Purchase and Sale submission Flashcards
What are the 4 methods of sale?
Private Treaty
Informal Tender
Formal Tender
Auction
How do you choose which method to use?
Client objectives
Desired timescale
Public accountability
Current and likely future market
What is a sale by private treaty?
Parties are free to negotiate on their own time, without commitment in the open market.
It is the most popular method.
What are the pros and cons of private treaty?
Pros:
flexible
parties control the process
no obligation to sell
confidential
Cons:
potential for gazumping/gazundering
late decisions not to buy
associated abortive costs
What is informal tender?
- It’s an invitation to submit best offers by a specific deadline
- It’s a flexible sale process because allows further negotiations as the vendor is not obliged to accept the highest offer
What are pros and cons of informal tender?
Pros:
- Enhance competitions between sellers and brings negotiation to eventually an end
- Flexibility, as it allows further negotiation and allows the vendor to have more control of the sale process and timescales
- Limited upfront costs given that a informal tender can be triggered without a full legal pack
Cons:
- can be difficult to manage bids as they are not legally binding
- parties may have insufficient time to arrange lending facilities
What is requested in an email for best and final bids?
- Deadline for bids
- name of applicant
- Finance arrangement, with solicitor cover letter
- condition attached
- specify which type of offers are strongly desired
- that the vendor reserve the right to not accept the highest offer
What information goes in a legal pack?
- Title deeds: to prove ownership
- Reports on inquiries
- Leases and other tenancy agreements
- Other property information, including it fixtures and fittings
- EPC
- Contract for Sale and other documents with conditions attached (if it’s a formal tender)
Explain what is a formal tender? and roughly what it involves?
- It’s a similar process to the informal tender (so invitation to bid), however, parties must submit their offer through a prescribed form and provide the necessary deposit when placing their bid, so it becomes a legally binding process if one of the bids is formally accepted by the vendor.
- The bid is sealed and will be opened in front of the vendor together with all the others bids, and there’s no opportunity to increase the bid
What is the difference between a formal tender and an informal tender? can the vendor include some right against highest bids?
Formal tender:
- By selecting a bid, under a formal tender, the vendor can potentially enter into a binding contract; and there is no opportunity to further increase the bid once submitted;
Informal tender:
- Does not legally bind the parties to the sale until contracts are exchanged and there is an opportunity to further negotiate the bid
Both methods can reserve the right of not accepting the highest offers.
What are the pros and cons of formal tender?
Pros:
- completely transparent and accountable
Cons:
- no flexibility
- need to prepare various documentation (full marketing material and legal pack) ahead of the sale so can be costly
What is an auction? what party need to do and is it legally binding?
- It’s a public sale where the property is offered to the highest bidder.
- Parties will need to register before bidding and will be allowed to inspect the property before the auction day.
- The contracts are potentially exchanged at the fall of the hammer.
What are the actions that a seller must do before putting a property on auction?
Needs to:
- Provide legal pack
- Fix a reserve price below which the property will not be sold
- Prepare the auction particulars in line with CPR
What are the actions that an interested party must do before bidding on a property on auction?
- Arrange a 10% deposit
- Undertake an AML
What are the pros and cons of auction?
Pros:
- It’s useful to use for achieving a quick sale,
- It gives certainty that the price will only be sold if the reserve price is reached
- Useful for selling unusual properties which are difficult to value
Cons:
- Costs of promotion and publicity
- Lack of confidentiality over price achived
- Cannot choose the purchaser
What must agency instruction agreements include?
- Agency basis (sole / joint)
- Agency rights (sole selling / sole agency)
- Proposed fee
- Marketing costs & disbursements
- Confirmation of no COIs
- Money Laundering regulations requirements
- Timescale for the payment of fees and disbursements
- Details of CHP
What goes into Heads of Terms?
- Vendor
- Purchaser
- Property & Adress
- Tenure
- Purchase price
- Legal costs (each party responsible for their own ones)
- VAT details
- Timetable (exchange, completion etc)
- Conditions
- Solicitors details
What are the commercial SDLT rates?
£0 - £150k = 0%
£150 - £250k = 2%
£250k + = 5%
How do you seek proof of funds?
A written statement from the purchaser’s solicitor.
What items are typically in marketing?
EG
Data Room
Photography
Planning briefing paper
Promap plans
What does the RICS Professional Statement Conflicts of Interest UK Commercial Property Investment Agency 2017 relate to?
Specific risks identified with investment agency.
Deals with:
a. Dual Agency - cannot act for buyer and seller
b. Multiple introductions:
Obtain written consent
Information barriers
Inform seller on appointment
c. Incremental advice:
Obtain written consent
Information barriers
d. Personal/Own interest:
Transparent
Objective
Section 21 - Estate Agents Act
What is contained on a title register?
Title number, edition date
Property Register – describes the land in the title
Proprietorship Register – the class of the title, the owner, and any entries which affect disposal
Charges Register – any mortgages, other financial charges, notices and covenants affecting the land
Restrictive covenant – restriction on the use of land
How can fees be set up in a agency instruction?
- Fixed fee
- Percentage fee
- Tiered fee: different fees for different levels of service
- Hourly fee
- Performance fee: incentive to finalise the deal by a certain period
When does the EA Act apply?
- Applies during the sale or purchase period and applies to any:
- Disposal or acquisition of an interest in land
- Freehold property
- Leasehold property with a capital value
- land as well as buildings
What are the SEVEN key points which the Estate Agents Act 1979 promotes (CHOALK)?
The act ensures that agents act with:
- Clarity as to the terms of the agency (Section 18)
- Honesty and accuracy
- Agree in advance liability for costs
- Are Open regarding personal interest (Section 21)
- Do not act with discrimination
- Legal obligation to tell client about offers received
- Keep clients’ money separate
What typical clause would you include regarding to agency rights and fees? explain each of them?
- Sole Agency rights: fee will only be owed if the agent introduced the buyer (during contract period only)
- Sole Selling rights: fee will be owed regardless of whether the agent introduced the buyer - additionally, a fee is due after rights period ends if the purchaser/tenant was originally introduced by the agent.
- Ready able and willing purchasers’ clause: an abortive fee is due to the agent if the an applicant is ready and able to proceed with a purchase, but the client decides to withdraw
