Purchase and Sale (Submission) Flashcards
Can you name some of the key legislations for agency instructions?
Estate Agency Act (1979)
Consumer Rights Act 2015 (cooling off period)
COI Commercial Office Market Investment Agency (2017)
What is a cooling-off period?
A cooling-off period of up to 14 days is allowed for clients who change their minds and don’t want to instruct the agent in accordance with current consumer protection regulations.
Would you take the instruction if the Property belonged to a family member?
In this scenario I would say no as it could lead to a personal conflict, hence impacting my ability to act impartially.
I would also consider the ethical decision tree to assess…
I could also get third party review from another surveyor to check they are in agreeement. I would then advise the family member to visit the RICS surveyor recommendation tool.
What are the 4 methods of sale?
Private Treaty
Informal Tender
Formal Tender
Auction
What is Private Treaty sale and pros and cons/ risks?
Parties free to negotiate in their own time in the open market with no bid deadline. Can be between just two parties. Most popular sales method.
Pros
- flexible timescales
- room for negotiation
- the vendor has no obligation to sell
Cons/ risks
- potential for gazumping and more likely gazundering (chipping the price)
- late decision not to buy
- associated abortive costs
What is informal tender and pros and cons/ risks?
This can be used to bring Private Treaty process/ negotiations to a close by inviting parties to submit a bid or a ‘best and final’ bid and will ask for details to include:
- applicants solicitor
- finance arrangements
- any conditions attached to the offer
Pros:
- flexible
- the possibility of negotiating a higher bid
- Vendor has no obligation to sell = allowing them to control the process
Cons:
- can be difficult to manage bids
- needs to be sufficient interest in the property to work well
- marketing costs can be high due to intense marketing period
- NOT LEGALLY BINDING SO A PARTY COULD WITHDRAW THEIR OFFER UP TO EXCHANGE = risk in terms of timing and loss of costs
What is formal tender and pros and cons?
Used when there may be a public interest in the property as it gives control and transparency over the marketing process.
Sealed bids are requested. Purchasers have one opportunity to bid and there is no opportunity for negotiation. The marketing particulars would comprise a full legal pack and detailed information required within their bid.
Pros:
- completely transparent
- definitive timescale by setting a bid deadline
Cons:
- no flexibility as Vendor is obligated to sell
- the possibility of missed opportunities due to time constraint
- no aspect of negotiation
Can you give me pros and cons to Auction sale?
Pros:
- quick sale
- good method for unusual properties that are hard to value
- used when good interest is expected
- vendor can set reserve price
Cons:
- cost of promotion and publicity
- no confidentiality on the price achieved
- vendor cannot choose a purchaser
What are the types of agency?
- Sole Agency (one agent)
- Joint Agency (fee is split 50/50 = working with the other agent = best intention for the seller)
- Multiple Agency (100% of fee goes to agent who introduced buyer = competition between the two agents)
Why are Head of Term’s important?
They provide an executive summary of the purchase.
They provide a framework for contract, purchase timescales and any pre-exchange conditions.
They allow both parties to refer back to the agreed terms during the purchase and sale process.
What are included in your heads of terms for Chalfont St Peter?
‘SUBJECT TO CONTRACT’!
Included:
Vendor & solicitors details
Purchase & solicitor details
Property address
Legal interest (freehold) & Vacant Possession to be provided on completion
Exchange date
Completion date
Purchase Price
5% deposit to be paid on exchange of contracts
Further conditions/ assumptions:
- There will be no affordable housing required.
- There are no restrictive covenants which could prevent development.
- All drawings are to be assigned to the Purchaser at no extra cost
What other conditions might you consider on an offer?
Other assumptions:
- there is no contamination on site that would prevent the use of standard strip foundations. If piling is required, this would be deductible from the purchase price
- Any other costs we have assumed in my appraisal
- All required mains services and utilities are available to the boundary of the site and have sufficient capacity
- VAT will not be charged on the purchase price
Why must you state that it is subject to contract in HoT?
To ensure it is not legally binding until exchange.
What is meant by exchange?
This is when the parties become legally committed to an agreement and swap contracts for signing. Often a deposit is paid on exchange with the rest to be paid on completion.
Positives and negatives of exchange and completion on the same day?
Pros: less time consuming, on St Marks the owner needed their cash as soon as possible due to family reasons
Cons: less time for seller to provide VP so works better if the property is already empty, and doesn’t work if the sale is part of a chain
MOCK QUESTION
What normally occurs between exchange and completion?
- Vacant Possession (exclusive use of the property)
- Some developers will need to organise potential finance
- Potential to undertake contamination
- Also better for cashflow to delay site payment as soon as possible
Is the informal best bids process a binding tender?
No its isnt if the following statement is made on particulars:
‘the vendor reserves the right to not accept the highest or any offers made’.
