Purchase And Sale Flashcards
4 main methods of sale
Private treaty
Informal tender
Formal tender
Auction
What is private treaty
Parties are free to negotiate in their own time and without commitment in the open market. Most popular method of sale
What are the advantages and disadvantage of private treaty
Pros-
Flexibility
Parties control process
Confidential
Vendor not under any obligation to sell
Cons-
Late decisions not to buy
Associated abortive costs
Gazumping-when a seller accepts a higher offer after agreeing a previous offer
Gazundering-when a buyer lowers their original offer just before contracts are exchanged
What Is informal tender
Used when there is a good level of interest in a property, best bids procedure that is not legally binding upon the parties so either party can withdraw at any point up to contract
The agent invites in writing to all interested parties to submit their best bids in accordance with prescribed timescale
What do you put in a best bids email
Name and address of applicants sollicitor
Required date and time of receipt of written offer
Confirmation of any finance arrangements
Details of any conditions attached to the offer
Confirmation that offers of a variable nature will not be considered ie.10,000 above the highest bid
The vendor reserves the right not to accept the highest or any offer made. (Most important)
What is formal tender
Often used by statutory body to give control and transparency over the marketing process. Provides a high level of public accountability
All bids to be opened in front of client or independent witness/line manager
No opportunity for the prospective purchaser to change or increase their bid after the submission of the offer
Terms and conditions of sale with legal pack already provided with marketing particulars
Difference between formal and informal tender
Formal
Provides potential purchaser with a single chance to bid for a property.
High level of accountability
Detailed T&C for sale prepared by vendor and published in advance with the offer to bid letter
Highest figure is accepted unless vendor reserves the right
Possible for the formal tender to lead directly to a contract for sale
Informal
Sometimes used as a negotiating mechanism to invite all parties to bid
Less onerous terms and conditions are prepared
Further negotiations can follow on from the outcome of this process
Pros and cons of auctioneering
Advantages include
Short time for disposal of property
Certainty of sale
Useful method for unusual properties which are hard to accurately value
Used for properties which are likely to gain a strong level of interest
Cons
Cost of auctions
Lack of confidentiality over price achieved
Vendor cannot choose the purchaser
Intensive nature of a short marketing period
Buyers may not have the time to do the necessary due diligence to put in an offer
What are the 3 types of agency
Sole agency
Joint agency- two or more agents sharing a fee on a pre agreed basis
Multiple agency- any number of agents but only successful agent gets a fee
What is the difference between sole selling rights and sole agency rights
Sole selling rights is beneficial to agent as even if purchaser is not found by agent they are still entitled to a fee where as with sole agency rights they’re not
What are sole agency rights
A fee is only due if the agent introduced a purchaser within the term of the instruction agreement
What are sole selling rights
If sold and not found by agent a fee is still payable
also a fee is payable even after sole selling right period ends when the property is sold to a purchaser introduced by the agent during the period of sole selling rights
What is a ready able and willing purchase clause
Defined in the estate agents act 1979
Basically means that an abortive fee is payable if a willing and able purchase wants to buy the property but then the client decides to withdraw
Timeline of a sales instruction
1)Receive instruction from client
2) check competence and independence
3)issue agency instruction agreement to client and receive signed copy
4) complete and record money laundering check
5) gather info such as leases, title plan and do statutory due dilligence
6) check vat position of vendor
7) inspect and measure the property
8) confirm position with fixtures and fittings
9) research market and assemble comps
10) prepare marketing report include estimated value and full recommendations
11) obtain written approval of marketing particulars
12) undertake marketing campaign
13) negotiate sale, draft heads of terms and instruct lawyers
14) liaise with solicitors and assist with any queries
15) facilitate practical arrangement for completion
16) issue invoice upon completion and retain file
How long does the vendor have to back out of the agency contract once signing
14 days statutory cooling off period (Consumer rights act 2015)
What should be put in the agency instruction agreement (TofE)
Agency basis (sole/joint/multi)
Agency rights (sole selling or agency rights)
Proposed fee
Marketing costs and disbursements
Confirmation of no conflict of interest
Money laundering requirements
Timescale for payment of fees
Details of CHP
must be signed and returned to agent before marketing can commence
What happens if the purchaser is failing to complete a transaction
Vendor can serve a notice to complete on proposed purchaser giving them a deadline to complete. Legal costs paid for by purchaser
If deadline passed vendor can rescind the contract and remarket the property
Any deposit can be retained by vendor
Vendor can sue for damages to claim for any loss in value following sale of the property to another party at a lower sale price
What does subject to contract mean
Shows that the agreement is not yet legally binding and that the parties are still negotiating terms.
Contract will only become enforceable when all parties formally sign and exchange document
Level 2 office block Newcastle (Purcase and sale)
In Dunston by metro centre
Office block investment
Conducted aml checks
prepared marketing particulars.
Logged interest from data room and viewings
Updated client on progress of sale
