Auctions Level 1 Flashcards
What are the auctioneers rights?
Right to refuse a bid
Sign auction contract on behalf of seller
regulate bidding increments
What should you check when hosting an auction at a venue?
the hirer of the auction room has insurance cover
their is no prohibition against holding an auction on the property
fire regulations complied
size of auction room will accommodate bidders
What is in an auction contract?
Memorandum of Sale
Addendum
Special conditions of Sale
Particulars of Sale
Common Auction Conditions
What is a reserve price?
The reserve price is the minimum price at which the auctioneer is authorised by the seller to sell.
When is the reserved price agreed?
at any time before the lot is offered for sale by auction
What is a Guide Price?
indication of where the property may sell.
Where does the reserve sit in a range?
Reserve must sit within the range.
Why do you have reserve and guide prices definition on the website?
to comply with Advertising Standards Authority who state that explanatory text must include definition of guide and reserve
What would you do if you were selling a property with rental arrears?
rental arrears must be confirmed by sellers solicitor. Old arrears to be the seller’s responsibility unless otherwise stated in the special conditions of sale.
What is included in Terms of Enragement?
Property address
Name of seller
AML requirements
Date of Auction
Reserve Price
Entry Fee
VAT
Auctioneers Fee
Solicitor
Signature
What AML do you need if it was an individual?
Certified ID and proof of address dated within 3 months
What AML do you need if you it was a company selling?
Certified ID and proof of address dated within 3 months of the seller and anyone with 25% more share of the company
Why do you do AML for auctions?
because it is a financial transaction
Who signs contracts when they exchange?
Auctioneer can sign contract on the auction day which is stated in our terms of enagement.
if sold prior or after auciton
Formula A is where one solicitor holds both parts of the contract.
Formula B is where each solicitor holds thier clients part of the contract
Do you report bid prior to auction?
Yes as per the Estate Agent Act 1979
What should the auctioneer do if the property does not sell?
Clearly state that is had not been sold
Tell me about the Auctioneers Act 1845
Section 7 - must be an auction board up with auctioneers name and address
Section 5 - is that all bidders are aware that there is a minimum price that must be reached but not the specific amount.
Do you publish the price when a property is sold before or after auction?
it is usual not to publish the sale price without the consent of the seller and the
buyer.
How do you comply with Data Protection in Auctions?
sending out mail outs, they can be easily unsubscribed.
What is an addendum?
An amendment or addition to the CONDITIONS or to the PARTICULARS, in the form of a written notice from the AUCTIONEERS or an oral announcement at the AUCTION.
What are the completion time frames for auctions?
20 Business days or date specified in special conditions of sale
Does the deposit include VAT?
10% of the PRICE (exclusive of any VAT on the PRICE)
Tell me about the Estate Agents Act 1979?
some of the key principles of the act are
- clarity on terms of agency
- honesty and accuracy
- openess regarding any conflcits
- absence of discrimination
- keep clients money seperate
Tell me about the consumer protection regulation act?
agents must declare everything known about a property
if information is discovered then it should be passed onto all interested parties
policed by trading standards office and is a criminal offence
unfair trading practices
- false or misleading info
- hiding info
- failing to provide info
- exerting undue pressure
Tell me about the misrepresentation act?
relates to false statements in marketing particulars
if incorrect then issue an addendum
misrepresenationcan be fraudulent, negligent or innocent
can be sued or contract rescinded
civil offence
tell me about the bidding agreement act 1927 / 1969
extracts of act must be displayed at auction - purpose is to make auctions fair, and that no one is cheating or working together to drive up prices
can be both civil and criminal offence.
Tell me about the housing act?
2 or more qualifying tenants
section b notice
4-6 months
What are special conditions of sale?
specific terms and conditions that apply to the sale property through the auction process.
What is a sale memorandum?
document that confirms the sale of an item or property to the winning bidder
What are the advantages or disadvantages of online auction?
- cheaper having to not have to pay for a room
- disadvantage, no networking, clients enjoy coming to auction room
What do you consider when publishing marketing particulars?
form part of the auction contract, sellers solicitors should sign off and comply with consumer protection regulations and business protection from misleading marketing regulations.
What legislation would govern the guide and reserve price setting?
Consumer Protection
Can you exchange contracts without the seller’s permission?
The Auction Agency Agreement gives the auctioneer authority to exchange on behalf of the seller at auction if the price is at the reserve or higher.
What happens if completion is missed by a buyer?
The buyer will be served a notice to complete within 10 working days.
The seller’s solicitor would charge a fee to the buyer to do so.
The notice would include a warning that the seller may exercise their rights to rescind the contract and retain the deposit should the buyer not complete in this period.
What goes into the sale particulars?
Guide Price
Property address
Gross Initial Yield
Rent Passing
Photo of the property
Lease details
What makes up the special conditions of sale?
property address
selling entity
solicitor
deposit
VAT
title number
tenancy schedule
arrears
What are the advantages and disadvantages in auction as auctioneering as a method of sale?
- short time frames
- certainty of sale as exchanged via unconditional contract
- wide marketing
- precludes people who rely on finance
- high entry costs as vendor needs to prepare legal pack
- lacks confidentiality
What legislation governs guide and reserve price?
Advertising standards authority
Can you talk me through how that deposit was dealt with? How was it held?
deposit was held as a stakeholder.
What would the difference between a stakeholder holding a deposit, a stakeholder for the seller and as agent for the seller?
When a deposit is held as a stakeholder the deposit is not realised until completion of the transaction where as if it is held as an agent the deposit is released prior to completion of the transaction.
What legislation gives auctioneer power to exchange at fall of the gavel?
Sale of Land by Auction Act
Do you know of any RICS Guidance on Auctioneering?
RICS Professional Statement on Auctioneers Selling Real Estate in England and Wales 2018
a. Best practice advice on running an auction
b. Guide & Reserve prices so as not to mislead
c. Reserve prices must be confirmed with client in writing, and kept confidential
d. Compliance with AML and Health & Safety Law
e. Legal Docs available
f. Confirm VAT & EPCs
g. Running the auction day
What processes are undertaken before during and after an auction?
Before
- appraisal
- inspection and due diligence
- marketing / sales particulars
- legal pack
- Registration and AML
During
- Bidders compete to place higher bids
- highest bid purchases
After
- Issuing contracts
- Collecting deposits
- Documentation / records
Tell me about Sale of Land by Auction Act 1867
makes fall of the gavel binding exchange of contracts
What legislation governs particulars of sale and which governing bodies enforce this?
legislation - Misrepresentation Act
Governing bodies - office of fair trading and adverting standards agency
What is an auction?
An auction is a public sale where goods or services are sold to the highest bidder.
why can you not disclose information to other parties about offers?
In breach of the estate agents act 1979 as it would be biased
what’s included in a sales memorandum?
date
property address
vendor
purchaser
solicitors for both parties
price agreed
What is the difference between informal and formal tender?
Informal - best bids
formal - sealed bid
How do joint agency fees work at auction?
joint agents will share a fee on a pre agreed basis.
