Purchase and Sale L2 Flashcards
What are the four main methods of sale?
Private treaty, formal tender, informal tender, auction.
What factors should you consider when recommending what method of sale to use?
Clients’ objectives, public accountability, current and likely future market conditions, likely demand, timing requirements.
What is the private treaty method of sale?
Parties are free to negotiate in their own time and without commitment in the open market. It is a private matter.
What are the advantages of the Private treaty method of sale?
Flexibility, parties control the process, vender not under obligation to sell, confidential.
What are the disadvantages of the Private treaty method of sale?
The potential for gazumping (seller goes with a higher offer at the last minute) or more likely gazundering (buyer reduces their offer at the last minute), Late decisions not to buy, Associated abortive costs, Lack of competitive tension among purchasers.
When would you recommend the use of Informal tender (best offers or bids)?
When there is a good level of interest in the property, either at the commencement of a marketing campaign or to bring negotiations to a conclusion.
What is the process for Informal tender (best offers or bids)?
The agent invites in writing all interested parties to submit their ‘best and final’ offer in accordance with a prescribed timescale. All bids should be opened in front of the client or an independent witness / line manager. ‘Best bids’ procedure is not legally binding so either party can withdraw at any point up to contract.
What should be included in a letter to interested parties asking them to submit their ‘best and final’ offer as part of an Informal tender sales process?
Statement saying, ‘the vendor is under no obligation to accept the highest, best or any bid’, 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 more than the highest offer received) will not be considered.
When would you recommend the use of a formal tender?
Used when there is a high level of interest in the property, used by a statutory body to give control over the marketing process, Provides a high level of public accountability.
What are the differences between a Formal tender and an Informal tender?
Formal tender only gives purchasers one opportunity to bid whereas under informal tender purchasers can amend offers. Formal tender can lead to a direct contract for sale whereas informal tender will not. Formal tender provides a high level of accountability whereas informal tender does not.
What are the advantages of the Auctioneering method of sale?
Achieving a relatively short timetable for the disposal of the property. Certainty of sale, assuming a reserve figure is
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achieved. Useful for unusual property which is hard to accurately value. Used for a property which is likely to generate a strong level of interest.
What are the disadvantages of the Auctioneering method of sale?
Cost of promotion and publicity. Lack of confidentiality over the price achieved. Vendor cannot choose the purchaser. Intensive nature of a short marketing period.
What is the process for Auctioneering?
Conflict of interest checks undertaken prior to accepting the instruction. Terms of Engagement must be agreed in writing in advance. Money laundering checks must be completed for all vendors and proposed purchasers in advance. Full due diligence undertaken prior to offering the property for sale. General Conditions of Sale, Memorandum of Sale and any notices to bidders are published by the Auctioneer. Reserve price (below which the property will not be sold) needs to be agreed with the vendor. Clarity required regarding the Auctioneer’s rights to refuse bids, to regulate the bidding increments, to accept proxy, telephone, internet, and postal bids and to sign the contract on behalf of the vendor. Contracts exchanged at the fall of the gavel.
What actions are required by a purchaser ahead of auction day?
View the property and consider a structural survey. Take the proper legal advice and complete a due diligence exercise. Read the Notice to Prospective Buyers. Arrange a deposit of 10% and insurance for exchange. Provide ID for money laundering procedures.
When is an agent typically owed a fee under sole selling rights?
Whenever a property is sold.
