Going for Gold Graham Stockey FRICS IRRV(Hons) Principal Assurance - - PowerPoint PPT Presentation

RICS Valuer Registration – Cyprus Going for Gold

Graham Stockey FRICS IRRV(Hons) – Principal Assurance Surveyor for RICS Regulation Joseph Hardy BSc(Hons) MRICS – EMEA Regulatory Reviewer

Valuer Registration: What does it do ?

Valuer Registration ensures that members always meet and maintain the RICS Global – Gold Standard for

• valuation. That measure which sets RICS members apart.

► Risk monitoring and quality assurance ► Checking compliance with the Red Book

Valuer Registration?

Valuer Registration

► RICS Valuer Registration is the independent quality assurance process

that reinforces and ensures compliance with the highest professional standards in valuation – the RICS Global Gold Standards, Red Book.

► To continue to raise RICS valuation standards ► Global consistency – to ensure RICS valuations remain the global gold

standard

► Monitor output – improve quality ► Public protection and demonstrate robust self-regulation ► Mitigate the risks of statutory intervention

RICS Valuer Registration

► Established in 2010 – now mandatory in 29 countries ► Developed jointly by RICS, valuation professionals and end-users ► Specialist Valuer Registration reviewers in every world region ► Aim is to assure compliance with RICS standards ► c. 300 reviews undertaken each year to firms sponsoring registered

valuers

► Average 88% of those audited received improvement advice

Europe

VR Mandatory Markets by Region

►

Belgium

►

Cyprus

►

Denmark

►

France

►

Ireland

►

Italy

►

Luxembourg

►

Netherlands

►

Spain

►

United Kingdom

Registered Valuers by Country

What do valuation users want?

Valuer Registration: Stakeholder benefit

► Assurance that the valuer is competent and qualified ► No conflicts of interest ► Plain Language, Accessible Reports, Technical terms defined. ► Compliance with professional / international standards. ► Consistency

Valuer Registration has been MANDATORY in Cyprus since September 2016

Valuer Registration : Do I need to be a Registered Valuer?

.

Valuer Registration Monitoring: The Visit

PS 2 Ethics, Competency, Objectivity & Disclosures

The most fundamental requirement is for the Professional to be able to demonstrate independence & qualification for task. In our RRV we look to ensure the following processes are in place:

► Robust and formal conflict of interest checks ► Record results of conflict of interest checks in case file ► Include cross discipline and associated activity checks ► Include clear declarations of conflict status in terms of engagement and

valuation reports

► Do not accept instructions on the periphery of your valuers competence, firms

• perational area or specialisms

► Ensure the complete ability to demonstrate qualification for task – Keep up to

date CV’s on file

VPS 1 Terms of Engagement

Valuer Registration Monitoring: The Visit

This is the agreement between the Professional and the Client, we look to confirm the following minimum, key requirements are included:

► Case specific, agreed terms of engagement held on file ► Clear and unambiguous purpose stated ► Completely Red Book compliant content ► Clear guidance on extent, limitations and use of report given ► Assumptions, special assumptions and scope of inspection clearly

explained Failure to issue and agree compliant terms places the firm, client and stakeholders at risk

VPS 1 Terms of Engagement

Valuer Registration: The visit

RED BOOK SAYS -

• a. Identification and status of the valuer
• b. Identification of the client(s)
• c. Identification of any other intended users
• d. Identification of the asset(s) or liability(ies) being valued
• e. Valuation (financial) currency
• f. Purpose of the valuation
• g. Basis(es) of value adopted
• h. Valuation date

i.

Nature and extent of the valuer’s work – including investigations – and any limitations thereon

j.

Nature and source(s) of information upon which the valuer will rely

• k. All assumptions and special assumptions to be made

l.

Format of the report

VPS 1 Terms of Engagement

Valuer Registration: The visit

m) Restrictions on use, distribution and publication of the report n) Confirmation that the valuation will be undertaken in accordance with the IVS

• ) The basis on which the fee will be calculated

p) Where the firm is registered for regulation by RICS, reference to the firm’s

complaints handling procedure, with confirmation that a copy will be made available on request

q) A statement that compliance with these standards may be subject to

monitoring under RICS’ conduct and disciplinary regulations.

r) A statement concerning any limitations on liability that have been agreed.

Some seem to think this is like an exam where you are asked to attempt any five! Every item is mandatory without exception. Terms of Engagement is a memorandum of the scope of your instructions. It helps limit your liability.

VPS 2 Inspections and investigations

Valuer Registration Monitoring: The Visit

In our review we look for supporting material in the file to substantiate the valuation and give confidence that the results can be relied upon:

► Legible, structured and comprehensive site notes and other investigations

• n file

► Comparable data sourced, dated and referenced with analysis on file ► Clear linkage between comparables and valuation ► Clear and appropriate valuation calculation and rationale on file ► Clearly documented details of information relied on, its source and its

reliability

► A clear audit trail of information to support valuation & report ► Good file management e.g. Complete, structured, tidy

Clear site notes & investigations together with the comparable and valuation exercise are key to substantiating the valuation and report. Any omissions can undermine the validity of the valuation report ‘IF IT ISN’T WRITTEN DOWN, IT DIDN’T HAPPEN’.

VPS 2 Inspections and investigations

Valuer Registration: The visit

RED BOOK SAYS -

► VPS 2 Inspections and investigations ► Inspections and investigations must always be carried out to the extent

necessary to produce a valuation that is professionally adequate for its

• purpose. The valuer must take reasonable steps to verify the information

relied on in the preparation of the valuation and, if not already agreed, clarify with the client any necessary assumptions that will be relied on.

► VPGA 8: Valuation of real property interests ► Advisory not mandatory but gives a list of matters which typically affect

the value of a real estate asset. Site notes and desktop enquiry notes should reflect all of these matters otherwise the valuer cannot say they have taken everything into account in considering value.

► VPS 2 Valuation records ► A proper record must be kept of inspections and investigations, and of

• ther key inputs, in an appropriate business format.

VPS 2 Inspections and investigations

Valuer Registration: The visit

► VPS 2 cont’d ► Valuation records ► To maintain a proper audit trail and be in a position to respond

effectively to a future enquiry, legible notes (which may include photographs or other images) of the findings and, particularly, the limits of inspection and the circumstances in which it was carried out must be made. The notes should also include a record of the key inputs and all calculations, investigations and analyses considered when arriving at the valuation.

► All of these requirements underline the importance of creating and

keeping an Audit Trail.

► ‘IF IT ISN’T WRITTEN DOWN, IT DIDN’T HAPPEN’.

VPS 3 Valuation Reports

Valuer Registration Monitoring: The Visit

The report is the deliverable, the client interaction point. We check if the report is fit for purpose based on Red Book and does it match the terms of engagement agreed?:

► Include all elements required by Red Book ► Have a clear and unambiguous purpose stated ► Provide clear guidance on the extent, limitations and use of report ► Are assumptions, special assumptions and scope of inspection clearly explained ► Valuation approach and reasoning clearly and adequately presented ► Appear well drafted & written, with easily understood report material

We want to ensure the report content is compliant and that there is a demonstrable audit trail of information to substantiate the valuation reported.

VPS 3 Valuation Reports

Valuer Registration: The visit

► i)

Assumptions and special assumptions

► j)

Restrictions on use, distribution and publication of the report

► k)

Confirmation that the assignment has been undertaken in accordance with IVS

► l)

Valuation approach and reasoning

► m)

Amount of the valuation or valuations

► n)

Date of the valuation report

► o)

Commentary on any material uncertainty in relation to the valuation where it is essential to ensure clarity on the part of the valuation user

► p)

A statement concerning any limitations on liability that have been agreed. This document is the mirror image of the Terms of Engagement document BUT its content is standalone – All items must be included. Yes, this duplicates the Terms of

• Engagement. It is supposed to.

Valuer Registration Monitoring: The Visit

VPS 4 - Bases of Value, Assumptions and Special Assumptions

Basis of Value - Fundamental demonstration of valuer knowledge

► Has the correct basis of value been adopted ► Is the correct definition stated with basis of value in documents

Assumptions - Critically important to the validity of the valuation and client understanding

► Ensuring the assumptions satisfy the requirements of Red Book VPS

4 para 2

► Check that assumptions are referenced in the report and terms of

engagement, along with a clearly defined scope of inspection Special Assumption - Most valuations are subject to a special assumption these are a critical element that must be clearly defined

► Verify that special assumptions are agreed, defined and consistent in

terms of engagement and report

► Has the valuer fully explained the impact on value of the special

assumption in the terms of engagement and report?

► Look to see if a valuation without the special assumption is included

Valuer Registration Monitoring: The Visit

VPS 5 - Valuation approaches and methods

New addition to the Red Book for the new 2017 edition, we are looking to ensure that the correct approach has been adopted in the valuation. The purpose of this is to provide clarity to the client linking the method to the correct approach and demonstrate your professionalism in knowing when to use which approach.

► Market approach

(comparable method)

► Income approach

(investment method)

► Cost approach

(Discounted Replacement Cost)

Valuer Registration: Common findings

PS 2 - Ethics, Competency, Objectivity & Disclosures

► No evidence on file of previous involvement checks and potential conflicts of

interest. VPS 1 - Terms of engagement (Scope of Work) –Where actually agreed

► Identity of valuer where team involved and report being ‘signed off’ by

Registered Valuer;

► Clear purpose of valuation; ► Nature and extent of the valuer’s work; ► Nature and source(s) of information; ► All assumptions and special assumptions to be made.

VPS 2 - Inspections and investigations

► Illegible, unstructured and insufficient site notes and other investigations on file

– Or none at all;

► No comparable data on file; ► Comparable data unsourced, not dated or referenced; ► No comparable analysis on file; ► No valuation calculation or rationale on file; ► No linkage between comparables and valuation.

Valuer Registration: Common findings

VPS 3 - Valuation reports

► Identity of valuer where team involved and report being ‘signed off’ by

Registered Valuer;

► Clear purpose of valuation; ► Nature and extent of the valuer’s work; ► Nature and source(s) of information; ► All assumptions and special assumptions to be made; ► Valuation approach and reasoning.

VPS 4 – Bases of Value, Assumptions and Special Assumptions

► No definition along with the statement on Basis of Value ► Lack of detail around assumptions or generic/unconsidered assumptions ► Special Assumptions not clearly defined

Data Capture and Security

Valuer Registration Monitoring: Data

Data Security

► RICS has in place a dedicated Data Protection Officer which oversee RICS

compliance with Data Protection.

► RICS is registered with the Information Commissioners Office under registration

number Z2632946 for processing data under the Data Protection Act. All data will be processed in accordance with the Data Protection Act 1998 and will be protected from unauthorised use and access

► All staff undergo mandatory data protection and information security training ► Only VR Scheme digital content can be uploaded to Share Point by a Firm or

registered sole practitioner

► Only individuals engaged in the specific digital content document review are

permitted access to the downloaded content

► Documents downloaded can only be used for VR compliance review,

investigation and/or enforcement purposes and for no other purposes

► Downloaded documents cannot be shared with any other parties not named as

connected with the specific review

► No content may be removed from Sharepoint without the permission of the

RICS administrator

► RICS will take any additional steps necessary to ensure the protection and

confidentiality, such as appropriate redaction.

Where we will take action:

Valuer Registration: Enforcement

► Unqualified (not competent) to undertake the task in hand ► Undeclared and unmanaged conflict of interest ► Irresponsible approach to the valuation ► Refusal to comply with Red Book ► Extensive non-compliance with Red Book requirements ► Operating without PII ► Suspicious activity; e.g. fraud ► Breach of Rules of Conduct or Scheme Rules