Purchase & Sale

Question 1

What are the different methods of sale?

Answer 1

Private Treaty
Informal Tender
Formal Tender
Auction

Question 2

When is private treaty used?

Answer 2

When no specific timescales are necessary. Allows the seller to accept an offer at any time. Flexible, retains control, however can take longer to sell.

Question 3

What is the difference between informal and formal tender?

Answer 3

Formal - deemed to have exchanged contracts at the bid is accepted. Expensive, independent witness required to be present when opening bids.
Informal - not legally binding, usually a prescribed period of time to complete.

Question 4

When would an auction be used?

Answer 4

Target timescale to complete. Visible bids can drive up sale price but no guarantee.
More uncertain on price.

Question 5

What factors are affecting the land sales market currently?

Answer 5

High interest rates
Two wet summers in a row means harvests are depleted, purchasers wary of volatile production levels.
For investors - change in government brings risk of change to APR

Question 6

What factors are affecting the residential property market currently?

Answer 6

High interest and mortgage rates
Cost of living crisis
Inflation down to 2% however peaked at 11.1% in October 2022 (affects mortgage rates)

Question 7

Farm Machinery Auction (L2)
Briefly outline how you registered bidders and why.

Answer 7

Obtain ID and proof of address within the last month and check they match. Add their details to the GAP platform and give them a buyers number.
Required under the Anti Money Laundering, Terrorist Financing and Transfer of Funds Information on the Payer) Regulations 2017.

Question 8

Farm Machinery Auction (L2)
Was a tractor or combine sold? If so, what key information would the buyer need to be aware of?

Answer 8

Yes, tractors.
make, model, age, hours, registration, 2/4 wheel drive, quick hitch, links, PTO shaft.

Question 9

Farm Machinery Auction (L2)
Where and when were the farm machinery auctions? What factors affected the auction result?

Answer 9

Both were early autumn, one 2022 one 2023. Both were vintage machinery, appeal more to collectors so time of year didn’t have much bearing.

Question 10

Farm Machinery Auction (L2)
What guidance is available relating to the handling of Client Money? Where did the funds from the auction go?

Answer 10

RICS Professional Standard - Client Money Handling 1st Edition, October 2019, effective from January 2020.
Under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, cannot accept cash for payments over £7,500.
Money from auction held in a client account, clearly labelled client before being transferred to the clients own account once correct amounts confirmed.

Question 11

Leeds Allotment (L2)
What were the key points covered in your marketing recommendations report?

Answer 11

Introduction
Property Overview
Pre Sale Considerations
Method of Sale
Pricing Strategy
The Way Forward (e.g. marketing costs)

Question 12

Leeds Allotment (L2)
What were the recommendations?

Answer 12

Believed a sale of around £60,000-£80,000 was achievable. Recommend opening price of £80k via online auction or private treaty, depending on clients wishes (i.e. timescales, or higher sale price).

Question 13

Leeds Allotment (L2)
Who was the owner of the allotment?

Answer 13

Private client

Question 14

Leeds Allotment (L2)
How would your advice differ should this have been a local authority?

Answer 14

Section 8 of Allotment Act 1925 would apply. Consent required from the secretary of state to sell for any purpose other than for allotments.

Question 15

East Drayton Auction (L3)
Why did you use auction over other methods?

Answer 15

The client wished for known timescales and to sell for the highest amount, auction allowed a known closing date and created competition.

Question 16

East Drayton Auction (L3)
Briefly explain how the auction process works.

Answer 16

• After undertaking COI, LOE, TOB, and AML.
• Photographs taken for brochure.
• Brochure drafted
• Prior to marketing, solicitors instructed to create legal pack
• Listing uploaded to auctions site and advertising undertaken
• end date and time, successful bidder notified and deposit contribution/bidders fee taken.
• Subject to sale being agreed, sale memorandum sent to solicitors.
• Keep client informed throughout process.

Question 17

East Drayton Auction (L3)
What does the solicitors legal pack contain?

Answer 17

title docs
searches
special conditions
contract
transfer doc
any tenancies or licences

Question 18

East Drayton Auction (L3)
What did the brochure contain?

Answer 18

address, plans, size, sale method, access, other fees, contact details, wayleaves, overages, directions, viewings, health and safety

Question 19

East Drayton Auction (L3)
Explain what a buyer had to do in order to bid.

Answer 19

1. Register
2. Authorise (AML and ID - done through website)
3. Once registered and authorised, free to bid.
4. Exchange occurs immediately at the end of the specified period. Legally bound to buy
5. Payment of deposit contribution and bidders fee
6. Have by 12pm next day to transfer remainder of deposit
7. If not carried out, buyer may forfeit all money paid so far.

Question 20

Priory Farm (L3)
How did you go about advising your client of a suitable offer for the land?

Answer 20

Obtained comparable evidence - £9k/ac
Applied 20% premium - £10.8k/ac

Question 21

Priory Farm (L3)
How did you calculate the premium?

Answer 21

Advised by an RICS valuer that 20% uplift would be appropriate to account for marriage value and to account for the fact that the property was not on the open market.

Question 22

Priory Farm (L3)
Explain what the difference would be if there was no premium.

Answer 22

20% if no marriage value and no uplift for an off the market sale.

Question 23

Priory Farm (L3)
What is marriage value?

Answer 23

Also known as synergistic value.
It is the additional element of value created by the combination of two or more assets whereby the combined value is more than the sum of the separate values.

Question 24

Upper House Farmland (L3)
Briefly explain what methods of sale you considered for this land.

Answer 24

Due to the landlocked nature of the property, an off the market sale or requesting best and final offers would be the most appropriate.

Question 25

Upper House Farmland (L3)
Why did you decide on the chosen method of sale?

Answer 25

Given the absence of retained access rights to the parcel, a sale to a neighbouring landowner was the only reasonable options, and as such they were contacted off the market initially to gauge interest. If more than one interested party with strong offers, we would have requested best and final offers.

Question 26

Upper House Farmland (L3)
Briefly explain how you invited offers and what information did you request to help best advise your client?

Answer 26

1. Obtained LR info on 5x surrounding landowners
2. Wrote to each explaining client is considering options.
3. Would they like to put offer forward, if yes by 30th November 2023.
4. Ask for name, address, solicitor details, any conditions, loan or other finance details, how quickly can they progress.

Question 27

Upper House Farmland (L3)
What regulations did the AML checks fall under and how did you undertake these checks?

Answer 27

The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. Looks into financial history of the purchaser and reduces the risk of fraud.

Obtained ID and proof of address within last month, run through smart search system before accepting offer.

Question 28

Cat Hill Wood (L3)
Why did you decide to invite offers on Cat Hill Wood instead of considering other sale methods?

Answer 28

Given the success of the sale of Upper House Farmland, the client asked us to attempt a similar sale of an off-lying parcel of woodland.

if no significant interest, then consider sale by auction.

Question 29

Cat Hill Wood (L3)
How did the market conditions affect the advice given to your client?

Answer 29

Woodland comps in the area showed roadside parcels to be selling in the region of £5-7k/acre. The offer received was from a party whose access track went through the property and would have had an element of marriage value.

Question 30

Cat Hill Wood (L3)
How was it in your clients best interests to accept the offer received?

Answer 30

Offer far exceeded comparable evidence, no real value to them to retain, more of a burden in terms of tree safety with it being roadside and no rent received. Part of wider strategy to dispose of small outlying parcels of woodland.