C - Other sources
17
Q
What could be included in category A?
A
- Completed transactions of near-identical properties for which full and accurate information is available; this may include data from the property itself.
- Completed transactions of other, similar real estate assets for which full and accurate information is available
- Completed transactions of similar real estate for which full data may not be available, but for which enough reliable data can be obtained to use as evidence
18
Q
What could be included in category B?
A
- Information from published sources or commercial databases; its relative importance will depend on relevance, authority and verifiability
- Other indirect evidence
- Historic evidence
- Demand/supply data for rent, owner-occupation or investment
19
Q
What could be included in category C?
A
- Transactional evidence from other real estate types and locations
- Other background data (e.g. interest rates, stock market movements)
20
Q
How do you find relevant comparables?
A
- Inspection of an area to find recent market activity by seeking agents’ boards
- Visit/speak to local agents
- Auction results
- In-house/Firm databases
- External sources and databases
21
Q
What is the investment method of valuation?
A
The investment method is a valuation approach that determines value by capitalising a property’s rental income at an appropriate yield to reflect risk and return.
22
Q
When is the investment method of valuation used?
A
- When there is an income stream to value
- The rental income is capitalised to produce a capital value
- The conventional method assumes a growth implicit valuation approach
- An implied growth rate is derived from the market capitalisation rate (yield)
23
Q
What is the conventional investment method and when is it used?
A
Rent received, or Market Rent multiplied by the years purchase to calculate the Market Value
24
Q
What is the term and reversion method and when is it used?
A
Used for reversionary investments (Market Rent more than passing rent) - under-rented. Term capitalised until next review/lease expiry at an initial yield. Reversion to Market Rent valued in perpetuity at a reversionary yield.
25
What is the layer/hardcore method and when is it used?
Used for over-rented investments. Income flow is divided horizontally.
Bottom slice = market rent
Top slice = rent passing less market rent until next lease event
Higher yield applied to top slice to reflect additional risk
Different yields used depending upon comparable investment evidence and relative risk
26
What is a yield?
A measure of investment return (risk), calculated as a percentage of capital invested
27
How do you calculate a yield?
A yield is calculated by income divided by price x 100
28
How do you determine a suitable yield?
By analysing comparable evidence
29
What is the current prime yield for Industrial (20 yrs NIY etc)
5.00%
30
What is the current yield profile for a Greater London Industrial Estate?
4.75%
31
What is the current yield profile for a good modern UK Industrial Estate?
5.00% - 5.25%
32
What is the current yield profile for major regional city offices?
6.50% - 7.00%
33
What is the current yield profile for Solus Retail?
6.00%
34
How do you calculate Years Purchase?
Divide 100 by the Yield. This is the number of years required for its income to repay its purchase price.
35
What are the factors reflected in a yield?
- Prospects for rental and capital growth
- Quality of location and covenant
- Use of the property
- Lease terms
- Voids
- Income security
36
What is a 'All Growth Implicit' yield?
The yield adopted assumes many of the assumptions that are made explicit in a DCF approach and the risks are hidden in the selected yield
37
What is an All Risks Yield?
The remunerative rate of interest used in the valuation of fully let property let at market rent reflecting all the prospects and risks attached to the particular investment
38
What is a True Yield?
Assumes rent is paid in advance not in arrears
39
What is a Nominal Yield?
Initial yield assuming rent is paid in arrears
40
What is a Gross Yield?
The yield not adjusted for purchasers' costs
41
What is a Net Yield?
The resulting yield adjusted for purchasers' costs
42
What is an Equivalent Yield?
Average weighted yield when a reversionary property is valued using an initial and reversionary yield
43
What is an Initial Yield?
Simple income yield for current income and current price
44
What is a Reversionary Yield?
Market Rent (MR) divided by the current price on an investment let at a rent below the MR
45
What is a Running Yield?
The yield at one moment in time
46
What is the Discounted Cash Flow (DCF) technique?
Growth explicit method of valuation. It seeks to determine the value of a property by examining its future net income or projected cash flow from the property and then discounting the cash flow to arrive at an estimated current value of the property
47
What is the Profits Method of Valuation?
A property valuation approach that estimates value by capitalising the maintainable operating profit of a business occupying the property.
48
What is the Residual Method of Valuation?
A valuation approach that estimates land or development value by deducting all development costs and profit from the completed project's gross development value.
49
What is the Depreciated Replacement Cost (DRC) Method of Valuation?
A valuation approach that estimates a property's value by calculating the current cost of replacing the asset and then deducting depreciation to reflect its existing condition.
50
What is the RICS Valuation - Global Standards 2024 ('Red Book')?
The Red Book sets globally recognised, mandatory standards for high‑quality, consistent, and transparent valuations, updated to align with the latest International Valuation Standards.
51
When did the RICS Valuation - Global Standards 2024 ('Red Book') become effective?
31 January 2025
52
What were some of the key changes in the new Red Book 2024?
- Alignment with new International Valuation Standards (IVS) 2025
- New content relating to valuation modelling and methods
53
What are the RICS Professional Standards (PS) Mandatory Worldwide?
PS 1 - Compliance with standards and practice statements where a written valuation is provided.
PS 2 - Ethics, Competency, Objectivity and Disclosures
54
What are the Valuation Technical & Performance Standards (VPS) - Mandatory Worldwide?
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
VPS 6 – Valuation reports
55
What is the definition of 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 arm 's-length transaction
- After proper marketing
- Where the parties had each acted knowledgably, prudently and without compulsion
56
What is the definition of 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
- When the parties had each acted knowledgeably, prudently and without compulsion
57
What is the definition of Fair Value (IFRS 13)?
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
58
What is the definition of Investment Value?
The value of an asset to a particular owner, or prospective owner, for individual investment or operational objectives
59
What are some of the minimum requirements to be included in a valuation report?
There are 17, including Valuation Purpose, Date, Figures etc
60
How many Valuation Practice Guidance Applications (VPGAs) are there?
11
61
What does VPGA 1 cover?
Fair Value for accounting purposes
62
What does VPGA 2 cover?
Market Value for secured lending purposes
63
What is the RICS Professional Standard: Valuation - Global Standards (UK National Supplement, 2023)?
Provides UK‑specific mandatory requirements and guidance that adapt and apply the global Red Book valuation standards to UK law, market conditions, and regulatory expectations.
64
What is the UK VPS 3 Regulated Purpose Valuations (RICS valuation monitoring) guidance?
Mandatory valuer and firm rotation rules for Regulated Purpose Valuations to ensure independence—5‑year individual limit, 10‑year firm limit, 3‑year break, with enhanced governance on engagement, advice, and reporting.
65
What does the RICS Professional Standard: Sustainability and ESG in commercial property valuation and strategic advice, 3rd edition (2021) state?
The 2021 RICS Sustainability & ESG standard requires valuers to assess and report how sustainability and ESG factors affect a commercial property’s value, including current performance, risks, upgrade costs, and their influence on market behaviour.
66
Can DRC valuations be Red Book compliant?
No, they are not suitable for Red Book compliant or Secured Lending valuations
67
How would you value a long leasehold interest?
The ground rent is deducted from the gross income to calculate the net rent received. This is capitalised at a yield for the length of the lease to create a Market Value.
68
How do you calculate the Net Effective rent?
The average rent over the lease term after adjusting the headline rent for incentives such as rent‑free periods or capital contributions.
69
What is the RICS Valuer Registration Scheme (VRS)?
You have to register with the RICS, stating:
- What type of valuations you do
- Purpose of valuations
- Number of valuations
- What data sources are used
- Firm's total fee income from Red Book valuations in the last year
RICS APC - Core & Technical
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