Purchase & Sale Flashcards
- What is incremental advice?
a. When an agent is approached by another party for advice related to purchase/disposal that is incremental to an existing instruction
b. Example: estate agent approached by buyer to undertake a valuation
c. RICS members can only provide incremental advice if consent is given and info barriers are in place
RICS Professional Statement - UK Residential Real Estate Agency, 2017 (6th Edition)
Provides summary of code of practice for property marketing for residential property
Relates to:
* Standards and ethics
* Ending the instruction
* Acting for purchaser, seller or Landlord
* Relevant estate agency legislation
Methods of sale
1) Private Treaty
* Most popular method of sale in England
* Parties are free to negotiate in their own time and without commitment.
Advantages:
* Parties control the process
* Flexibility
* Vendor is not obliged to sell
Disadvantages
* Potential for gazumping
* Late decisions not to buy
* Associated abortive costs
2) Informal Tender (Bids)
* Used when there is a good level of interest in the property
* Best bids is not legally binding on the parties either can withdraw at any point
* Agent invites best and final bids to parties in writing in accordance to the predetermined timeline
3) Formal Tender (Sealed bids)
* The vendor can state there is no obligation to accept the highest bid
* Full Marketing and legal pack to be sent in advance of tender to prospective purchasers
* Applicants bid blindly without knowing what others offered
* No opportunity to change or increase bid
* Once best bid is selected, in some instances contracts are exchanged
4) Auction
- Reserve price agreed with vendor
- Contracts exchanged at fall of the gavel
- Auction particulars to be drafted in accordance with Consumer Protection Regulation 2008 and Misrepresentation Act 1967
- short timetable and more certainty of sale. Costs to promote, vendor can’t choose purchaser and lack of price confidentiality
What are the key principles of the following main Estate Agency legislation?
A) Estate Agency Act 1979
B) Misrepresentation Act 1967
C) Consumer Protection Regulation 2008
D) Consumer Rights Act 2015
A) Estate Agency Act 1979
- S.18: clarity as to terms of agency
- S.21: openness regarding personal interests
- Obligation to tell clients about offers received
- Penalty: warning, fine or prohibition order
B) Misrepresentation Act 1967
- pre-contract phase
- duty of care to check information
- penalty for non compliance: sued or contract rescinded
C) Consumer Protection Regulation 2008
- applies during the entire sales and lettings process
- illegal to give false or misleading marketing information
- penalty: unlimited fine, prison up to 2 years, or prohibition order
D) Consumer Rights Act 2015
- 14 day cooling off period
Name the types of tenancy
Assured Tenancy
- Type of tenancy that some private tenants and most housing association tenants have.
- A landlord can only end an assured tenancy if they have a legal reason or ground for possession. For example, rent arrears or antisocial behaviour.
AST
- Issued by HA and private landlords
- tenancy started on or after 15 Jan 1989
- has to be tenant’s main address
- rent is under £100k a year
Regulated Tenancies (also known as protected or secure tenancy)
Explain the sales process
- Receive instruction from client
- Check competence
- Issue terms of engagement
- Receive signed terms of engagement
- Complete AML checks
- Gather information i.e. inspections / undertake due diligence
- Undertake valuation for market price using comparable method
- Prepare marketing material (written approval by vendor)
- Undertake marketing campaign
- Negotiate sale, draft heads of terms and instruct solicitor
- Liaise with vendors solicitor till exchange.
What is a TR1 form?
A TR1 is a Land Registry form. Must be completed when a house is being registered for the first time or is being transferred to another party.
What is hope value?
The element of value of land over and above the existing use value ie reflects the prospect of potential development/alternative use.
What is Marriage Value?
created by a merger of interests
What is Overage?
an agreement that the buyer will pay extra, on top of the original purchase price i.e. if buyer is able to obtain planning permission increasing the value
What is a Special Purchaser?
Has a special interest in the property
What is leasehold and freehold?
Freehold - Land is owned into perpetuity
Leasehold - Land is owned for a specified time (999 years) peppercorn / ground rent paid to freeholder
What does term ‘Without prejudice’ mean?
It is a legal term which is often used during negotiations to imply that any liability or fault cannot be attached to a statement or a proposed offer.
What are the pros and cons of each method of sale?
a. Private Treaty – Flexible, parties control the process, confidential and vendor not under obligation to sell. Can be gazumped as a buyer, buyer/seller can pull out
b. Formal Tender – Vender has choice to accept offer of their choice. Bids cannot be changed after submission. Speeds up the process to exchange of contracts
c. Informal Tender – Vender has choice to accept offer of their choice and they can pull out. Buyer can also pull out
d. Auction – short timetable and more certainty of sale. Costs to promote, vendor can’t choose purchaser and lack of price confidentiality
What is the current rate of stamp duty?
a. Only applies to property over £250,000
b. The portion from £250,001 - £925,000 = 5%
c. The portion from 925,001 to £1.5m = 10%
d. The portion from £1.5m and above = 12%
e. No stamp duty up to £425,000 for FTBs
