P&S Flashcards
Tell me about private treaty - what is it? advantage/disadvantage?
- Most common method of sale.
- 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.
- Allows for negotiation
- Typical information to ask for when considering proceedability includes proof of funding, solicitor’s details and further contextual information on any chain sales.
- Best bids are not legally binding – all due diligence done after the bid accepted
Advantages
Flexibility - the parties can negotiate in their own time and without commitment.
Advertising can be limited or extensive to suit the client’s requirements
It is relatively inexpensive
The seller is not obliged to sell
It is a confidential process
Disadvantages
There is the potential for gazumping or gazundering, both of which are considered to be unethical practices by RICS
There may be the risk of a late decision not to buy (withdrawals) and associated abortive costs
The quoting price could be under or over stated, requiring prudent advice on offers put forward or offers considered
Tell me about formal tender - what is it? an advantage/disadvantage?
- The property is put on the market with a specific time and date that best bid offers must be received by
- All due diligence by potential purchasers done BEFORE the best bid. The tender pack should include full marketing material, a legal pack and requirements for the contents of written bids.
- The bid is made blindly and it must contain a SIGNED CONTRACT
- Short marketing period, all parties are on an even playing field
- Offers are opened in front of an independent witness. The seller’s agent will make a recommendation on which offer should be accepted.
- At this point, a purchaser will be selected and either the parties proceed to exchange in accordance with the terms & conditions of sale or a banker’s draft is accepted and contracts are immediately exchanged.
- Formal tender is generally used where there is strong demand for a property or public accountability is required. The process is generally expensive due to the administrative requirements of the tender process.
Tell me about informal tender -what is it? an advantage/disadvantage?
Informal tender, also known as sealed 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. This is generally accompanied by the interested party’s solicitor’s details, finance arrangements and any conditions.
The informal tender details should also confirm that the vendor the reserves right not to accept the highest, or any, offer made to avoid process becoming a binding tender. Offers of a variable nature should not be considered, e.g. offering an amount in excess of the next highest offer.
If a late bid is received, the seller should be informed as per the requirements of the Estate Agents Act 1979. However, RICS again 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. However, the process is not legally binding so either party can withdraw until the point of exchange. There may also be subsequent rounds of bidding to bring the process to a close.
Tell me about auction- what is it?
• Usually quickest method of sale
• Legally binding contracts signed on the day with a deposit of 10% of the purchase price
• Reserves are set (minimum price) but not guaranteed to get the highest price you can as it depends on the bidders that turn up on the day
Auction is sometimes called a ‘method of last resort’, where it is difficult to accurately assess price in the open market.
Auction should, therefore, produce the highest price in certain circumstances, e.g. a property is in poor repair, has serious defects or is unconventional, a quick sale is required, redevelopment or renovation is required or where high demand is expected. Typically, auctions may appeal to cash buyers.
Terms of engagement are agreed between the seller and auctioneer in advance of the auction, including the auctioneer’s right to refuse bids, bidding increments, types of bid accepted, reserve price and authority to sign the contract on the seller’s behalf.
Relevant legal and marketing documents are published prior to the auction, e.g. General Conditions of Sale, Memorandum of Sale, particulars and notices to bidders. Potential purchasers must undertake full due diligence prior to auction, including viewings and structural surveys.
When the gavel falls, contracts are exchanged and the purchaser generally pays a 10% deposit and arranges insurance.
Tell me about auction- an advantage/disadvantage?
Advantages
Short certain timescales can be achieved
‘Best price’ can be achieved after wide market exposure
The property can be sold with certainty over selling terms
Disadvantages
Expensive advertising costs
It is not a confidential process
The marketing period is likely to be short
A failure to sell might lead to the property becoming ‘blighted’
There is little control over the identity of the purchaser
What’s the difference between a formal and informal tender?
A formal tender is used in a public or private tender method of sale. It provides the purchaser with a single opportunity to bid for a property, all due diligence is done before the bid and includes a signed contract of sale by the purchaser. An informal tender can be used in private treaty sales to conclude the sale, it does not include a signed contract and due diligence can be done after the bid is accepted.
What factors do I need to consider when advising on the most suitable method of sale?
• The client’s objectives – quick sale? Best price?
• Conditions of the market
• Likely level of demand
• Client’s necessary level of accountability – e.g. state uses public tender to show transparency and accountability
Timing of sale
Marketing budgets
Tell me about the legal processes to complete a purchase/sale.
The legal conveyancing process can be lengthy, starting with the circulation of a Memorandum of Sale by the estate agent to the parties’ legal representatives. This will document the selling price, any conditions, timings and details of the legal representatives.
The Memorandum of Sale will form the basis of the draft contract issued by the seller’s legal representative. This will be followed by local authority searches, which identify restrictions such as listed status, new public roads, rail schemes and Tree Preservation Orders. Planning and title will also be investigated, as well as any additional searches being recommended, e.g. flood risk, mining and radon.
The legal representatives will also raise enquiries based on the draft contract and results of the searches, which will need to be resolved before the process can move forward to exchange. A common way of dealing with appropriate issues is to take out indemnity insurance, e.g. against a chancel repairing liability. The parties will exchange contracts when any outstanding enquiries are resolved and the contract documentation is finalised. At the point of exchange, the deposit will be transferred over and the purchaser will need to arrange buildings insurance.
A completion date will also be set, which is generally 2-4 weeks after exchange, although it can be simultaneous.
At completion, the remaining funds and legal ownership are transferred to the purchaser and the keys will be released by the estate agent. The purchaser’s legal representative will register the change of title at the Land Registry and will settle any SDLT liability owed.
How do exchange and completion work in an auction transaction?
Exchange on the day of the auction. Close on the sale 3 weeks later.
Nb. Agency legislation as for leasing & letting.
Residential Tenancies Act (2004, as amended)
Land and Conveyancing (Amendment) Act 2009 (banned Upward Only Rent Reviews from 28th February 2010)
Landlord & Tenant (Amendment) Act 1980 and was further amended by the Landlord & Tenant (Amendment) Act 1994.
Tell me about a factor which drives property markets.
1) Demographic trends. e.g. Baby boomers v Millenials.
2) Interest rates.—lower rates bring in more buyers, and increase the demand for real estate, which can then drive up prices.
3) The economy.
4) Government policy and legislation. tax incentives, deductions, and subsidies can boost or hinder demand for real estate.
Tell me about supply and demand in the Cork property market.
Cork city - 5.5% increase in 2021. Average price of €313,000.
Cork county - 7.6% increase in 2021. Average price of €255,000.
The supply of property was higher than in 2020 but still much lower than pre-pandemic levels.
The economist said inflation in listed prices for homes is “stubbornly high” and that in the face of strong demand, the key to solving issues in the housing market is more homes coming up for sale.
Tell me about government incentives which impact demand in relation to your purchase & sale work.
The Help to Buy (HTB) scheme is an incentive for first-time property purchasers. It will help you with the deposit you need to purchase or self-build a new house or apartment. You must purchase or self-build the property to live in as your home.
Where you meet the required conditions, you will receive a refund of:
Irish Income Tax
and
Deposit Interest Retention Tax (DIRT) you paid in Ireland.
The refund will be from the four tax years prior to when you make your application. The refund will not include any refunds you have already claimed.
What are the different types of interest in land?
- Legal proprietory interest - ownership.
- Lease - right to possess/ occupy the land.
- Easement - right to pass through/ access portion of the land.
- Profit a prendre - right to enter land and remove resources e.g. gravel, soil, stone.
What is the difference between freehold and leasehold?
Owning the leasehold interest in a property means that you own just the building and not the land it is on and that your ownership is for a fixed number of years. … Owning the freehold interest in a property means that you own the land and buildings (if any) outright.
Why would you use a marketing board for a purchase/sale transaction?
1) Brand Awareness
2) Cost effective marketing
3) A key tool in the marketing mix
4) Display your dominance
Tell me about an information pack you have prepared for a purchase/sale transaction.
The informaiton pack for 222 Blarney Street included: Property details i.e. block built, mid terrace, 1900's, rooms, condition, heating. Photos Walkthough video. Measurements. BER details. Details of auction date. Agent contact details and PSRA number.
Why would you use online marketing for a purchase/sale transaction?
Online marketing is essential to reach wide audiences. Daft/ MyHome for adverts, Social media marketing, and Goggle targetted ads. The shop window has moved online and if your property is not advertised in the online world it wont be seen.
What is a Memorandum of Sale/ Heads of Terms?
A memorandum of sale is a legal document that records the details of a sale of a property. It is used to record that the sale of a property has been agreed between buyer and seller subject to contract.
What are current Stamp duty levels for residential property?
The Stamp Duty rates on a transfer of residential property are:
1% on the first €1 million
2% on excess over €1 million.
What is Stamp duty?
Stamp Duty tax is the property transaction tax.
Tell me about the relationship between VAT and residential property sales.
New property - 13.5%
2nd hand property - exempt
Old property - further development post completion - 13.5%
Residential property being sold by developer - 13.5%
Old property - no development potential - exempt.
What is included in the PSRA TOE?
PSA Letter: • Parties • License • Nature – sole or joint • Services provided • Duration • Termination • Effect of termination • AMV • Fee • Outlays • Deposit • AML • Indemnity • PII • Complaints handling procedure • Conflict of interest declaration • Additional Terms of Business