ModelTree valuation software aligns with RICS Red Book standards

Did you know that ModelTree valuation software aligns with the principles and standards of the RICS Red Book Global Standards? Here’s how it meets the requirements.

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1. Compliance with IVS:

• ModelTree follows internationally recognized valuation methodologies like Discounted Cash Flow (DCF), direct capitalization, and others. These align with the RICS Red Book, which mandates adherence to International Valuation Standards (IVS).

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2. Transparency and Documentation:

• ModelTree ensures transparency in assumptions, inputs, and outputs, providing detailed calculation and reporting capabilities. This is critical for meeting the Red Book’s emphasis on clarity and disclosure in calculations and reports (VPS 6) (IVS 105).

IVS 105 Valuation Models, section 30.01 (d): “transparency: all persons preparing and relying on the valuation model must understand how the valuation model works and its inherent limitations.”

IVS 105 Valuation Models, section 40.03: “The valuer must understand the way the valuation model operates.”

“ModelTree calculation engine is not a black-box system, it instead allows see through how all valuation models calculate, i.e. input – output relationships.”

“ModelTree valuation reports meet RICS valuation report content requirements, and reports can be tailored for a specific valuation assignment case.”

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3. Professional Judgment Integration:

• While ModelTree automates calculations and supports data management, it allows users to adjust assumptions and inputs manually, ensuring that professional judgment remains central to the valuation process, as required by the Red Book (IVS 104).

IVS 104 Data and Inputs section 50.01: “The source, selection and use of significant data and inputs must be explained, justified, and documented.”

“ModelTree allows to write comments and notes and upload files, and attach them to valuations at property, building, land plot, premises, lease agreement and many more  levels.”

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4. Support for Multiple Valuation Techniques:

• ModelTree supports various approaches such as income approach (DCF, Capitalization), market approach (Comparable transactions), and cost approach. These methods align with the Red Book’s guidance on using appropriate valuation methodologies based on asset type and purposes (VPS 3) (VPS 5) (IVS 105).

IVS 105 Valuation Models, section 20.01: “If the valuer does not possess all of the necessary valuation models to perform all aspects of the valuation, it is acceptable for the valuer to engage a specialist or service organisation to provide a valuation model.”

“ModelTree contains, in its cash flow model library, well-tested, market-standard, country-specific valuation models that align with RICS requirements. If needed, the models can be tailored further for the user.”

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5. Customization for Specific Markets:

• The ability to tailor cash flow models and assumptions makes ModelTree suitable for diverse valuation scenarios, including compliance with jurisdictional requirements, as suggested by the Red Book.

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“ModelTree cash flow models, input assumptions, output KPIs and dashboards are customizable.”

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6. Technological Integration:

• By supporting advanced data management and real-time updates (e.g., through live market data feeds), ModelTree complies with the Red Book’s guidance on leveraging technology while maintaining accuracy and reliability.

VPS 5 Valuation Models, section 4: “Valuation modelling can involve advanced numerical and statistical practices and the use of advanced technology.”

“ModelTree leverages technology, to pull external property and macro economy market data via APIs, and suggests valuation model inputs for the user.”

“ModelTree is a database system, allowing a tight and controlled data management, including audit trail tracking.”

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Want to ensure your valuations meet RICS Red Book standards? Learn more about how ModelTree can help!

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