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Purchase & Sale Flashcards

1
Q

What are the FOUR main methods of sale

A

lPrivate Treaty, Informal Tender, Formal Tender and Auction

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2
Q

What must you consider when using each method of sale

A

Client objectives
Public accountability
Current and likely future market conditions
Likely demand for the property
Timing requirements

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3
Q

What is Private Treaty

A

Where parties are free to negotiate in their own time and without commitment in the open market

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4
Q

What is the most popular type of sale

A

Private treaty

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5
Q

What are the advantages of private treaty

A

Flexibility
The parties control the process
The vendor is not under any obligation to sell
Confidentially

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6
Q

What are the disadvantages of private treaty

A

The potential for gazumping or gazundering
Late decisions not to buy
Associated abortive costs

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7
Q

What is informal tender summary

A

Best offers or best bids

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8
Q

When is informal tender used

A

When good level of interest in property, either at commencement or to bring negotiations to a conclusion

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9
Q

Is Informal Tender (best bids) legally binding?

A

No, either party can withdraw at either time

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10
Q

What is informal tender (in length description)

A

The agent invites in writing all interested parties to submit their best and final offers in accordance with a prescribed timetable

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11
Q

Informal tender: what is included in the the letter to interested parties

A

Required date and time of receipt of the written offer
Name and address of applicants solicitor
Confirmation of finance arrangements
Details of any conditions attached to the offer
Confirmation that offers of a variable nature will not be considered
The vendor reserves the right not to accept the highest, or any offer made.

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12
Q

Informal Tender: Does the Vendor have to pick the highest or any offer submitted?

A

Not, not if stated in a statement saying so. Without the statement, the informal bid process could become binding tender

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13
Q

What is formal tender (summary)

A

sealed bids

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14
Q

When is formal tender used

A

Often by statutory body to give control and transparency over marketing process
Provides high level of public accountability, or when there may be strong interest for property

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15
Q

In a formal tender is the vendor under obligation to accept highest bid

A

No, not if included in letter to prospective purchasers

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16
Q

Formal tender - who should open the bid

A

All bids should be opened in front of client, or an independent witness / line manager

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17
Q

What is a disadvantage for a purchaser (submitting a bid) in formal tender

A

There’s no opportunity to increase their bid after the submission of their offer

18
Q

What is difference between formal and informal tender

A

Formal tender
- provides potential purchaser with single chance to bid
- high level of accountability
- detailed terms / conditions for the sale are prepared by the vendor and published in advance within the offer to bid letter
- No opportunity for further bid
- highest figure accepted (unless vendor states right to refuse highest / any offers)
- Possible for formal tender to lead direct to contract for sale

Informal tender
- Can be used during private treaty negotiations to obtain a best offer from applicants
- Further negotiations can follow on from outcome of this process
- Usually less onerous terms / conditions are prepared
- Informal tender will not lead to a contract for sale
- Sometimes used in negotiating to get parties to bid
- Vendor can state they’re under no obligation to obligations to accept highest / any bid.

19
Q

Summary for formal tender process?

A

Formal tender only = sale

20
Q

Summary for informal tender process

A

Private treaty - informal tender - perhaps more negotiations - sale

21
Q

What comes before informal tender

A

Normally private treaty

22
Q

What comes after private treaty

A

Normally informal tender

23
Q

What are the advantages for auctioneering

A
  1. Achieving a relatively short timetable for disposal of the property
  2. Certainty of sale, assuming a reserve figure is achieved, that the property is sold
  3. Useful method of sale for unusual property / hard to value properties
  4. Used when property has strong level of interest
24
Q

What are disadvantages for auctioneering

A
  1. Cost of promotion and publicity
  2. Lack of confidentiality over price achieved
  3. Vendor cannot choose the purchaser
  4. Intensive nature of a short marketing period
25
Q

What is the procedure for auctioneering

A
  1. Terms of Engagement agreed in writing in advance
  2. Conflict of interest undertaken prior to taking instruction
  3. Money laundering checks completed now for all vendors and proposed purchasers in advance.
  4. Clarity required that Auctioneer has right to refuse bids, to regulate bidding increments, to accept proxy, telephone, interest and postal bids and to sign contract on behalf of the vendor
  5. Full due diligence completed prior to offering property for sale
  6. All relevant documentation regarding the property to be sold must be available for inspection in advance
  7. General conditions for sale, memorandum of sale and any notices to bidders are to be published by auctioneer.
  8. Reserve price to be agreed with vendor
  9. Contracts exchange at fall of gavel
  10. Auction particulars in catalogue must be prepared in accordance with requirements of Consumer Protection Regulations 2008 and Misrepresentation Act 1967.
  11. Specific guidance is provided by RICS in respect of online marketing and contact of electronic bidding / dealing with clients money. Insurance required by purcahser at point of exchange
26
Q

In an auction, when is insurance required?

A

Insurance required by purchaser at point of exchange.

27
Q

What’s key in Consumer Protection Regulations 2008 and Misrepresentation Act 1967 in auctioneering

A

The auction particulars are in the catelogue and in accordance with the requirements in the CPR 2008 and M 1967

28
Q

Auctioneering: What is required by a purchaser before the auction day

A
  1. View the property
  2. Consider structural survey
  3. Take property legal advice
  4. Complete due diligence
  5. Read the notice to prospective buyers
  6. Arrange a deposit of 10% & insurance for exchange
  7. Provide ID for money laundering procedures
29
Q

What are the THREE types of agency

A
  1. Sole Agency: only one agent
  2. Joint agency: two or more joint agents sharing a fee on a pre-agreed basis
  3. Multiple agency: any number of agents, but only successful agent gets fee
30
Q

What’s the difference between joint and multiple agency

A

Joint is normally two or more agents, but share a fee on a pre-agreed basis. Multiple agency is any number of agents, but only the successful agent gets the fee.

31
Q

What’s the timeline of a sales instruction

A
  1. Receive instructions from the client
  2. Check competence and independence
  3. Issue agency instruction agreement to client
  4. Receive agreement signed by client
  5. complete money laundering checks
  6. Gather information: inspection details, leases, legal title documents, planning information
  7. Undertake due diligence - read the lease, environmental, planning, legal, contamination, tenant covenant status
  8. Check VAT position of the vendor and whether sale has TOGC status
  9. Inspect and measure the property
  10. Confirm position with fixtures and fittings with vendor
  11. Research market and assemble and verify comparable evidence
    12> undertake valuation of freehold interest (not red book global)
  12. Prepare marketing report with recommendations
  13. Obtain written approval of the contents of the marketing particulars
  14. Undertake the marketing campaign as agreed
  15. Negotiate the sale, draft heads of term and instruct lawyers
  16. Liaise with vendors lawyer
  17. Assist with any queries during legal formalities
  18. Issue invoice upon completion of transaction and retain file.
32
Q

What’s the act for obtaining written approval for marketing particulars

A

Consumer Protection Regulations, 2008 and Misrepresentation Act 1967 et al.

33
Q

Agency Instruction Agreements: Must set out clearly what?

A
  1. Agency basis (sole / joint)
  2. Agency rights (sole or agency rights)
  3. Proposed fee
  4. Marketing costs and disbursements
  5. Confirmation of no COI
  6. Money laundering regulation requirements
  7. Timescale for payment of fees & disbursements
  8. Details of the practices complaints handling procedure
    Must be signed and returned to agent before marketing commences
34
Q

Describe sole selling rights and sole agency rights. Specifically when fees are due

A

The typical clause is sole selling rights

Sole Selling Rights: The agent gets paid regardless of who finds the buyer.
Sole Agency Rights: The agent only gets paid if they find the buyer; the owner can sell without paying a commission.

35
Q

What is a ‘ready able and willing purchasers’ clause

A

Defined in the Estate Agents Act 1979
Clause often included when an application is ready and able to proceed with a purchase, but the client then decides to withdraw, an abortive free may be charged by the agent.

36
Q

What happens if there’s a failure to complete a transaction

A

Notice to Complete

  • The vendor can serve a Notice to Complete on the proposed purchaser giving them a deadline to completed.
  • The legal costs for this work are to be paid by the proposed purchaser
  • If deadline has passed, vendor can rescind the contract and remarket the property
  • Any deposit can be retained by the vendor
  • The vendor can sue for damages to claim for any loss in value, following the sale of the property to another party at a lower sale price.
37
Q

If the purchaser fails to complete a transaction, can the vendor keep the deposit

A

Yes

38
Q

If the purchaser fails to complete a transaction, can the vendor sue

A

Yes, they can sue for damages to claim for any loss in value following the sale of the property to another party at a lower sale

39
Q

What should be done prior to undertaking a property acquisition

A
  1. COI
  2. Competence
  3. Undertake money laundering check
  4. Agreement of TOE
  5. Understand objectives and search parameters
  6. Consider techniques to find properties (cold calling, advertising, websites)
  7. Measurement and valuation
  8. heck for planning use / consent / conditions
  9. Undertake due diligence (flooding, asbestos, legal title)
  10. Check for any rent or service charge arrears
  11. Covenant approval and information to be supplied to landlord / vendor
  12. Negotiation and instruction of solicitors
  13. Conditional contract can be agreed for various conditions to be satisfied post exchange of contract and before completion (such as achieving planning consent and vacant possession).
39
Q

What are forms of purchase vehicles

A
  1. Special Purchase Vehicle (SPV) companies - a company formed specifically to buy a property to reduce the payment of SDLT
  2. Offshore unit trusts such as JPUTs (Jersey Property Unit Trusts)
  3. Real Estate Investment Trusts (REITS) - a company tax resident in the UK which listed on Stock Exchange (has at least 75% of its business in property investment)
  4. Joint Venture

Flashcards (20 decks)

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