Purchase & Sale Flashcards
Tell me about the four methods of sale.
・Auction
TofE agreed, including reserve price and right for auctioneer to sign contract on seller’s behalf, legal packs are published, when gavel falls, contracts are exchanged and 10% deposit is paid by purchaser and insurance arranged
・Private Treaty
Property is marketed openly inviting purchasers to ‘treat’ with the seller
・Formal Tender
Complex and rigid with bid deadline - usually used by Public Sector. Bids are binding on the offerors and no opportunity to withdraw or alter bids after. Offers are opened in front of independent witness, the parties go straight to exchange
・Informal Tender
Parties bid by a deadline, tender details specify what is required, bids should be opened in front of independent witness
Tell me about an advantage/disadvantage of sale by private treaty/formal tender/informal tender/auction.
Private Treaty
Positives:
・Flexibility to negotiate
・Marketing budget can be tailored to the client
・Inexpensive
・Seller is not obliged to sell
・Confidential process
Negatives:
・Potential for unethical gazumping or gazundering
・Abortive costs of late withdrawals
Informal Tender
Positives:
・Not binding
・Still relatively inexpensive
Negatives:
・Still a risk of gazundering
Formal Tender
Positives:
・Certainty of sale if an offer is accepted
・Quick exchange as all information is provided by the purchaser in their bid
・Transparent and allows full control over the process, which is good for statutory & public bodies
Negatives:
・Expensive as a full marketing pack must be prepared
・Common for the seller to assume an obligation to accept the highest bid
Auction
Positives:
・Quick sale when under time constraints
・Certainty over selling terms
Negatives:
・Expensive advertising costs
・Not confidential
・Failure to sell may lead to the property becoming ‘blighted’
・Little control over the identity of the purchaser
Tell me about the legal processes to complete a purchase/sale.
・Seller’s conveyancer provides legal title plan and register and draft contract
・Purchaser’s side negotiates contract and raises pre-contracted enquiries
・Enquiries are answered and buyer carries out satisfactory searches
・Purchaser recieves loan (if applicable)
・Completion date agreed and contracts are exchanged - both parties legally committed and deposit is paid
・Memorandum of Sale is agreed and completion occurs - purchaser’s conveyancer transfers payment to the vendor’s conveyancer and receieves the title deed and transfer deed in return
How do exchange and completion work in an auction transaction?
・When the gavel falls, contracts are exchanged and deposit paid (10%)
・Completion date set (typically 4 weeks)
Tell me about your understanding of legislation relevant to your agency practice.
・Estate Agents Act 1979
・Consumer Protection Regulations 2008
・Business Protection Regulations 2008
・Misrepresentation Act 1967
Tell me about your understanding of the Estate Agents Act 1979.
・Purpose is to make estate agents act in the best interest for their clients and that sellers and buyers are treated honestly, fairly and promptly
・Mandatory for P&S
・Covers the duties estate agents own to clients e.g. provide a comprehensive breakdown of fees and charges and declare personal interest before acting
What are the 6 key principles of the Estate Agents Act 1979?
The Estate Agents Act 1979 promotes 7 principles (18 21 HAANOK):
18 – Clarity in terms of agency and fees
21 – openness regarding personal interests
HA – Honesty and accuracy
A – Agreement and liability for costs
N – No discrimination
O – Obligation to tell clients about offers received
K – Keep client’s money separate
The most important points are:
- Specify all costs/fees in advance (S.18)
- Itemise all payments
- Specify nature of agency
- Disclose personal interests (S.21)
- You must inform clients of any offers truthfully
- Follow RICS rules when handling money
How does Section 18 relate to your agency practice?
Clarity in terms of agency and fees.
The following must be agreed in writing before work is started on the instruction:
・TofE
・Fees
・Agency basis
・Services provided
・Marketing strategy
What are the four agency bases?
・Sole selling rights
・Sole agency
・Joint agency
・Multiple agency
What are the differences between the four agency bases?
・Sole selling rights - An agency agreement for a set period of time within which a fee is due if a sale is agreed by anyone.
・Sole agency - Exclusive right to market for a set period of time but a fee is not due if the sale is introdcued by the client.
・Joint agency - Two agents with agency rights and fee arrangements to be agreed.
・Multiple agency - Multiple, competing agents.
Where are the four agency bases defined?
・S18 Estate Agents Act 1979
What is a ready, willing and able purchaser?
・Defined by The Estate Agents (Provision of information) Regulations 1991
・Ready (in a position to sign a contract)
・Willing
・Legally capable
・Financially capable
How does Section 21 relate to your agency practice?
・S21 of the Estate Agents Act 1979
・Agents must disclose any personal interest they have in a property before acting
What 3 things do you need to make a contract?
・Offer
・Consideration
・Acceptance
Can a verbal contract be legally binding?
Yes
What is capacity in relation to contract law?
Some parties have limited capacity to enter into and have contracts enforced upon them
・Corporations
・Minors
・People with mental incapacity
・Drunk people
Does the sale of land have to be in writing and what Act defines this point?
・Law of Property (Miscellaneous Provisions) Act 1989
・A contract for the sale of an interest in land must be in writing and only by incorporating all the terms which the parties have expressly agreed in one document
Tell me about key points of the Consumer Protection / Business Protection Regulations.
Consumer Protection Regulations
・When dealing with consumers, traders - must act fairly
・Provide accurate information
・Avoid unfair, misleading or aggressive business practices
Business Protection Regulations
・Prohibits misleading business-to-business advertising
・Imposes restrictions on how businesses can compare the products to rivals’
What is an average consumer/material information?
・Average Consumer - Reasonably well informed, reasonably observant and circumspect
・Material Information - Any unavoidable costs that will be incurred by the occupier regardless of the way it is occupied e.g. service charges, business rates
What are considered to be unfair practices under this legislation?
・False endorsements/authorisations (e.g claiming you’re part of RICS when you’re not)
・Misleading Availability (e.g stating a product is only available for a limited time to make a customer make a quick decision)
・Misleading context/effect (e.g fake closing down sales)
・Pyramid schemes
・Aggressive Sales (creating the impression a customer can’t leave until they sign a contract etc)
・Unreasonable demands (requiring a customer who wishes to claim on an insurance policy to produce irrelevant documents
・Inertia Selling (demanding payment for products sent to the consumer that they did not ask for)
How does the Misrepresentation Act 1967 relate to your agency practice?
・Ensures parties have an option to pursue in contract law and law of tort if misrepresentation causes loss to one of the parties
・If misrepresentation is found, a contract founded on this information can be effectively voided
・Can be fraudulent, negligent or an innocent mistake
What does the Unfair Contract Terms Act 1977 say?
・Imposes limits on the extent to which contractual provisions like ‘exclusion clauses’ can be used to avoid liability for breach of contract, negligence or other breaches of duty
Tell me three key issues raised in the RICS Real Estate Agency and Brokerage Standards / RICS Commercial Real Estate Agency (Purple Book).
RICS Real Estate Agency and Brokerage, 2016 (PS)
・Very similar to RICS UK Commercial Estate Agency, 2016 but focuses on purchase & sale rather than leasing & letting
1. Ethics & duty of care – diligent service, act within scope of competence, avoid conflicts, don’t discriminate
2. Securing instructions – Terms of engagement, including fees, agency basis. Also KYC and AML.
3. Advice on Acting for the seller – Give realistic and justifiable likely selling prices that reflect your professional judgement and market conditions and confirm this in writing. Keep records of how you arrived at this value – inspection notes, comps etc
4. Acting for the seller: agreeing the sale – make reasonable endeavours to find out the source of funds, communicate all offers in writing to the client immediately, confirm acceptance and conditions in writing to the buyer.
5. Acting for the buyer – use your market knowledge and networks, provide frequent updates to the client and confirm offers & acceptance promptly in writing.
6. Ending the Instruction
7. Safety & Security – Confidentiality, data protection & personal safety.
Tell me about a factor which drives property markets.
・Supply
・Demand
・Interest rates
・SDLT holiday
・Government policy - Use Class change
Tell me about supply and demand in a property market you are familiar with.
・Retail market
・Over supply of reatil units
・Low demand compared to recent years, however there is appetite
・Industrial market
・Restricted supply (5% vacancy rate)
・Strong demand and thus upward rental pressures
Tell me about government incentives which impact demand in relation to your purchase & sale work.
・SDLT had a big impact on demand - removing additional costs a purchase would usually take on, thus purchasers saw this as an opportunity to buy
What is SDLT
Stamp Duty Land Tax - a tax imposed by the U.K. government on the purchase of land and properties with values over a certain threshold.
What are the different types of interest in land?
・Freehold
・Long leasehold
・Leasehold
・Legal interests - e.g. easements
・Equitable / beneficial interests - e.g. beneficiary of a trust that owns an investment
What is the difference between freehold and leasehold?
・Freehold - Absolute ownership: registered on land registry and has the deed
・Leasehold - Ownership of the property for a set period of time, but not the land it is built on
Where are interests in land defined?
・Law of Property Act 1925
・Freehold, leasehold, easements
What is an example of an equitable interest in land?
・Where someone has paid one or more instalments on the purchase of the property but not yet the full sum and so hasn’t been provided with th property deed
What is an example of a legal interest in land?
Freehold, leasehold, easement
Why would you use online marketing for a purchase/sale transaction?
・Hit other agents, wider range of marketing, hit national and regional occupiers/developers
Why would you use a marketing board for a purchase/sale transaction?
・To hit local occpiers, investors, developers
Tell me about an information pack you have prepared for a purchase/sale transaction.
Cowfold
- Title plan
- EPC
- CPSE