Methods of Disposal Flashcards
1
Q
What are the 4 methods of disposal?
A
- Private treaty
- Public auction
- E-bidding
- Tender
2
Q
What is the most common method of disposal?
A
Private Treaty
3
Q
What does Private Treaty mean?
A
- Sellers negotiate separately with one or more interested parties
4
Q
Must private treaty include a salesperson?
A
- No
- Can be done with or without
5
Q
How do Private Treaty happen?
A
- Typically, prospective buyers respond to some form of advertising about property.
- Seller/Salesperson will arrange a viewing/inspection.
- Buyer makes an offer
6
Q
What happens if a buyer asks for a lower price in a Private Treaty?
A
- Salesperson reverts to seller
- Seller may make counter-offer
- Negotiate price
7
Q
Advantages of Private Treaty
A
- Cheap and simple (in terms of marketing)
- Flexible as there is no deadlines, and parties are free to negotiate without final commitments
- No time pressure
- Negotiations are private
- Opportunities exist for bargaining
8
Q
Disadvantages of Private Treaty
A
- Negotiations tend to move price downwards as advertised price is assumed to be top price
- Proceedings tend to be drawn out with neither party being sure of the
sale until contracts are exchanged
9
Q
What does public auction takes advantage of?
A
- Takes advantage of the ‘marketplace’ atmosphere that prevails at a well-attended auction sale.
10
Q
What does a reserved price mean?
A
- Usually subjected to a reserve price with the property being withdrawn if the price is not met
- This means that if the price is not met, NO ONE GETS THE PROPERTY
11
Q
What is an upset price?
A
A declared reserve, used when the price is a key attraction
12
Q
Would Auctioneer describe the property?
A
- Yes, briefly.
- Auctioneer will highlight significant details in the particulars and conditions of sale
12
Q
What happens on the Auctioneer’s Team?
A
- The auctioneer is accompanied by a representative of the vendor’s solicitors and a clerk.
- The legal representative handles legal questions, while the clerk records the bidding.
13
Q
Bidding process in Public Auction
A
- Bids are invited, but is unwise to start with an opening bid at reserve price
- Auctioneer will encourage higher bids with increases regulated
14
Q
Reaching reserve price
A
- after reaching or surpassing the reserve, auctioneer indicates that property will be sold
- sold to highest bidder
15
Q
Statutory Conditions Regulating Auction
A
- Must be sold to highest bidder
- If there is a dispute as to any bid during the auction, property must be put up against as the last undisputed bid
- Sale must be subject to a reserve price
- Vendor or salesperson may bid
- Increase in each bid will be regulated by the auctioneer
- Once sale has been closed, purchaser must pay to auctioneer as stakeholder, a deposit of 10% of the purchase price
16
Q
Advantages of Sale by Public Auction
A
- Competition is concentrated between prospective buyers in the short span of time when the auction takes place
- Reserve price is set by owner
- Bidding only move the price upward
- The sale can be concluded quickly once the hammer is knocked down to the highest bidder
- Extensive advertising
- Conditions of sale are far less restrictive, allowing for a clear-cut transaction
17
Q
Disadvantages of Sale by Public Auction
A
- Tend to be expensive, as they need accurate, concentrated and widespread advertising.
- Method is vulnerable as an auction can take 6 to 8 weeks to prepare and during that time there can be change in marketing conditions.
- If a property remains unsold at auction this can have a damaging
effect upon the eventual sale price.
18
Q
What is Tender?
A
- Similar to an auction
- Except that it involves ‘blind bidding’
19
Q
Essence of tender
A
- Every prospective purchaser submits an offer in writing
- On the day appointed for that purpose the tenders are opened and a decision is made on who gets the property.
20
Q
Advantages of Tender
A
- useful for when there is a strong demand and a degree of rivalry amongst purchasers
- seller can compare bids in private
- suitable when seller wanna sale price to be confidential
- public body to impose additional requirements of acceptable design and restricted use of land
21
Q
Disadvantages of tender
A
- may scare off interested customers
22
Q
What is Auction suitable for?`
A
- statutory requirement that mortgagee sale or
- sale of properties of a deceased be disposed by this method as it is deemed to be the most objective method of selling
- for properties with considerable competition to be expected
- or seller must sell within a prescribed time.
23
Q
What is Tender suitable for?
A
- En-bloc sales
- land parcels or investment properties
