Critical Analysis Flashcards
How did you adhere to the Blue Book?
“All business practice adhered to blue book, which covers the responsibilities of residential property agents to ensure they are working to the highest ethical and professional standards.
Real Estate Agency Code (Part 1 = principles that shape the culture of fairness & transparency that underpin all activities undertaken by real estate agents within whichever country of practice. Part 2 = principles for the UK market.)
Real estate agency and brokerage and real estate management: RICS professional statement (Rules of Conduct)
Standards and ethics (Comply w/ legislation and Rules of Conduct, duty of care to client, COI, discrimination, vulnerable customers,ensure information provided to customers is accurate, train staff).
Before securing instructions (CHP, COI, TOE, Client Money, PII & Employers Liability Insurance, AML, CPD, GDPR, H&S, sole/ joint agency, BER, getting permissions in writing).
Acting for the seller or landlord: marketing the property (Providing market advice, inspect and measure 1st, keeping records, marketing strategy, advertisement description (what to include) erecting sign boards, viewings, keys, updating clients).
Acting for the seller: implementing the sale or lease (Offers, best bid procedures, records, negotiations, communication, deposits).
Acting for the buyer (searches, COi’s, client money, communication, issues with the property).
Acting for the landlord: letting the property (providing advice, Registration, ToE’s, duty of care, inventory, types of tenancy, tenancy agreements, ending tenancies).
Ending the instruction - (written instruction, invoices, holding client moneys).”
What legislation did you adhere to?
Property Services (Regulation) Act 2011
Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 - 2021
Safety, Health and Welfare at Work Act 2005.
Data Protection Act 2018
The Residential Tenancies Act 2004 (as amended 2010,2015, 2019,2021.
The Housing (Standards for Rented Houses) Regulations 2019
How did you formalise your instruction?
I joined the O’ Connor Murphy team after the instruction had already been formalised, so the conflict-of-interest checks, and terms of engagement were already completed.
How did you measure the property?
As part of the inspection process, I measured all the vacant units in line with IPMS 2 – Residential on a G.I.A. basis, and I dual reported to the client as requested. I used the lazer measure (which had been fully charged and calibrated), wrote distances down, ensured to avoid mirrors, windows etc to record an accurate figure. I started with the living area, then hallway, then bedrooms and bathrooms. I cross referenced the measurements with the architect drawings provided by the client. I also measured the balconies and stated them separately. I kept a measuring tape in the boot of my car as back up.
What did GIA and IPMS 2 include and exclude?
IPMS 2 – Agency/valuation purposes (GIA)
Measured to the internal face of the perimeter walls. Atria measured at floor level only – do not include voids at upper levels.
Includes:
- Areas with headroom of less than 1.5m
- Internal walls and partitions (check are these structural?)
- Columns, chimney breasts, stairwells, liftwells
- Corridors of permanent essential nature (fire corridors)
- Lift/plant rooms
- Toilets, toilet lobbies, cleaner rooms
- Voids over stairwells, lift shafts on upper floors
- Loading bays
- Mezzanines with permanent access
Excludes:
- Perimeter wall thickness and external projections
- External side open balconies and external fire escapes
- Canopies
- Greenhouses, garden stores
- Substations not in exclusive use
How did you stay safe during your inspection?
Firstly, I carried out a desktop pre-assessment, health and safety risk assessment, and contacted the block manager for access arrangements and to ask if there were any hazards that I should be aware of. Tell someone where I was going and when I left the building/site. As it was during the C-19 lockdown, I followed the development safety protocols (sign in and out, one person to a unit) and wore relevant personal protective equipment (PPE). I m
Explain your review of the apartments.
Inspected the block, common areas, condition, facilities.
Inspected vacant units. Position, floor, orientation, size, condition.
Reviewed all documentation. - Floorplans, spreadsheets showing property & tenancy details, BER ratings, size, level, vacancy dates, photos, marketing material.
How did you advise on the break up of the portfolio and how did this achieve maximum prices?
I advised the client to utilise a variety of sale routes including private treaty, auction, sale with tenant in situ and to prepare an investment package to target Private Rental Sector (PRS) investors. This option offered a shorter sales timeline of 12 months, and higher exit values.
PRS - 10
The PRS units achieved the highest exit values, however not all units were suitable for this method of sale for two reasons: 1) they were stuck in the RPZ so not achieving high rents, and 2) the units had become vacant in recent months.
Private Treaty - Open Market 14
Units that had become vacant in recent months. The client initially expected all units to be sold by private treaty, however, this option required a sale timeline of 15 -18 months to achieve the highest possible sales values (two sales agreed per month, with allowance for fall through sales). A shorter timeline of 12 months could be achieved if the sale
prices were reduced (three sales per month with allowance for fall through sales).
Private Treaty - Tenant in situ 4
I targeted individual investors with the currently occupied high yielding units. I contacted tenants to consider if they would purchase the unit they were renting.
Auction - 2
The units that were facing the building site and would be more difficult to sell.
How did you dispose of the vacant units in a timely manner?
By channelling the units towards different buyer pools.
How many NOT’s did the vendor send out?
The vendor could send 10 NOT every 6 months due to the Tyrrelstown amendment.
This means that if a landlord intends to sell 10 or more “units” inhabited by tenants, within a single development, within a certain period, the tenants have the right to remain in their homes even though they’re sold.
Explain the RPZ restrictions.
An RPZ is an area where the rent increases have been at 7% or more in four of the previous 6 quarters of the RTB rent index, and where rent is above the national average.
Rent cannot be above the local market rent, 3 comparables are required.
All RPZ’s are now extended to Dec 2024.
Rent reviews every 24 months.
Rent increases are capped at 2% or inflation as per HICP (whichever is lower).
Exemption: If a property is new to the rental market and has not been rented at any time in the previous 2 years, rents may be set at the market rent and the caps do not apply. Importantly, landlords seeking to rely on an RPZ exemption are now required by law to submit notification of this to the RTB within one month of the new rent amount being set. The RPZ prescribed Exemption Form located on www.rtb.ie must be used when notifying the RTB.
How did you advise on MV?
I inspected the apartments, and reviewed the relevant information on the apartments i.e., size, level, rent achieved, vacancy dates, condition, BER ratings, and Rent Pressure Zone (RPZ) restrictions.
I used the comparison method of valuation as there were many suitable comparable properties within the area. I analysed the comparable units, Collated evidence in a schedule or matrix, spoke with local agents, and I recorded comprehensive details. Adjusted quantitatively and qualitatively using the hierarchy of evidence and other key considerations (including local knowledge and experience)
Analyse to form opinion of value. Stand back and look to sense check the final valuation figure.
Reported my opinion to the client.
Definition
Market Value – the estimated amount and asset or liability should exchange on the open market at the valuation date between a willing purchaser and a willing vendor in an arm’s length transaction after proper marketing and assuming both parties have acted prudently, knowledgably and without compulsion
Why were some of the units under-rented?
Previously did not receive rent reviews for many years. For example, many of the two bedroom apartments were achieving €1200 per month, and upon investigation, no rent reviews had issued in the previous five years. This is well below market rate for Cork city centre, premium quality apartments. The Daft Q3 Rental Report states the average rent in Cork city is €1544 per month (Lyons, 2021).
Explain market conditions that affected your advice.
Q1/Q2 2021 - Beginning of instruction, Covid lockdown, no viewings allowed, sales were slow.
Q2/ Q3 2021 - Lockdown restrcitions lifted, active market, 2 sales per month
Q3/ Q4 2021 - Launched new marketing campaign, increased sales, achieved 16 sale agreed units in Nov.
Q1 2022 - 4 sales in January, 3 sales in February. Very high demand.
Explain the options for the method of sale.
Private treaty -
PT is the Most common method of sale, and Usually drives highest price.
• Property is marketed openly, (print advertising and online website portals).
• Offers are then made and a suitable purchaser is usually selected after recommendations are made to the seller by their agent. Considerations: proof of funding, solicitor’s details and further contextual information on any chain sales.
• Advantages: Allows for negotiation, flexible, inexpensive, confidential, seller not obliged to sell.
•Disadvantages: Potential for gazumping, risk of late withdrawal, guide price can be misleading.
Auction -
Auction is Usually quickest method of sale, as potential purchasers bid against eachother on the auction day until the sale is agreed (once the reserve has been met).
• Legally binding contracts signed on the day with a deposit of 10% of the purchase price
Auction is sometimes called a ‘method of last resort’, where it is difficult to accurately assess price in the open market.
• Advantages: Short timescales, competitive bidding, binding contract, wide exposure, Certainty on selling terms.
•Disadvantages: Expensive advertising costs, not confidential, marketing period is short, failure to sell might lead to the property becoming ‘blighted’, little control over the identity of the purchaser. Not guaranteed to get the highest price you can as it depends on the bidders that turn up on the day.
Best bids by private treaty -
Best bids is used where there is good market demand or where negotiations need to be brought to a close after a period of marketing via private treaty. However, the costs are generally higher than selling by private treaty.
The selling agent invites interested parties to submit their written ‘best and final’ bids at a specified time and date. The potential purchaser must also send their solicitor’s details, finance arrangements and any conditions. Vendor reserves right to refuse offers. SCSI consider accepting late bids to be unethical practice. The bids should then be opened in front of an independent witness and the parties informed of the outcome. Due diligence is carried after the sale is agreed, and the process is not legally binding. There may also be subsequent rounds of bidding to bring the process to a close.
Which methods of sale did you recommend and why?
private treaty because this is the most popular method of sale, allows room for negotiation.
best bids because certain vacant units could achieve a higher exit price if valued based on the investment method.
auction because certain units may be difficult to sell.
How did this meet your client’s requirements?
The client’s objective was to break up the portfolio to achieve the highest possible individual unit sale price, and to dispose of all vacant units in a time efficient manner. How to achieve both? It is a balancing act. By using mutiple methods of sale, I targeted different customers simultaneously without flooding any of these separate markets.
The client later informed me that they would have been satisfied with 21 sales in the year 2021, so they were very impressed that we agreed 31 sales within the 12-month period.
