Purchase and Sale Flashcards
What are the common methods of sale what are the advantages/disadvantages?
- Private Treaty - Property marketed openly, using particulars and advertising. Affords potential purchaser opportunity to treat with seller
Advantages -
Flexibility
Relatively inexpensive
Parties control the process
No obligation to sell
Confidential Process
Disadvantages -
Potential for Gazumping/Gazundering (considered unethical by RICS)
Risk of late withdrawal and associated abortive costs
uncertain timelines - prolonged negotiations
Over pricing could deter buyers
- Informal Tender - Structured process, Known as sealed bids, interested parties must submit best & final bids/offers by a specified date usually accompanied by solicitors details, finance arrangements & any conditions.
The bids are opened infront of an independant witness. Should include that the vendor reserves the right not to accept highest bid or any bid to avoid the process becoming a binding tender.
Advantages -
Competitive Bidding - can lead to higher offers
Straightforward with clear timeframe - all bids are submitted at the same time.
Vendor has options to choose form multiple buyers, if sale falls through generally other purchasers waiting in the wings.
Flexibility - vendor not obliged to accept any offers
Structured process - all bid submitted at same time so easier to compare offers
Disadvantages -
No guarantee of multiple bids
Not legally binding - can withdraw till contracts are exchanged
Requires clear terms ie vendor reserves right not to accept highest or any bid to avoid process becoming binding
- Formal Tender -
Used where there is strong demand for a property or public accountability is required.
Applicants bid blindly, no opportunity to withdraw or alter bids after submission.
Should include full marketing. material, legal pack & requirements for the contents of written bids
Offers opened in front of an independent witness and sellers agent makes recommendations of which offer to accept.
Purchaser selected & parties proceed to exchange in accordance with T&C or bankers draft is accepted & contract exchanged immediately
Advantages:
Potential for quicker sale Period from accepting an offer to completion is quicker as purchaser is presented with everything upfront.
High level of accountability - all parties aware of T&C of sale
Clear transparent process
Legally binding
Disadvantages -
Expensive due to admin costs of process
No negotiating
Can’t withdraw
- Auction - ToE agreed between the seller & auctioneer in advance
Relevant legal & marketing docs are published prior to auction. Potnetial purchasers responsible for undertaking due diligence prior to auction.
Fall of the hammer contracts are exchanged. Generally purchaser pays 10% deposit.
Advantages:
Short certain timescales
In theory best price achieved after wide market exposure
Property can be sold with certainty over selling terms
Disadvantages:
No control
Not confidential
can deter buyers
Expensive upfront costs.
How would you consider a property whilst considering method of sale?
*Type/Character/Uniqueness
*Location/condition/Size
*Planning Permission/ Listed status
*Clients timeframes/objectives
*Current demand in a particular area
*Level of control
How do the above factors affect property value?
Type -
Character uniqueness -
Location -
Condition -
Size -
Planning Permissions -
Listed Status -
Clients Timeframes/objectives -
Current Demand in a particular area -
What are the broad elements of the Estate Agents Act 1979?
Act regulates estate agents to ensure fair trading practices and protect consumers in the property market.
s18: Clarity on terms of agency & when fees become payable within ToE
Honest & Accuracy
Agreement & Liability for Costs
s21: Agents must disclose any personal interests they have to the client and within heads of terms
Absence of discrimination
inform clients about offers recieved
clients money must be held securely
What are the broad elements of the. Misrepresentation Act 1967?
- Defines Misrepresentation
- Deals with damages for misrepresentation - allows for claimant to claim damages for misrepresentation unless the other party can prove reasonable grounds for believing the statement to be true
Allows for court to award damages in lieu of rescission for innocent misrepresentation
What are the broad elements of the Consumer Protection from unfair trading regulations 2008?
The regulations impose general prohibition on traders in all sectors from engaging in unfair commercial practices with consumers
General Prohibition of unfair commercial practices
Prohibition of misleading actions & omissions
Prohibits aggressive commercial practices
Enforcement
Consumers rights to redress
What are the broad elements of the Money Laundering, Terrorist Financing & Transfer of Funds Regulations 2017?
Customer Due Diligence and Enhanced Customer Due Diligence
Ongoing monitoring
Risk Assessment
Suspicious Activity Reporting
Nominated officer to oversee implementation of MLR 2007
Training for all staff
Record Keeping for firms
Policies and procedures to prevent & detect money laundering
Regular audits and reviews - to ensure ongoing adherence & effectiveness
Who does these Acts Protect & how?
- Estate Agents Act 1979 - Protects both purchasers & vendors - by ensuring Estate Agents act honestly, fairly and promptly and in best interests of their clients. Regulates work of estate agents setting minimum standards of behaviour and ensure compliance with certain requirements.
- Misrepresentation Act 1967 - protects individuals who enter into a contract based on false or misleading statements made by the other party - makes provision for recession of contracts if induced to enter by a misrepresentation.
Makes provision for financial damages due to a misrepresentation even if it wasn’t fraudulent - Consumer Protection from Unfair Trading Regulations 2008 - Protects consumers - by prohibition of unfair or misleading trading practices and bans misleading omissions & aggressive sales tactics. Affording consumers the right to redress
- Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2007 - Protects firm, clients & members of the public from being used by criminals to launder money - by preventing the use of financial systems for criminal activities, promoting transparency & safeguarding integrity of financial systems
What documentation do you require prior to a sale/ purchase from both sides of a transaction.
Proof of ID
Utility Bill (Issued within the last 3 months)
What would you need to find prior to undertaking an instruction?
Establish competence to carry out the instruction
Client passes AML checks
There is no Conflict of Interest
Proof of ownership
How would you produce Particulars?
Using the firms software Expert Agent - which involves inputting the information, photographs & plans and the particulars are then generated with a reference number
What are key requirements/elements of particulars?
All material information must be provided (Consumer Protection from Unfair Trading Regs 2008)
- Location/Address
- Situation
- Description of the Property/Land
- Guide Price
- Rights, covenants & Wayleaves
- incase of land (RPA, Schemes)
- EPC
- Council Tac
- Local Authority
- Tenure
- Viewing Arrangements
- Directions
- Photos which clearly show the property sale
UK Residential Real Estate Guide 6th Edn. will provides guidance in this regard.
How would you manage offers on a property? what would you need to do?
If an offer is made over the phone, I ask for confirmation via email inc how they will finance the purchase ie cash buyer/loan
I report all received to my client promptly and in writing in accordance with the Estate Agents Act 1979
I confirm with the offeror that the vendor has been informed of their offer
I do not disclose other offers made to any 3rd Party unless I have confirmation in writing from my client.
If the offer is not accepted I will inform the offeror upon confirmation from the vendor
If the offer is accepted I will confirm with the purchaser & request the relevant AML documentation & solicitors details
All offers are logged on our firms software (Expert Agent) against the property
With file notes and emails detailing offers kept on the physical file.
What Legislation covers cash in purchase & sale transaction?
Proceeds of Crime Act 2002
Anti Money Laundering,Terrorist Financing and Transfer of Funds Regulations 2017
What is the current market in your area for Land, Houses, detached properties.
Land -
Where do you get comparable data from?
Agents Websites
Auction Websites
Rightmove
Our own comparable spreadsheet.
I also ensure to verify the evidence before using it.
How do you maintain comparable data as current?
I ensure that records are regularly updated, ensuring evidence used is recent, verifiable and consistent with local market practice.
How do you rank comparable data?
Using the Hierarchy of Evidence.
Cat A - Direct Comps
Cat B - General Market Data
Cat C - Other sources
What is marriage value, why is it significant?
An additional element of value where the combined value of multiple assets is more than the sum of the separate valued
What is lotting & why is it important?
Is the dividing up of a larger property eg an estate, farm or land into separate lots/parcels.
Important because:
Garner interest from a wider market - people may not be able to afford or be interested in the property as a whole
Gives a relative value of each asset.
What is the difference between market value & sale/guide price?
Market value - estimated price a property would fetch in a competitive unrestricted market.
Sale Price - The actual price a property sold for in a specific transaction on
Guide Price - An indication of the sellers expectations and a starting point for offers
Can you tell us about a property inspection you have undertaken?
