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Cemap 2&3 Self Testing > 6. Buying A Property: An Overview > Flashcards

6. Buying A Property: An Overview Flashcards

1
Q

What is a private treaty?

A

Type of sale that isn’t from an auction

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2
Q

What is a contract?

A

An agreement between at least 2 people

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3
Q

What is the consideration part of a contract?

A

Payment

Buyer = money
Vendor = property

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4
Q

What gives someone the capacity to enter into a contract? (2)

A

1.Age 18+
2. Legally able to buy/sell

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5
Q

Who is:
1. The principle
2. The agent

A
  1. The person selling the property
  2. Acts on behalf of the principle, with permission
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6
Q

What does Caveat Emptor mean? What is it in relation to?

A

Means - ‘let the buyer beware’, like sold as seen.

Most contracts are on this basis, means there is no duty to disclose unless you are specifically asked.

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7
Q

What is the Law Society’s property information form?

A

A form given to the vendor’s solicitor from the buyer’s solicitor. The vendor’s solicitor must answer questions about the property and it’s surroundings, e.g. flooding, parking restrictions. Can face legal action if a problem later arises about something they did not disclose.

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8
Q

What is actual authority?

A

When an agent is acting on behalf of a vendor, actual authority is what the agent and vendor can and can’t do, as stated in a contract

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9
Q

What is the general principle of agency?

A

The principal is laible for the agent’s actions, unless they acted outside their remit.

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10
Q

If an agent acts outside of their remit, the principal might be able to seek redress. What does this mean?

A

Seek compensation

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11
Q

What is apparent authority?

A

Principal makes a statement that they are happy for the agent to have wider authority to act outside of their remit

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12
Q

What is ratification?

A

Agent acts outside of their authority but pricipal later agrees that their action was acceptable

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13
Q

What are the 3 key considerations when establishing a budget?

A
  1. Amount of deposit
  2. Property price range realistically affordable
  3. Can other fees be afforded, e.g. val, admin etc
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14
Q

Can solicitors help buyers find a property?

A

Scotland, yes. Rest of UK, no.

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15
Q

Is the estate agent an agent of the vendor or buyer?

A

Vendor, they can help both but only where a conflict doesn’t exist. If it does, they must side with vendor.

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16
Q

What is the main role of an estate agent?

A

To market the property and get best price possible for vendor

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17
Q

What is an average amount of commission taken by estate agents? How does this differ for internet estate agents?

A

1-3.5% of sale price

Internet tends to be lower or fixed fee

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18
Q

What is sole selling rights?

A

The agent has exclusive rights and will stil receive a fee even if the vendor finds a buyer themselves.

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19
Q

What is sole agency?

A

The agent has exclusive rights to sell but will not get a fee if the vendor finds the buyer themselves

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20
Q

What is joint sole agency?

A

Two agents agree to market the property exclusively and split the commission

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21
Q

What is multiple agency?

A

A number of agent market the property, whoever makes the sale receives the fee

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22
Q

How are the following priced compared with the rest?
1. Sole agency
2. Joint agency
3. Multiple agency

A
  1. lower fees
  2. higher fees
  3. standard fees
23
Q

When is an EPC certificate needed? (2)

A
  1. New Builds
  2. When property is marketed for sale or rent
24
Q

How long are EPC certs valid?

A

10 years

25
Q

Does an agent have to wait until they have an EPC cert to market the property?

A

No, the MUST COMMISSION the EPC before marketing, but do not have to wait until it has been received

26
Q

What types of property require an EPC? (2)

A

Anywhere that has a roof and walls
AND
Uses energy to heat, cool or ventilate

27
Q

Which properties are exempt from needing an EPC? (3)

A
  1. Places of worship
  2. Buildings intended to be used for less than 2 years
  3. listed buildings (so long as they meet min energy performance standards
28
Q

What is the minimum EPC required for renting out a property (unless one of the exempt properties)?

A

E

29
Q

What what point is an offer made on a property by a buyer to a vendor legally binding?

A

Exhange of contracts. This is referred to as ‘subject to contract’

30
Q

How are offers on property likely to be affected by:
1. Raising Markets
2. Falling or Static Markets

A
  1. sell above asking price
  2. sell below asking price
31
Q

What is Gazumping? Is it legal?

A

The vendor accepts the buyer’s offer but then accepts a better offer from another buyer later on. Legal in eng and wal, illegal in scot unless under conditional offer

32
Q

What is an offer of advance?

A

The offer letter, formal statement of T&Cs

33
Q

Is an offer letter binding on the lender?

A

Yes

34
Q

Under which circumstances can a lender withdraw an offer once it has been made? (4)

A
  1. Buyer has knowingly provided FALSE INFORMATION
  2. CHANGES to buyer CIRCUMSTANES affecting affordability
  3. CHANGES to CONDITION or VALUATION of the property
  4. TITLE ISSUES - title searches usually carried out after offer stage
35
Q

What three things must an offer letter specifically include?

A
  1. An illustration
  2. A Tariff of Charges
  3. Information regarding the 7 day cooling period - borrower has 7 days to change their mind, but they can waive their right to this
36
Q

Do solicitor’s searches take place before or after the exhange of contracts?

A

Before

37
Q

What do the solicitor’s searches aim to find out? (3)

A
  1. is the property what it is claimed to be?
  2. Does the vendor have the right to sell it?
    3There is nothing which will prevent the buyer from getting a good title
38
Q

Which solictor drafts the contract and sends it to the other?

A

Vendor’s sols

39
Q

When does the buyer have to provide the vendor with their deposit?

A

exchange of contracts

40
Q

What happens if the buyer doesn’t complete after contracts have been exchanged?

A

Lose their deposit and face legal claims

41
Q

Who is responsible for insuring the property? Buyer or Vendor?

A

Once contracts have been exchanged, buyer is responsible for any loss or damage, so they need to insure the property from point of exchange. However, vendor should also maintain their insurance to cover themselves in case vendor fails to do so.

42
Q

What is the average time for completion to take place after exchange of contracts?

A

around 28 days, but can be sooner. They can even take place on the same day.

43
Q

What is a conditional exchange?

A

When an issue needs to be settled before completion but both parties don’t want to delay. A term will be written into the contract to fix the issues. The contract is still binding if the terms are met, though if they are not then they can withdraw without penalty.

44
Q

What are the two main benefits of selling at auction?

A
  1. Bargains
  2. Speed
45
Q

What needs to be in place before going to auction? (3)

A
  1. Deposit & Mortgage - funds
  2. Survey and Valuation work would have been done to get to the point of mortgage offer
  3. Vendor’s Solicitor provides a legal pack for potential buyers
46
Q

What is contained within the solicitor’s pack provided by the vendor’s solictor re: auctions? (6)

A
  1. Memorandum of Sale
  2. Special conditions of sale
  3. Local Searches
  4. Land Reg Search
  5. Proof of title
  6. Copy of any lease
47
Q

Do buyers at auction have to rely on the vendor’s solictor to do all legal searches for them?

A

No, they can commission their own legal work to protect themselves. But either way, the sale is still binding so long as they have not been mislead in any way.

48
Q

What happens if a reserve price is not met at auction?

A

Property is not sold. Though if there are close bids, the vendor can still come to an agreement with potential buyers after auction.

49
Q

What happens after a winning bid is placed at a traditional auction? (2)

A
  1. 10% deposit is paid same day (non-refundable unless buyer has been mislead)
  2. Contracts exchanged on the same day
50
Q

What is the modern method of auction?

A

One that is carried out online, like ebay

51
Q

What happens after a winning bid is placed at a modern auction? (2)

A
  1. 5% reservation fee paid same day. This covers the auctioneer’s cost and IS NOT DEDUCTED FROM THE PURCHASE PRICE
  2. Contracts must be exchanged WITHIN 28 DAYS (not same day)
52
Q

For properties sold at auction, when must completion take place?

A

within 28 days after contracts are exchanged.
For traditional auction, this is 28 days after the auction day as contracts are exchanged on the same day. Modern, this could be 28 + 28

53
Q

What issues should be considered when buying at auction? (6)

A
  1. PRIOR OUTLAY (costs - val & legal fees are paid prior and there is no guarantee you will get winning bid)
  2. HABITABLE STANDARD - auction properties often need work done to be habitable
  3. DEPOSIT - 10% must be available on the day of auction, non refundable
  4. RETENTION OF FUNDS - if repairs are needed, will there be a retention in the mortgage
  5. SPECULATION - No guarantee the bid will be successful
  6. NO BACKING OUT

Cemap 2&3 Self Testing (29 decks)

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