Methods of Disposal

Question 1

What are the 4 methods of disposal?

Answer 1

• Private treaty
• Public auction
• E-bidding
• Tender

Question 2

What is the most common method of disposal?

Answer 2

Private Treaty

Question 3

What does Private Treaty mean?

Answer 3

• Sellers negotiate separately with one or more interested parties

Question 4

Must private treaty include a salesperson?

Answer 4

• No
• Can be done with or without

Question 5

How do Private Treaty happen?

Answer 5

• Typically, prospective buyers respond to some form of advertising about property.
• Seller/Salesperson will arrange a viewing/inspection.
• Buyer makes an offer

Question 6

What happens if a buyer asks for a lower price in a Private Treaty?

Answer 6

• Salesperson reverts to seller
• Seller may make counter-offer
• Negotiate price

Question 7

Advantages of Private Treaty

Answer 7

• 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

Question 8

Disadvantages of Private Treaty

Answer 8

• 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

Question 9

What does public auction takes advantage of?

Answer 9

• Takes advantage of the ‘marketplace’ atmosphere that prevails at a well-attended auction sale.

Question 10

What does a reserved price mean?

Answer 10

• Usually subjected to a reserve price with the property being withdrawn if the price is not met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

Question 11

What is an upset price?

Answer 11

A declared reserve, used when the price is a key attraction

Question 12

Would Auctioneer describe the property?

Answer 12

• Yes, briefly.
• Auctioneer will highlight significant details in the particulars and conditions of sale

Question 12

What happens on the Auctioneer’s Team?

Answer 12

• 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.

Question 13

Bidding process in Public Auction

Answer 13

• Bids are invited, but is unwise to start with an opening bid at reserve price
• Auctioneer will encourage higher bids with increases regulated

Question 14

Reaching reserve price

Answer 14

• after reaching or surpassing the reserve, auctioneer indicates that property will be sold
• sold to highest bidder

Question 15

Statutory Conditions Regulating Auction

Answer 15

• 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

Question 16

Advantages of Sale by Public Auction

Answer 16

• 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

Question 17

Disadvantages of Sale by Public Auction

Answer 17

• 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.

Question 18

What is Tender?

Answer 18

• Similar to an auction
• Except that it involves ‘blind bidding’

Question 19

Essence of tender

Answer 19

• 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.

Question 20

Advantages of Tender

Answer 20

• 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

Question 21

Disadvantages of tender

Answer 21

• may scare off interested customers

Question 22

What is Auction suitable for?`

Answer 22

• 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.

Question 23

What is Tender suitable for?

Answer 23

• En-bloc sales
• land parcels or investment properties