The International Valuation Standards (IVS), effective January 2025 mentions in IVS 105 Valuation Models states that the valuer must have knowledge about the limitations of the model.
Generic
When a sensitivity analysis is created but during the calculation process data for the allocated assets is changed, the outcome between the base scenario and the new scenario can be influenced by the changes made for these assets.
If a turnover rent contract line has a relationship to a rentable unit that also has a relationship to a passing rent contract line with at least one other that does not have a relationship to the same turnover rent contract line, then the base rent, as part of the turnover rent calculation is taken for the total passing rent and is not allocated to each individual rentable unit.
Direct capitalization method
When a contract includes multiple active contract lines of the "passing rent" type with differing rent review terms, the model defaults to the rent review assumptions of the earliest rent event or, if unavailable, the first contract line based on its code.
The method assumes that all rentable units linked to a contract (and not leased under another contract) are continuously rented from the start to the end date of the contract line.
For stepped rent contracts with sequential contract lines separated by vacancy periods, non-recoverable operational expenses tied to the potential gross income are calculated as zero during these vacancy periods.
When a rentable unit has a follow-up contract, the model only considers the contract active on the reference date or, if none is active, the first contract that will become active after the reference date.
Hardcore top slice method
When a contract includes multiple active contract lines of the "passing rent" type with differing rent review terms, the model defaults to the rent review assumptions of the earliest rent event or, if unavailable, the first contract line based on its code.
The method assumes that all rentable units linked to a contract (and not leased under another contract) are continuously rented from the start to the end date of the contract line.
For stepped rent contracts with sequential contract lines separated by vacancy periods, non-recoverable operational expenses tied to the potential gross income are calculated as zero during these vacancy periods.
When a rentable unit has a follow-up contract, the model only considers the contract active on the reference date or, if none is active, the first contract that will become active after the reference date.
Discounted cash flow method
In case the review rent type equals ERV upwards only, the potential gross income (part harmonized, part non-harmonized) is compared with the ERV, instead of each transaction individually.