Purchase and Sale Flashcards
What is the UK RICS Professional Statement relation to Agency?
- RICS UK Commercial Estate Agency 1st Edition October 2016
- Sets out 12 core principles
- Advice for agents
Give me some of the 12 Core principles from the RICS UK Commercial Estate Agency 1st Edition 2016?
- Act in an honest, fair, transparent and professional manner
- Due skill, care, diligence
- Fair and clear terms of business
- Avoid conflicts
- Do not discriminate
- Clear communication with clients
- Honest marketing materials
- Realistic advice (price)
- Have due regard to security and safety
- Appropriate PI Cover
- Clients money held separately
- Clear identify of client
What advice does the RICS Professional statement UK Commercial Estate Agency 1st Edition 2016 offer ?
ASMIA
- Acting ethically (gifts, CoI)
- Securing instruction (AML)
- Marketing Property (legal requirements
- Implementing disposal (method of sale)
- Acquisition of Property (CoI, Client communication)
What is the Global RICS Professional Statement for agency?
RICS Global Real Estate Agency and Brokerage Professional Statement 3rd Edition 2016
Can you name Gov legislation in relation to agency?
- Estate Agents Act 1979
- Misrepresentation Act 1967
- Consumer Protection from Unfair Trading Regulations 2008
- Data Protection Act 2018
What are the main principles of the Estate Agents Act 1979?
7 CHAOALK
- There are 7
- Clarity as to the terms of agency
- Honesty and accuracy
- Agreement and liability of costs
- Openness
- Absence of Discrimination
- Legal obligations (tell about offers)
- Keep clients money separate
What are the 4 methods of a sale?
- Private Treaty
- Informal Tender
- Formal Tender
- Auction
What is a Private Treaty?
- Process where property is marketed for no set period with no set closing date
- Parties Free to negotiate in their own time without commitment in open market
- seller instructs agent, markets it, offers etc
(Private Treaty - Informal Tender = sale)
What are the Advantages and Disadvantages of a Private Treaty ?
Advantages:
- Flexibility
- Parties control process
- Seller not obligated to sell
- Confidential
Disadvantages:
- Abortive costs
- Late decisions not to buy
- Gazumping and Gazundering
What is Informal Tender (best offer)?
- Used when good levels of interest at end of marketing or to set a closing date
- Best offer but offer can be withdrawn
- Agent invites all interested parties to submit best/final offer within a timescale
- All offers must be opened innfront client
- Seller is under no obligation to accept highest, best or any bid
What details should be included in a written offer?
- Date
- Name and address of applicants solicitor
- Finance arrangement
- Conditions (if any)
Advantages to an Informal Tender?
- Shows client all potential offers
- Potential competition (drives price up)
- Confidential bids
What is a Formal Tender (sealed offer)?
- Sealed bid process used usually by governing bodies
- Marketing material must include legal pack
- Applicants have a single blind bid
- All bids sent/opened in front of client
- Bid can’t be changed once submitted
- Seller is under no obligation to accept highest, best or any bid
- Provides high level of accountability
What is Auctioneering?
- Used usually for alternative properties (amenity land, garages)
- Lot sizes under £2m
What are the advantages and disadvantages of Auctions?
Advantages:
- Quick
- Set timescale
- Guaranteed sale if reserve price met
- Bidders drive up price
- Used for unusual properties
Disadvantages:
- Costs of promotion
- Seller can’t chose buyer
- No price Confidentially
How do you choose which method of sale to use?
- Client’s objectives
- Time scales
- Likely level of interest
- Public accountability
- Market conditions
What types/basis of estate agency are there?
- Sole Agency
- Joint Agency
- Multiple Agency (only successful agent gets the fee)
Describe the process of a sale from start to finish?
- Receive instruction
- Check competence
- Check conflicts
- Issue agreement letter
- AML checks
- Gather info and undertake due diligence
- Inspect and Measure
- Assemble comps/evidence
- Produce and issue MR
- Prepare brochure and marketing materials
- Viewings/negotiations
- Accept offer/closing date set
- Draft HoT’s
- Monitor legal process
What do you include in a Marketing Report?
Use for Granton, Almondview, Bath street and Comiston Road
- Addess/client
- Market Commentary
- Terms (Fee, AML, Timing)
- Location
- Description
- Opinion of Sale Price/Market value
- Marketing strategy
- T&C’s
- ToE’s
Tell me about the Consumer Protection from Unfair Trading Regulations 2008?
- Relates to the duty owed to the consumer by the trader
- Prohibits unfair business practice to consumers
- eg) Agents must declare all what they know about a property
When does the Consumer Protection from Unfair Trading Regulations 2008 apply?
During the entire sale/lease process
When does the Estate Agent Act 1979 apply?
During the entire sale/lease process
What is the Misrepresentation Act 1967?
- Relates to false statements, which can have an affect on the sale / purchase
- Seller or Agent can be sued
- Misrepresentation can be Fraudulent, Negligent and Innocent
When is planning consent needed for a Marketing Board?
- When it is over 2.3m in height or 4.6m if free standing
- Listed Building
What should be included in Heads of Terms?
- Date
- Subject of Contract
- Seller/Purchaser details
- Agents/Solicitors details
- Price/rent
- Funding (if required)
- Conditions
- VAT
- Timescales
- AML
Caveat to say HoTs not legally binding and only binding when missives have been signed
What keys part of the Estate Agents Act should surveyors be aware of?
- Section 18 - Terms of Engagement
- Section 21 - Telling client if you have interest in property
What is a cooling off period?
- A cooling off period is allowed for clients who change their minds and no longer want to sell a property. The cooling off period is 14 days
What is a Transfer of Going Concern?
- When money is coming out of a business/investment property
- VAT is transferred to new purchaser and not paid on sale
What are the 3 main offences under Money Laundering?
- Tipping off
- Assisting
- Failing to Report
Who is G&S’s AML Officer
Fraser Lang
What legislation is there to be aware of in purchase and sale?
- Estate Agent Act 1979
- The Money Laundering, Terrorist Financing and Transfer of Funds (Info on the payer) Regulations 2017 as amended 2022
- Bribery Act 2010
- Equality Act 2010
- Consumer Protection from Unfair Trading Regulations 2008
What is within Terms of Engagement for Agency Work?
1 Agency Rights (Sole, joint)
2. Contact details
3. Address of Property
4. Scope of Work
5. Fee Basis
6. PII
7. Marketing Costs
8. Terms of contract
9. CHP
10. AML
11. Timescales
12. Confirmation no conflicts
Talk me through a Closing Date?
- Letter issued in advance to all parties who have formally noted interest or enquired about property
- Set date and time for all offers
- Once all offers received, open with client and review together
- If no conditions accept highest offer
- If conditions, review and advise client on recommendations
Granton Harbour
What was the purpose of the call you had with the client?
- Establish clients objectives for the sale of the sites (targets schedule and notes of interest each month)
- How they would like to be updated, types of marketing etc
- Outline of sale price
Granton Harbour
What specific requirements did the client have for the sale of the development plots, and how did you address these in your approach?
- Quick Sale as liquidation
- Happy for offers clean or subject to planning
Granton Harbour
Can you share some details about the content and key findings presented in the Marketing Report you prepared for the client, including market details and the structure of your fees?
- Marketing Report:
1) Location/description
2) Terms (AML, Fees and Timescales)
3. Outline of sale price
4. Marketing Strategy
- Marketing included, Brochure, mailing list and website
- Fee agree at 1% of achieved sale price
Granton Harbour
What were the key challenges you faced during this process?
- House builders not interested due to increases in build costs and inflation rates
Granton Harbour
Can you elaborate on the schedule of interest and target purchasers table you created, including how often you sent updates to the client and the criteria used to identify potential purchasers?
- I would compile a Targets and Schedule of interest on excel
- These would be sent each month to the client as agreed
- I used mailchimp to identify potential purchasers
Almondview
Can you elaborate on the conflict of interest check and Anti Money Laundering Checks you conducted?
- I carried out Conflict of Interest checks by using our internal database as well as due diligence given this was a new client
- AML checks included:
- 2 pieces of ID and proof of address for client
- Running Risk Assessment
- Smart search
- Signed off by AML officer and saved in file
Almondview
What were the key components of the Marketing Report you prepared, and how did you determine the advised sale price and marketing strategy?
- Marketing Report
- Market Commentary
- Terms (AML, Fees, Timescales)
- Outline Sale price
- Marketing Strategy
- Price
- Advised on sale price through comparable used of similar offices within the area which was backed up by a recent valuation on the office
- Marketing Strategy
- Brochure, mailing list, LinkedIn, website
Almondview
What sort of sale was this?
Informal Tender
Almondview
Talk me through the offers received at the closing date?
- £350,000 (subject to Change of use)
- £365,000 (subject to finance)
- £400,000 (subject to finance+ special purchaser)
Almondview
Why was offer 3 over market value?
- Could be said this purchaser was a special purchaser
- Neighbouring firm who wanted the office for expansion
Almondview
Can you summarize the outcome of the transaction and whether it met the client’s expectations or objectives?
– Achieved over sale price
- Completed within 6 month timescale
Bath Street
You mention the Salvation Army was your client, does AML differ for them? And can you talk me through this AML process?
- Yes as they are a charity
- Copy of Charity registration (name, nature of activity etc)
- Screenshot of current management team
- ID documents and Smart Search on 2 senior members
Bath Street
How did you approach the measurement of the property?
- Gross Internal Area (GIA)
- The entirety of space as measured from the inside face of the main external walls
- Due to comps being church halls etc
Bath Street
Why was there such high demand for this property?
- This kind of unit in Portobello does not come to the market often
- Interest shown from a range including Developers and owner occupiers
- Yoga Studio high interests
Bath Street
What criteria or considerations were taken into account when setting a closing date for the sale?
- High level of interest after 2 open viewings
- Advised client that we could set a closing date
- Sent out an email with all parties who viewed with information required and the deadline for submitting an offer
Bath Street
Can you provide insights into the process of appraising offers received from potential buyers?
- Selecting highest offers with the least about of conditions
- 2 offers stood out and where assessed further with advice given to the client
Bath Street
Could you explain the key differences between the two highest offers for the property
- Offer 1: £155,000 with subject to the sale of a house
- Offer 2 : £165,000 cash with limited conditions (Satisfactory Title, BS )
- The second offer was:
- Higher
- Cash with limited conditions
- Offer 1 had potential to be longer due to sale of a house with was located in Jedburgh
Bath Street
As the property sold for £165,000 and was on for offers over £120,000. Did you market at the wrong value?
- No
- We based sale on previous evidence of £109 per sqft (Church and community halls)
- Put on market at £120k to help drive up price
- Market responded well and had a variety of interest
- Buyer was going to be owner occupier as developers priced out due to profit
Bath Street
How did you verify proof of funds for the clean cash proposal?
- Bank Account statement shows funds
- As they were individuals
Comiston Road
What prompted the need for the disposal of the retail unit, and were there any specific objectives or expectations the client had in mind for the sale?
- The sale of this property was party of a bankruptcy
- Main Objective of the client were for a quick sale
- Send over offers as they come in to client
- After sale was completed client required schedule of everyone who had enquired for their records
Comiston Road
Can you elaborate on the due diligence you conducted, particularly the conflict of interest checks?
- As standard prior to commencing any instruction
- Check of Internal Database (Aims)
- AML of seller (FRP Advisory 2 senior management)
Comiston Road
What were the key components included in the marketing report you prepared for the client?
- Terms (Fees, AML, Timescale)
- Outline of sale price (£130-140)
- Marketing Strategy (brochure etc and offers over £135)
- Terms of Engagement
Comiston Road
Once the client signed the Terms of Engagement, what steps did you take to initiate the marketing campaign, and how did you seek the client’s approval for the marketing materials?
- Carried out an inspection and measured the unit using NIA.
- Created brochure
- Prior to sending out sent brochure to client for approval then brochure was uploaded to our website and emailed to our mailing list
Comiston Road
Can you share insights into the three offers received and the considerations that led to your recommendation to the client?
- Offer 1: £137,990 (Cash)
- Offer 2: £140,000 (Subject to funding)
- Offer 3: £125,000 (Cash)
- My advice was that due to the clients objective of a quick sale that the higher cash offer would be best suited
- Due to potential length of time the funding could take for offer 2 even though this was a higher offer in terms of money but not the best in terms of the objectives
Comiston Road
How did you verify proof of funds for the prospective purchaser whose offer was accepted?
- Asking purchaser for bank statement within last 3 months
Comiston Road
What were the key terms and conditions outlined in the Heads of Terms, and how did you maintain regular communication with both sets of solicitors to ensure a smooth transaction?
- HoT’s info:
1.Date
2. Subject of Contract
3. Seller/Purchaser details
4. Agents/Solicitors details
5. Price
6. Conditions
7. VAT
8. Timescales
9.. AML
- I used email to communicate with both sets of solicitors during this stage
Comiston Road
Could you clarify what is meant by “achieved via private treaty” in the context of the sale?
- As the sale was carried out in the Process where property is marketed for no set period with no set closing date
- Both parties negotiate in their own time without commitment in open market
