Purchase and Sale COPY COPY Flashcards
Tell me about the four methods of sale.
- Formal Tender
- Informal Tender
- Private Treaty
- Auction
Tell me about an advantage/disadvantage of sale by private treaty/formal tender/informal tender/auction.
Private treaty – a method of sale where parties are free to negotiate in their own time and without commitment in the open market Advantages - Flexibility - Parties control the process - Vendor not under any obligation to sell Disadvantages - Potential for gazumping/gazundering - Late decisions not to buy - Associated abortive costs
Informal Tender – Used when there is a good level of interest. Best bids procedure not legally binding. Agent invites in writing all interested parties to submit their best and final offer with details to include; (DNFCVV)
• Required date and time of receipt of the written offer
• Name and address of the applicant’s solicitor
• Confirmation of finance arrangements
• Details of any conditions attached to the offer
• Confirmation that offers of a variable nature (i.e. an escalator bid, offering an amount in
excess of the highest offer received) will not be considered.
• The vendor reserves the right not to accept the highest, or any, offer made. This is most
important. Without this statement, the informal best bids process could become a binding
tender
Advantages
- Less onerous than formal tender
- Can be used as a negotiating mechanism to invite all parties to bid
- Further negotiations can follow
- High level of accountability
Disadvantages
- Does not lead to direct contract for sale
- Risk of accepting offer on property which is then withdrawn and associated abortive costs
- Negotiation process can be drawn out
Formal Tender – often used by statutory bodies to provide high level of accountability. There is no opportunity to bid again.
Advantages
- It is possible for formal tender to lead direct to a contract for sale
- High level of accountability
Disadvantages
- Less flexibility over the process
- No opportunity for further negotiations
Auction
Advantages
- Achieving a relatively short timescale for the disposal of the property
- Certainty of sale (assuming reserve figure is achieved)
- Useful for unusual properties
Disadvantages
- Short intensive marketing period
- Lack of confidentiality over price achieved
- Vendor cannot choose purchaser
Tell me about the legal processes to complete a purchase/sale.
- Negotiate the sale, draft heads of terms and instruct lawyers
- Liaise with the vendor’s lawyer in respect of Commercial I Residential Property Standard Enquiries (C/RPSEs)
- Assist with any queries during legal formalities
- Instruct exchange of contracts (take deposit money)
- Completion of sale after completion money has been paid
How do exchange and completion work in an auction transaction?
- Exchange of contracts occurs on the fall of the gavel in line with the le (viewed beforehand).
- Completion occurs 20 working days later
Tell me about your understanding of legislation relevant to your agency practice.
Estate Agents Act 1979
Promotes 7 points key points (choalk)
1. Clarity as to the terms of the agency (section 18)
2. Honesty and accuracy
3. Agreement for liability for costs
4. Openness regarding personal interests (section 21)
5. Absence of discrimination
6. Legal obligation to tell the client about offers received
7. Keep clients’ money separate
What are the most important points of the estate agents Act 1979?
Most important points
- Specify all costs/fees in advance, in writing in terms of business (Section 18)
- Itemise all payments - no global budget allowed
- Disclosure of personal interests – you must reveal promptly and in writing a any personal interest you or a connected person have in a transaction ‘connected person’ (section 21) is someone who could benefit financially from the transaction such as a relation or business associate (colleague)
- Specify nature of agency and selling rights to be agreed
> Sole selling rights or sole agency rights
> Sole, joint sole agency or multiple agency
- Offers: report all offers promptly and in writing
- Misrepresentation of interest/offer - you can only tell truth regarding offers received.
When do you need planning consent for a marketing board?
- A flat board larger than 2 sqm (commercial)
- A V board larger than 2.3 sqm (commercial)
- A flat board larger than 0.5 sqm (resi)
- A V board larger than 0.6 sqm (resi)
- Illuminated boards
- Boards erected on listed buildings and in conservation areas
How far from the building are you allowed to place it?
Must not project more than 1m from the building
How long do you have to remove a board after a transaction?
14 days.
How does Section 18 relate to your agency practice?
Terms of business - Specify all costs/fees in advance, in writing in terms of business (Section 18) – applicable when disposing of a property on behalf of the DoH.
What are the Three agency bases?
- Sole Agency – fee only due if the agent introduced the purchaser.
- Joint Agency – two or more agents sharing a fee on a pre-agreed basis
- Multiple Agency – any number of agents but only the successful agent gets a fee.
What are the two types of selling rights?
- Sole selling rights – remuneration will be payable if contracts are exchanged in a period when sole selling rights exist even if the purchaser who was introduced by the firm during the period of the sole selling rights contract.
- Sole agency rights - can be agreed which means a fee is only due if the agent introduced purchaser within term of instruction agreement
Where are agency basis/selling rights defined?
Estate Agents Act 1979
What is a ready, willing and able purchaser?
A prospective purchaser who is in a position to sign a binding contract; one who is prepared, legally capable and financially able to purchase a property.
Would need to be included in agency contract and then if a seller pulls out, would then be liable for;
- Abortive fee
- Marketing expenses
- Time spent measuring etc.
How does Section 21 relate to your agency practice?
Section 21 – Disclosure of personal interests – a ‘connected person’ is someone who could benefit financially from the transaction such as a relation or business associate.
I undertook a conflicts of interest check for any DoH disposal.
Explain to me what are Consumer Protection / Business Protection Regulations who and what do they relate to?
They relate to potential buyers and vendors and extend the duty owed to not just clients but to, potential clients, viewers, buyers and actual buyers, (all defined as consumers), to give accurate and/or necessary ‘material’ information and not to make any misdescriptions in the material.
Apply to lettings as well as sales and online agency
Whats difference between Misrepresentation Act 1967 and Consumer Protection Regulations 2008?
Criminal offence (misrepresentation civil offence)
- CPR relates to all known info needing to be declared (misrep relates to misrep or false statement).
- Cannot use disclaimer for CPR (can for misrepresentation)
- CPR whole process (misrep pre-contractual enquiries)
What does average consumer mean in relation to CPR?
Average consumer – a reasonably well informed person.
What does material information mean in relation to CPR?
‘Material information’ means information that the consumer needs to make an informed transactional decision and generally any information required to be given by law.
What are considered to be unfair practices under this legislation? (CPR)
- omit material information
- hide material information
- provide material information in a manner that is unclear, unintelligible, ambiguous or untimely
- fail to identify the commercial intent (unless this is apparent from the context)
Tell me what you know about the Misrepresentation Act 1967
- Act relates to a misrepresentation or a false statement (a mis-statement) of fact made by a party during pre-contractual enquiries, which has the effect of inducing the party to purchase.
- The vendor and/or agent can be sued for damages and/or the contract rescinded
- Agent has a duty of care to check that the advice, information or opinion is reliable
How does the Misrepresentation Act 1967 relate to your agency practice?
When marketing any of our disposal properties, for example in an auction sale.
What does the Unfair Contract Terms Act 1977 say?
- A statute which imposes limits on the extent to which liability for breach of contract, negligence or other breaches of duty can be avoided by means of contractual provisions such as exclusion clauses.
Do you need to inform your client if you offer a service to a prospective tenant?
Yes. Under Estate Agents (Undesirable Practices) (No 2) 1991
Tell me three key issues raised in the RICS Real Estate Agency and Brokerage Standards / RICS Commercial Real Estate Agency (Purple Book).
CAMPSHIRT DVC
1) Do the utmost to avoid conflicts of interests and where they do arise, deal with them openly and fairly
2) All advertising and marketing material is honest and truthful
3) Any client money is held separately and is covered by adequate insurance
4) Hold appropriate PII/errors or omissions insurance to ensure a customer does not suffer a loss because of a negligent act
5) Carry out work with due skill, care and diligence and ensure all staff employed have the necessary skills to carry out their tasks
6) Act in an honest, fair, transparent and professional manner
7) Make it clear the identity of your client and ensure all parties are clear of your obligations to each party.
8) Give realistic assessments of selling prices/rents/financial costs having regard to market evidence and using best professional judgement
9) Ensure that clients are provided with terms of business that are fair and clear, with details of the firm’s complaints handling procedure
DVC
10) Not to discriminate unfairly in any dealings
11) Ensure all meetings, inspections and viewings are carried out in accordance with the client’s wishes having due regard to security and personal safety
12) All communications with clients are fair, decent clear, timely and transparent
Tell me about a factor which drives property markets.
Economy, politics, interest rates
Tell me about supply and demand in a property market you are familiar with.
Redbridge – demand exceeds supply. Particularly for larger (3 bed+) homes. Emphasis from the LPA to push through schemes with larger homes rather than the 1/2beds which developers prefer.
Tell me about government incentives which impact demand in relation to your purchase & sale work.
Help to buy – e.g. 5% deposit on new-builds for first time buyers. Increases the demand for small new build properties.
What are current SDLT levels for commercial property?
Up to £150,000 - 0%
Between £150,001 and £250,000 - 2%
Over £250,000 - 5%
What are current SDLT levels for residential property?
Up to £125,000 – 0% £125,001 - £250,000 – 2% £250,001 - £925,000 – 5% £925,001 - £1,500,000 – 10% Over £1,500,000 – 12%
What are the different types of interest in land?
Freehold, leasehold, concurrent and equitable estates
What is the difference between freehold and leasehold?
Freehold – the building and the land is owned exclusively
Leasehold – have a lease from the freeholder
Why would you use online marketing for a purchase/sale transaction?
Cheap, wide target audience, easy to update/amend.
Why would you use a marketing board for a purchase/sale transaction?
To reach a wider target audience, i.e. a local audience
Tell me about an information pack you have prepared for a purchase/sale transaction.
Nelson Road – Auction property. Prepared various DD surveys, including arbo, EPC, title documents
Tell me about CPSEs and the sale process.
Commercial Property Enquiry Forms – it is a thorough set of enquiries used with the intention that a through set of replies can facilitate a speedy conclusion to a deal. If not answered may hold up the sale.
What is a Memorandum of Sale?
The memorandum of sale is an important document, it confirms the point at which a property sale has been agreed by both the buyer and the seller (vendor). The memorandum of sale should be issued by the estate agent as soon as the property offer is formally agreed.
Talk me through a survey you instructed and why.
Arboricultural
The site was well covered by trees – an arboricultural survey would help de-risk the site for a potential purchaser because it would remove some of the doubt about the potential impact these trees could have on the development. LPA would often request this with planning application.
What are the EPC requirements for commercial property in relation to MEES?
- New leases F and G no longer able to be leased from April 2018.
- Existing leases from 2023
Explain a factor which impacts upon sale value/sale terms.
Location, covenant strength, lease terms, condition
Explain an example of when you have provided marketing/sale strategy to a client.
If we take the example from my case study I worked alongside the marketing agent to develop the marketing strategy which involved a marketing V board, listing on Rightmove and Zoopla, advertising in the agents shop window. Furthermore, I suggested advertising on local property websites as the property hadn’t appealed to the typical buyer of a national auction firm, possibly with a national audience.
Talk me through an example of when you have purchased/sold a commercial property.
- I inspected and measured
- I instructed and reviewed due diligence (Arbo)
- Reviewed local market and spoke to agents of similar sites.
- Recommended sale by private treaty (knowing I could use informal tender to bring negotiations to a close if I decided so)
- Approved marketing particulars
- Set the asking price in line with external valuation
- 2 offers
- I recommended accepting cash offer for quicker sale
- Completed legal enquiries
- Oversaw exchange and completion of sale
Talk me through your long LH disposal at Durham.
- Desktop Inspection
- Reviewed legal due diligence including RoT
- Oversaw tender process
- Selected successful agent
- Approved marketing particulars agreed marketing channels.
- Informal tender - invited bids.
- Proceeded to best and final
- Recommended accepted higher offer.
- Negotiated HoTs
- Progressed deal to completion
