Purchase and Sale Flashcards
What are the three types of property tenure/interest?
Freehold, Leasehold and Commonhold.
What is Freehold Tenure?
Ownership of the property and the land it sits on.
What is Leasehold Tenure?
Ownership of the right to occupy for a fixed period (the lease term), but do not own the land it sits on.
What is Commonhold Tenure?
Ownership of an apportionment of the property and then shared/common areas are held in a commonhold association (instead of the freeholder). A commonhold association is jointly owned by all the flat/unit owners.
How can the type of Tenure impact on property transactions?
Tenure can impact demand, purchasers need to consider additional costs associated with SC/maintenance fees, extensions of lease terms etc? Can in some instances impact on mortgage lender view (e.g. short term remaining, or if the SC is astronomical London they are refusing some).
What are the methods of sale?
- Private Treaty
- Informal Tender
- Formal Tender
- Auction
What factors should be considered when selecting a method of sale?
- Client’s objectives
- Public accountability
- Market Conditions
- Estimated demand for the property (target market)
- Timing requirements
What is Private Treaty?
The parties are free to negotiate in their own time without commitment in the open market. (This is the most popular method in England). It is a private matter.
What are the advantages and disadvantages of Private Treaty?
Advantages:
- Flexibility
- Parties are in control
- Vendor is not under any obligation to sell.
- Confidential
Disadvantages :
- Potential for gazumping or gazundering
- Late decisions not to buy
- Associated abortive costs.
What is gazumping?
When a seller accepts a higher offer on their property, despite having already agreed to another offer.
(The contract isn’t enforceable yet as verbal agreements are not legally binding)
What is gazundering?
Gazundering is when a buyer waits until a sale is almost ready to complete before unexpectedly withdrawing their offer and making a lower one.
(They are relying on the seller accepting so not to start from scratch).
What is Informal Tender?
Best Offers or Bids.
When is Informal Tender Used?
When a property has a good level of interest in a property. This can be at the commencement of a marketing campaign or to bring negotiations to a close.
The agent invites all parties to submit their best and final offer in writing, and in a prescribed timescale.
When outlining a letter for Informal Tender, what details does the agent need to include?
- Date and time the offer needs to be received by
- Requirement for the name and address of the applicant’s solicitor, confirmation of financial arrangements, and any conditions attached to the offer.
- Outline that offers of a variable nature will not be considered
- The vendor reserves the right to not accept the higher offer (make sure this is in to make sure bids don’t become a binding tender).
What is Formal Tender?
Sealed Bids
What types/bases of agency are there?
- Sole Agency
- Joint Agency
- Multiple Agency
What is Sole Agency?
One agent is instructed.
What is Joint Agency?
Two or more agents are instructed and share a fee on a pre-agreed basis.
Multiple Agency?
Any number of agents, but only the successful agent gets a fee. (no sale no fee).
Can you explain the difference between Freehold, Leasehold and Commonhold?
How do interest rates affect the marketability or value of a property?
What methods of sale relates to your experience?
I have worked on Private Treaty and Informal Tender sales, but I am aware of Auctioneering and Formal Tender as additional methods of sale.
In your example, Sutton Coldfield Retail, why did you use the investment method?
The property was an income-producing asset, and the freehold disposal would be subject to the existing lease terms.
What factors influenced the yield?
Comparable evidence of local investment properties and their yields.
