Whether you are on the Valuation or Commercial Real Estate pathway, understanding the RICS Valuation Global Standards — commonly known as the Red Book — is non-negotiable. Here are the essentials every APC candidate should master.
What Is the Red Book?
The RICS Valuation Global Standards (Red Book) sets out mandatory practices and guidance for RICS members undertaking valuations. It incorporates the International Valuation Standards (IVS) and adds RICS-specific requirements. Any valuation provided by an RICS member for a third party must comply with the Red Book unless a specific exception applies.
Key Bases of Value
You must know the main bases of value and when to apply each:
- Market Value (IVS 104.1): 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.
- Market Rent (IVS 104.2): The estimated amount for which an interest in real property should be leased on the valuation date between a willing lessor and 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.
- Investment Value: The value of an asset to a particular investor or class of investors for identified investment objectives. This is not the same as Market Value — it is specific to the investor's circumstances.
- 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. Used primarily for financial reporting purposes.
Assumptions and Special Assumptions
Understanding the distinction between assumptions and special assumptions is frequently tested:
- Assumptions: Matters that are reasonable to accept as fact in the context of the valuation without specific investigation — for example, that the property has good title or that building regulations have been complied with.
- Special assumptions: Assumptions that require the valuer to assume facts that differ from those existing at the valuation date — for example, that a proposed development has been completed or that planning permission has been granted. Special assumptions must always be agreed with the client and clearly stated in the report.
Terms of Engagement
Before undertaking any valuation, you must agree written terms of engagement covering: identification of the client, the purpose of the valuation, the subject of the valuation, the basis of value, the valuation date, the extent of investigation, the nature and source of information to be relied upon, any assumptions or special assumptions, restrictions on use, confirmation of compliance with the Red Book, and the basis of the fee.
Common Assessment Pitfalls
- Confusing Market Value with Investment Value or Fair Value — know when each applies.
- Not understanding when the Red Book applies and the limited exceptions (such as agency work or internal valuations not for third-party reliance).
- Being unable to explain the valuer's duty of care and to whom it extends.
- Failing to discuss material uncertainty and how to disclose it appropriately.
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