Purchase and sale Flashcards
Name a number of different factors which can affect the market value of each different interest?
o Location o Size o Residential properties Number of bedrooms Utilities Condition Age Efficiency
• Occupation
o Same points as Ownership
o Length of lease
o Planning potential o Vacant possession/sitting tenant o Restrictions on use (agricultural ties etc.) o Proximity to transport links o Proximity to mills/refineries o Access
Method of sales
Auction
Off market
Informal tender
formal tender
Auction
open market property that is sold to the highest price in certain circumstances e.e quick sale, high demand expected, property in poor repair
TOE agreed between seller and auctioneer in advance including auctioneers rights to refuse bids, bidding increments, types of bids accepted, reserve price
pros -
•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
cons -
e•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
Formal tender
strong demand for property or public accountability is required. Tenders pack included, full marketing materials, a legal pack requirements for the contents of written bids. Applicants bid blindly and there is no opportunity to withdraw or alter bids after they are submitted. After the closing date, offers are opened in front of an independent witness and the seller’s agent will then make a recommendation on which offer should be accepted.
.
Informal tender
When good market demand and needs to be brought to a close after a period of marketing via private treaty.
con’s
However, the costs are generally higher than selling by private treaty.
private treaty
Most common where a property is marketed openly then offers are made.
Typical information to ask include proof of funding solicitors details
pro -
•Flexibility - the parties can negotiate in their own time and without commitment in the open market
•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
Cons -
•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
when was the estate agents act?
names some section
Estate Agents Act 1979?
Clarity as to the terms of the agency (section 18)
Openness regarding personal interests (section 21)
What are the 7 key principles of the Estate Agents Act 1979?
- Clarity as to the terms of the agency (section 18)
- Honesty and accuracy
- Agreement and liability for costs
- Openness regarding personal interests (section 21)
- Absence of discrimination
- Legal obligation to tell the client about offers received
- Keep clients’ money separate
What is the purpose of the Blue Book? ?
Provides a summary code of practice in all aspects of property marketing for residential property – does NOT relate to marketing of commercial property
Provides material on: relevant estate agency legislation, Code of Conduct for residential estate agents, securing instructions, property marketing, safety and security, agency management
Guide NOTE
What factors would you consider when choosing a method to use
- Client’s objectives
- Public accountability
- Market conditions
- Timing of sale
- Marketing budgets
what you find on a sales particulars
access directions description planning local authority viewing date of entry solicitor Basic payment scheme Accommodation: ground, first floor council tax EPC Fixtures and fittings Deposit
What are the requirements for agency instruction (Terms of Engagement) agreements?
- Agency basis (sole/joint agency)
- Agency rights (sole selling/sole agency rights)
- Proposed fee
- Marketing costs and disbursements
- Confirmation of no conflicts of interest
- Money Laundering Regulations
requirements - Timescale for the payment of fees and disbursements
- Details of the practice’s complaints handling procedure
Must be signed and returned to the agent before marketing can commence
Money Laundering Regulations.
Proceeds of Crime Act 2002 – a criminal offense if a party fails to report suspicion
Terrorism Act 2000 – also applies to agents who must report suspicion of any terrorist activities/funding
The Money Laundering, Terrorist
Financing and Transfer of Funds (Information on the Payer)
Regulations 2017,
What is the approach/procedure under the Money Laundering Regulations 2007?
- Tipping off
- Assisting
- Failing to report
- Must have procedures for identifying clients and ask for photographic ID and proof of address
- Use of internet checking companies for corporate clients
- Record keeping and staff training required
- Internal reporting procedures with a Money Laundering Reporting Office (MLRO)
- Must register with HMRC if arranging mortgages or giving investment advice
- Applies to all Estate Agency where agent enters business relationship/one-off accepting cash 15k Euros plus
- Must have a risk assessment in place and conduct their client due diligence on the basis of the assessment
- Identify risks and implement controls and procedures to mitigate risks
- Monitor controls and procedures
- Maintain records for a minimum of 5 years
- Less responsibility to run additional checks on standard risk clients – single official doc or 2 external docs
- Enhanced procedure for high risk clients (politically exposed persons)
- If public limited company then NO checks required as this has been completed by the London Stock Exchange but required to monitor their relationship on an on-going basis
- Residential lettings/property management is not included
Consumer Protection from Unfair Trading Regulations
2008 (when dealing with consumers)
prohibit unfair business to consumer commercial practices – apply to all lettings, sales, online agency.
Unfair practices – false/misleading information, hiding/failing to provide information, undue pressure on consumers, failing to show professional
Business Protection from Misleading Marketing Regulations 2008 (when dealing with businesses).
prohibit businesses from advertising products/services in a way that misleads other businesses
Policed by Trading Standards Office of the relevant local authority
Types of agency
Sole Agency
Joint Sole Agents
Multiple Agency
Sole Selling Rights
what is Sole Agency
The Agent instructed is the only Agent whom has the right to sell the property. If the Seller finds a buyer the Agent is not entitled to any commission (although the Seller will have to pay any expenses incurred by the Agent). Where the Seller breaks the agreement i.e. instructs another Agent, he may be liable for two sets of fees.
Joint Sole Agents
Where more than one Agent is appointed by the Seller with the instruction to work together. The commission fee would be shared between Agents.
Multiple Agency
The Seller can instruct a number of Agents, however the Agent that introduces the Buyer will be entitled to the commission. Often for this agency type the commission will be higher. The big problem is that each agent works independently, as they are in competition, which could cause problems with the sale if not controlled.
Sole Selling Rights
Here the Agent is the only person with a right to sell the property. If the Seller finds his own buyer he will still be liable to pay the commission. So the Agent must make the Seller aware that this is the type of deal they are entering into.
Complaining to the Property Ombudsman Scheme
- has overcharged you.
- infringed your legal rights.
- broke the Ombudsman’s code of practice.
- treated you unfairly.
- acted inefficiently.
what is in a Terms of engagement
- CLIENT AND PROPERTY
- AGENCY AGREEMENT
- SOLE AGENCY AGREEMENT
- COMMISSION AND PAYMENT
- TERMINATION
- WITHDRAWAL
- MARKETING EXPENSES
- METHOD OF PAYMENT
- VAT
- CLIENT’S SOLICITORS
- DISCLOSABLE INTERESTS
- Occupiers liability
- Unoccupied property
- PARTICULARS AND THE CONSUMER PROTECTION REGULATIONS 2008
- MONEY LAUNDERING REQUIREMENTS
- CONDITIONS APPLIED TO THE AGREEMENT
- COMPLAINTS HANDLING
- ACCEPTANCE OF TERMS
How long after receiving an offer should you inform your client
Each offer should be confirmed in writing to your client within at least one working day of receipt, or very exceptionally within no more than two working days of receipt of the offer. The only exception is where the seller has given specific instructions to the contrary in writing.
What should be included in a offer
- the time and date of the offer
- the amount of the offer
- any conditions attached
• the source and availability of funds (including whether
finance is needed and what stage this is at)
- any services offered by you to the buyer and
- any other factors that may influence the purchase.
What is included in a home report?
Single survey
Energy report
property questionnaire
Land and building transaction tax (LBBT)
Up to 145,000 - 0 % 145,000 - 250,000 - 2% 250,000 -325,000 - 5% 325,000 - 750,00 - 10% £750,000 over - 12%
What are the missive of sale?
It is a letters agreed between the buyer and seller are the price of the property, the date of completion, any special conditions concerning the individual property, and often a clause incorporating a Schedule of Standard Conditions.
what are sales memorandum/ heads of terms
document that records the sale information of a property, prepared by the agent
The address of the property
The agreed sale price
The names and contact details of the seller and buyer
Contact details of the solicitors representing the seller and buyer
The HMRC Land Registry number
Expected dates for exchange and completion
Information about the property, such as whether it is a freehold or leasehold
Any special conditions agreed as part of the same, for example, a sale at a specified price subject to certain repairs being made
Process for agent
- Receive instruction
- Agency letter of engagement/terms of business. (Agency specific procedures- proof of ownership, anti-money laundering procedures etc.)
- Establish scope of sale (subjects to be sold)
- Valuation (if required)
- Compile marketing strategy and budget*
- Marketing/market exposure
a. Signs*
b. Press*
c. Websites*
d. Approaching known parties
e. Viewings*
f. Open days* - Gauge interest
- Set closing date*
- Receive offers – proof of funds
- Present offers to vendor – all offers must be in writing
- Agree Heads of Terms
- Instruct solicitors
