Level One Flashcards
What are the four methods of sale?
- Private Treaty
- Informal Tender
- Formal Tender
- Auction
What is private treaty? Give some advantages and disadvantages?
Individual negotiations with a single party. In their own time and without commitment.
Advantages – flexible, parties control process, no obligation to sell, confidential.
Disadvantages – potential for gazumping (seller accepts last minute higher offer) or gazundering (buyer accepts last minute higher offer), late decisions not to buy and associated abortive costs.
What is Informal Tender? Give some advantages and disadvantages?
Best offer or best bids. Used when good level of interest in the property either on commencement of a marketing campaign or to bring negotiations to a conclusion.
Best bids not legally binding – can withdraw at any point up to contract. Bid should be opened in front of client and independent witness.
Possible for higher offer to be made and accepted but deemed unfair / unethical. Same case for a late bid – inform client but advise of unethical nature.
Agent invites all interested parties to submit their ‘best and final’ offer with a prescribed timescale. Would state ‘the vendor reserves the right not to accept the higher, or any offer made’.
What is Formal Tender? Give some advantages and disadvantages?
Sealed bids.
Often used by statutory body to exercise control / transparency over the marketing process – high level of public accountability.
Vendor can state he is under no obligation to accept highest bid. Full marketing to be provided in advance of writing to interested parties setting out information required accompanying the written offer.
Applicants bid blindly without knowing what the other parties are bidding. No opportunity for purchaser to change bid of increase after submission.
Difference with formal and informal – informal can be used in private treaty negotiations to obtain best offer from clients. If no disclaimer – formal would be used to exchange contracts at the point the bid is accepted so might have to issue bid with rental deposit.
What are Auctions? Give some advantages and disadvantages?
ToE agreed in advance, conflict checks before accepting, AML checks for all vendors and proposed purchasers in advance, clarity on auctioneer’s rights, due diligence before offering property for sale, documents ready in advance, reserve price to be agreed, contracts exchanged at fall of gavel, auction particulars prepared in line with CPR 2008 and Misrep Act 1967.
Purchaser in advance – view property and structural survey, take proper legal advice, read the Notice to Prospective Buyers, arrange 10% deposit and insurance for exchange, provide ID for ML.
Advantages – short timetable for disposal, certainty of sale (if reserve met), useful for unusual property which is hard to value, used for property likely to generate strong level of interest
Disadvantages – cost of promotion and publicity, lack of confidentiality over price achieved, vendor cannot choose purchaser, intensive short marketing period.
What legislation do you have regard to in your role as an investment agent?
Estate Agents Act 1979
Misrepresentation Act 1967
RICS Professional Standard – Conflicts of Interest, UK Commercial Property Market Investment Agency 2017
What are the key provisions of the Estate Agents Act 1979?
I adhere to Estate Agents Act 1979 and have particular regard to s.18 and s.21 of the Act.
S.18 – Clarity as to the terms of agency
S.21 Openness regarding personal interests
How do you act in accordance with the Misrepresentation Act 1967?
During the pre-marketing, marketing, and enquiries stages I always adhere to the Misrepresentation Act.
I ensure any information included within marketing particulars or used to inform potential parties is accurate (to the best of my knowledge), in order to reduce risk of negligence.
Inclusion of a disclaimer in the marketing brochure.
What are the key provisions set out in the RICS Conflicts of Interest – UK Commercial Property Market Investment Agency 2017?
Bans dual agency
Multiple introductions (are okay if informed consent obtained, and appropriate information barriers used)
Incremental advice (get informed consent, set up information barriers)
Can you explain the concept of due diligence in relation to property purchases?
Due diligence refers to the process of conducting a thorough investigation of a property’s legal, financial, and physical condition before making a purchase. This may involve reviewing title documents, lease, zoning regulations, building permits, environmental reports, fire safety information.
What is a vendor survey and when is it typically conducted?
A report that provides information about the physical condition of a property that is being sold. Typically conducted before the property is put on the market, to identify any issues that may need to be addressed before a sale can be completed. Vendor surveys can also help to provide transparency and confidence to potential buyers, and can help to prevent price chipping later in the sales process.
Can you explain the concept of stamp duty land tax in relation to property purchases?
Stamp duty land tax is a tax payable on the purchase of properties in the UK, above a certain value threshold. The amount of stamp duty is incremental based on the purchase price of the property, with the higher rates applicable to more expensive properties
When reviewing a lease what are the key characteristics that impact pricing?
- Rent
- Term
- Inside or outside the act
- Rent reviews - upward only, omrr etc etc
- FRI or not
What are the three types of agency?
- Sole
- Joint
- Multiple
What is SPV?
Special Purchase Vehicle.
Sale of a business with an asset - 1.8% - no stamp duty.
