Purchase and Sale L3 Flashcards
Level One
What are the four methods of sale?
Private Treaty - open market, no commitment, parties control process
Informal Tender - closing date inviting best and final offers
Formal Tender - similar to informal but includes legal pack and quick exchange
Auction - no control over purchaser, short marketing, costly and public
Level One
What different objectives might a client have when selling their property?
- Speed of sale
- Highest price possible
- Control over who it goes to
Level One
What is joint agency?
This is where two or more agents enter into an agreement to market the property together with the fee achieved being split between each party
Level One
What is multiple agency?
This is where more than one agent is engaged to market and sell the property, with only the successful agent getting 100% of the fee
Level One
Talk me through a sales instruction from start to finish
- Enquiry
- Inspection
- Appraisal
- Agreement
- Vendor AML
- Gather marketing material
- Launch to market
- Negotiations
- Accept an offer
- Buyer AML
- Introduce legal parties
- Financial and legal due dilligence
- Exchange and completion
Level One
Talk me through the AML process
In accordance with the Money Laundering Regulations (2017), we must understand the risks involved in dealing with different buyers and sellers and mitigate those risks to avoid being complicit in money laundering.
- Regular Due Diligence:
Individuals - photo ID; proof of home address; credit report to confirm no enhanced due diligence is necessary
Companies - as above, but for all beneficial owners; need to understand ownership strucute and if private/public
Vendors - as above, but proof they have the right to sell/lease; proof of ownership - Simplified Due Diligence:
Not all checks will need to be complete if we can re-use above due diligence; appropriate for listed companies on LSE or is on our Trusted Major Client List - Enhanced CDD:
If there is a higher perceived risk of money laundering or terrorist financing; owner or family member is a PEP (Politically Exposed Person); not dealing face to face; provides false information
In addition to regular due diligence; additional proof of address; look for red flags; closely examine every aspect of the deal
Level One
What are some of the 12 core principles that UK based chartered real estate agents must follow?
- Honesty
- Competency
- Transparency
- Avoid conflicts
- Do not discriminate
- Client money held securely
- Marketing is honest and truthful
- Hold appropriate PI cover
- Be realistic when using professional judgement
- Ensure face to face dealing are conducted with regard to security and safety
Level One
Tell me more about the Estate Agents Act 1979
Applies to sale and acquisition of land and property. Seven key principles:
1. Clarity on the terms
2. Honest and accurate
3. Agreement and liability for costs
4. Openness about conflicts of interest
5. No discrimination
6. Legal obligation to tell client offers received
7. Keep client’s money separate
Non compliance is a warning or fine. Not a criminal or civil offence.
Level One
Tell me more about the Misrepresentation Act 1967
The purpose of the misrepresentation act is to provide a greater amount of security to parties that enter into a contractual agreement, to ensure that they are not tied to an agreement, or suffer loss, as a result of a misrepresentation
Level One
Tell me more about CPR 2008
Consumer Protection from unfair trading Regulations, 2008
- Replaced the Property Misdescriptions Act
- Broader and not related directly to Property
- Agents must show duty of care and have an audit trail
- Agents must not exert any pressure
- Agents must declare everything known (good and bad)
- Failure to comply is a criminal offence with compensation of up to £25,000 due
- Policed by Trading Standards
What are the advantages of auction as a method of sale?
-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
What are the disadvantages of auction as a method of sale?
-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
What are the advantages of informal tender as a method of sale?
-Set timescales can be achieved
-More control over the purchaser inviting a select group of parties
-The process is not legally binding so either party can withdraw until the point of exchange, vendor not obliged to sell
What are the disadvantages of informal tender as a method of sale?
-Marketing costs and agency fees can be expensive
-Legal and financial arrangements are different dependent on the purchaser
-The process is not legally binding so either party can withdraw until the point of exchange (late withdrawals)
What are the advantages of formal tender as a method of sale?
-Set timescales can be achieved
-More control over the purchaser inviting a select group of parties
-Applicants bid blindly and there is no opportunity to withdraw or alter bids after they are submitted
What are the disadvantages of formal tender as a method of sale?
-Marketing costs and agency fees can be expensive
-Can be a time-consuming process
-Can be a lot of red tape especially if going through a public sale process
What are the advantages of private treaty as a method of sale?
-Flexibility - the parties can negotiate in their own time and without commitment in the open market
-Advertising can be tailored to suit the client’s requirements
-It is relatively inexpensive
-The seller is not obliged to sell
-It is a confidential process
What is Gazumping?
Refers to the process whereby a vendor (seller) accepts a verbal offer from a prospective purchaser (buyer) of a property and then accepts a higher offer from another buyer. The first buyer is said to be Gazumped
