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Charis APC > Purchase, Sale & Auctioneering > Flashcards

Purchase, Sale & Auctioneering Flashcards

Learn: Timeline of a sales instruction

1
Q

What are the 4 Methods of Sale ?

A
  1. Private Treaty
  2. Informal Tender
  3. Formal Tender
  4. Auction
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2
Q

What factors do you consider when choosing a method of sale ?

A
  • Clients Objectives
  • Public Accountability
  • Current and likely future market conditions
  • Likely level of demand for the property
  • Timing requirements
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3
Q

Methods of Sale: What is a Private Treaty ?

A
  • Parties are free to negotiate in their own time and without commitment in the open market (most popular method in UK. It is a private matter).
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4
Q

What are the advantages of Private Treaty ?

A
  • Flexibility
  • Parties control the process
  • Vendor not under any obligation to sell
  • Confidential
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5
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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6
Q

Methods of Sale: When do you use Informal Tender (Best Bids or Bids) ?

A

When there is a good level of interest in the property either from marketing or to bring negotiations to a conclusion.

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7
Q

Methods of Sale: Is the ‘best bids’ process legally binding ?

A

This is not legally binding upon parties, either party can withdraw at any point up to contract.

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8
Q

Methods of Sale: How should Informal Tender bids be opened ?

A

All bids should be opened in front of the client or independent witness/line manager.

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9
Q

Methods of Sale: Describe the process of calling for bids (Informal Tender)

A

The agent invites in writing all interested parties to submit their ‘best and final’ offer or ‘best bid’ in accordance with the set timescale. Within the letter should be;
- Date and Time offer should be in by
- Name and address of applicants solicitor
- Confirmation of finance arrangements
- Details of any conditions on the offer
- Confirmation that offers of a variable nature will not be considered
- the vendor reserves the right to accept any offer

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10
Q

Methods of Sale: When would you use Formal Tender (Sealed Bids) ?

A

Often used by a statutory body to give control and transparency over the marketing process

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10
Q

Methods of Sale: What must be included in the call for bids letter during informal tender ?

A
  • Date and Time offer should be in by
  • Name and address of applicants solicitor
  • Confirmation of finance arrangements
  • Details of any conditions on the offer
  • Confirmation that offers of a variable nature will not be considered (e.g offering a % more than others).
  • the vendor reserves the right to accept any offer (without this statement the informal best bids process could become a binding tender.
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11
Q

What should you remember about formal and informal tenders ?

A

“The Vendor is under no obligation to accept the highest, best or any bid.”

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12
Q

What materials must be provided during Formal Tender ?

A

Full marketing material, to include comprehensive pack, must be provided in advance of the tender process and a clear letter sent to all prospective purchasers setting out the information required accompanying the written offer

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13
Q

How should applicant bid during a Formal Tender ?

A

Blindly in a prescribed form without knowing what other parties are bidding

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14
Q

Differences between a formal tender and an informal tender: Formal tender (sealed bid)

A
  • Provides a potential purchaser with a single chance to bid for a property
  • High level of accountability
  • Detailed terms/conditions for the sale [published in advance with offer to bid letter]
  • There is no opportunity for a further bid
  • The highest figure is accepted (unless the vendor reserves the right to refuse any or all offers accepted and not agree to take the highest bid)
  • It is possible for the formal tender to lead directly to a contract for sale
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15
Q

Differences between a formal tender and an informal tender: Informal tender (best bid)

A
  • can be used during private treaty negotiations to obtain a best offer from applicants
  • Further negotiations can follow
  • Usually less onerous terms/conditions prepared
  • The informal tender will no lead direct to a contract for sale
  • It is sometimes used as a negotiating mechanism to invite all parties to bid
  • The vendor does usually state that they are under no obligation to accept the highest or any offer received
16
Q

Summary: Formal Tender process..

A

Formal tender only then sale

17
Q

Summary: Informal Tender process..

A

Private treaty then informal tender, perhaps more negotiations then sale

18
Q

Auctioneering : Advantages ? (4)

A
  • Achieving a relatively short timetable for property disposal
  • Certainty of sale
  • Useful method of sale for an unusual property which is hard to value
  • Used for property which is likely to generate a strong level of interest
19
Q

Auctioneering : Disadvantages ? (4)

A
  • Cost of promotion and publicity
  • Lack of confidentiality over achieved price
  • Vendor cannot choose purchaser
  • Intensive nature of a short marketing period
20
Q

Auctioneering : The procedure

A
  1. Terms of engagement agreed in writing in advance
  2. Conflicts checked prior to accepting instruction
  3. AML checks for all vendors and proposed purchasers in advance
  4. Clarity on Auctioneers rights to refuse bids, to regulate bidding increments, to accept proxy, telephone, internet and postal bids and to sign the contract on behalf of the vendor
  5. Full DD completed prior to property sale
  6. All property documents available in advance
  7. General conditions of Sale, Memorandum of Sale and any noticed to bidders are to be published by auctioneer.
  8. A reserve price (below which the property will not be sold)
  9. Contracts exchanged as the fall of the gavel
  10. Auction particulars are in accordance with Consumer Protection Regulations 2008 and Misrepresentation Act 1967
  11. Insurance required by purchaser at point of exchange
21
Q

Auctioneering: What actions are required by a purchaser before the sale day ?

A
  • To view the property and consider structural survey
  • Take proper legal advice and completed DD
  • Read the Notice of Prospective Buyers
  • Arrange a deposit of 10% & insurance for exchange
  • Provide ID for money laundering procedures
22
Q

What are the 3 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 the successful get a fee
23
Q

What is TOGC status ?

A

Transfer of a going concern (TOGC) is when a business, or part of a business, is sold and meets certain criteria which mean it is deemed to be a TOGC rather than a transfer of assets. In this scenario, no VAT applies to the value of the transaction, and it is ‘outside the scope’ of VAT

24
Q

Agency Instruction Agreements: Agency instructions must include ?

A
  • Agency basis (joint/sole)
  • Agency rights (sole selling or
  • Proposed fee
  • Marketing costs and disbursements
  • Confirmation of no COI
  • AML regulation requirements
  • Timescale for fee & disbursement payments
  • Details of complaints handling procedure
  • Must be signed and returned to agent prior to marketing
25
Q

Agency Instruction Agreements: Do you know any case law regarding Agency agreements ?

A

Wells vs Devani, (2019)
Supreme Court held that a ‘sketchy oral agreement’ made by ‘phone between a residential sales agent and their client was legally binding, interpreted in context and taking the parties’ behavior into account

26
Q

Agency Instruction Agreements: Pros of Sole Selling rights ?

A

Agent receives fees following contract exchange (completion of sale) even if the agent didn’t introduce the purchaser

27
Q

Agency Instruction Agreements: Cons of Sole Agency rights ?

A

Agent can only receive a fee if they introduced the purchaser within the instruction period. If the client finds the purchaser, the agent gets no fee.

28
Q

Failure to Complete a Transaction: A ‘ready able and willing purchasers’ clause

A

Defined in the Estate Agents Act 1979:
This clause is often included in instructions so that when an applicant is ready and able to proceed with a purchase, but the client decides to withdraw, the agent may be able to receive an abortive fee.

29
Q

Steps for Acquiring a property: DD before ToE

A
  • COI and competence
  • AML and sanctions check
  • Agree TOE
30
Q

Steps for Acquiring a property: Steps taken to identify a property for your client

A
  • Understand client objectives and agree parameters
  • Consider techniques to find properties (cold calling/ advertising / websites etc)
  • Measurement and valuation
  • Check planning use/consent/conditions/any proposed developments on planning portal
31
Q

Define the basis of valuation for a ratable value

A
32
Q

Where do you find rating guidance ?

A

RICS Website
General Rate Act 1967
Local Government Finance Act 1988
Rating Valuation Act 1999
and over 200 Statutory Instruments

33
Q

Property Acquisition: Service charge arears ?

A
34
Q

Forms of Purchase Vehicles: What is an SPV

A

SPV - Special Purchase Vehicle companies - a company formed specifically to buy a property to reduce the payment of SDLT

35
Q

Forms of Purchase Vehicles: What is a JUPT

A

JUPT - Jersey Property Unit Trusts - Offshore unit trust

36
Q

Forms of Purchase Vehicles: What is a REIT

A

REITs - Real Estate Investment Trusts - a company tax resident in the UK which is listed on a Stock Exchange and has at least 75% of its business in property investment.

37
Q

Forms of Purchase Vehicles: What is a Joint Venture ?

A

JV - Joint Venture - a business arrangement where two or more parties come together to form a new entity or partnership, often pooling resources for a specific task

Charis APC (10 decks)

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