Purchase & Sale - KT Qs Flashcards
Which types of transaction have you had experirence of?
Private Treaty & Informal Tender
What are the advantages/disadvantages of Private Treaty?
Pros:
Flexibility
The parties control the process
The vendor is under no obligation to accept the best, highest or indeed any offer.
Cons:
Gazumping (bidding higher last minute)
Gazundering (Chipping at the offer)
Late decisions not to buy.
Can be slow process (no defined deadline)
What are the advantages/disadvantages of Informal Tender?
Advantages:
Allows room for negotiation
Inexpensive (compared to auction)
The vendor does not have to accept the best, highest or indeed any offer
Purchasers have the ability to alter/change their offer
Purchasers can withdraw their offer after it has been submitted.
Disadvantages:
Possibilities of offers made by bidders who have not secured full finance
Conditional bids (e.g. subject to planning)
Difficult market conditions may discourage bidders (sitting on the fence)
From a buyers prospective they can be played off against one another
Gazumping / Gazundering
When would you recommend auction?
When the vendor wants a quick transaction & fast means of sale
When dealing with an unusual property type (hard to predict likely sale price)
When the property is likely to have high level of demand
When the property is likely to appeal to cash buyers
What are the 6 principles of the Estate Agents Act (1979)?
- Agents must act with Honesty & Accuracy
- Section 18 - Clarity on Terms of Engagement (ToE) and basis of agency clearly outlined.
- NO DISCRIMINATION (all have equal opportunity)
- Section 21 - Disclose any Personal Interests (‘Connected Person’ who could benefit from the transaction).
- EAA says you MUST report ALL offers recieved to the client (promptly & in writing).
- EAA says you MUST keep Client’s Money Separate (separate named bank account with the word ‘client’).
What basis of agency did you use in your Waterloo example?
What does that mean?
Sole Agents (this meant that the full fee would be paid upon completion).
I also ensured Sole Selling Rights (where the fee would be owed even if agent didnt introduce the purchaser).
Talk me through a sale or purchase you have been involved in?
(Waterloo Example - Level 3)
I advised a client looking to dispose of a Freehold office building in Waterloo.
This was an island site, next to Waterloo station and on a street market which is very buzzy.
I assessed my competence (SUK), carried out CoI check, ensured ToE were signed and returned, satisfied AML checks on the vendor before accepting the instruction.
I reviewed the Title Deeds and Title Plan for the building.
I then inspected and measured the property and prepared marketing particulars that were approved by the client, before bringing the property to the market.
The method of sale was initially Private Treaty, with the option to go to informal tender in light of strong interest.
During the marketing period, I undertook numerous viewings with a strong level of interest shown from investors, developers and owner occupiers.
Based on this strong interest, I advised the client to call for bids via an informal tender process, as this would allow the most flexibility.
I sent a ‘Call for Bids’ email to all parties who had expressed interest, stating the date and time offers were to be received by (and a caveat my client was under no obligation to accept the best, highest or any offer).
I the collated the salient information into an ‘offer schedule’ and arranged a meeting with the client to discuss. Given the quantity of offers, I advised inviting the strongest bids to a second round.
I advised proceeding with an owner-occupier who had made the highest unconditional bid, a reliable track record and a suitable timeframe for completion.
(They were a special purchaser - bidding with an emotive attachment to the adjoining site behind).
Tell me about a Marketing Plan you have done?
I advised a client on a sale of a Freehold office building in Marylebone.
The current use was Class E (offices) - however it was originally built as a townhouse and would demonstrate significant interest for conversion back to residential.
Therefore a targeted marketing plan was devised - to include:
Double-Page advertisement in the Estates Gazette
Internet advertising - speciailly using LinkedIn as the target market was to cover as wide as possible (not just agent led).
Targeted mailshots to Private Members Clubs whom the property would appeal strongly to on a Commercial basis.
Involving the Residential team to ensure that market was covered.
Describe a time you have advised a vendor on an appropriate method of sale?
I advised a client on the sale of their Freehold office building in Waterloo.
This was an island site, next to Waterloo station and situated on a street market which was very buzzy.
During the marketing period I held numerous viewings with a range of investors, developers and owner-occupiers.
As the client was not a forced seller, I advised to initially conduct the sale by private treaty, with the option to go to informal tender in light of strong interest.
Given this high level of interest, I advised the client to Call for Bids via an informal tender process, as this would allow them the most flexibility and they would be under no obliagtion to accept the best, highest or any offer.
Tell me about a problem you have had to solve to achieve a sale?
I provided advice to a charity client disposing of their Freehold office building in Islington.
The initial advice was to target owner occupiers who would bid based on an emotive attachment to the site. However, at the time of marketing demand from owner occupiers was subdued (because of poor market conditions, rising interest rates and cost of borrowing becoming higher, cost of living crisis).
I overcame this by establishing that the Local Authority had removed Article 4 protection in the area, meaning that conversion to residential would be planning risk-free by virtue of permitted development rights.
I therefore recommended a targeted approach towards residential developers.
You say about Article 4 Removal and the opportunity for a Freehold disposal to residential – did you give updated valuation advice in terms of the market / value per sq ft?
I sought advice from our Development team on the value for residential conversion.
The sales potential on this basis was £1m - £2m less than commercial but likely to generate significantly more interest.
In your Waterloo example - what was your advice on which offer to proceed with?
I recommended proceeding with an owner-occupier who made the highest unconditional bid, a reliable track record and a suitable timeframe for completion
(They were a ‘special purchaser’ bidding with an emotive attachment to the adjoining site behind).
What is the typical £psf for a type of property you have been involved in?
Typically in the region of £300.00 - £500.00 per sq ft
City Road = £540.00 psf (context)
Lower Marsh = £800.00 psf (context only)
What are market conditions like at the moment?
Market conditions have been poor represening a lot of uncertainty. Reflected by: soaring build costs, interest rates rising and the cost of borrowing becoming higher.
BUT I am aware: August 2023 - Bank of England announced they will hold interest rates at 5.25% - which could be a signal that cost of borrowing has reached its peak.
Inflation has also been stubborn to fall (although dropped now to 6.7%)
Also the cost-of-living crisis is having an impact on the property market - owner occupiers sitting on the fence.
In terms of the Office Disposal in Angel you provided Charities Act Advice - could you explain what the requirements are there please?
Charities Act report MUST be required when selling, leasing or otherwise disposing of charity land or property … to demonstrate the charity is obtaining “BEST VALUE” for the asset.
There have been recent changes to the Charities Act (2022) - this has broadened the scope on who can give advice to now include Estate Agents and Agricultural Valuers who are not RICS members.
It is now termed “DESIGNATED ADVISOR” rather than “Qualified Surveyors” Report.
The change also simplified sections of the report.
With the Waterloo disposal you state bids were recieved and you collated the ‘salient information’ - what was included in this and what was your advice to the client?
The Salient Information Included:
Offer Price
Proof of Funds (cash or reliance on third-party finance)
Any conditionality attached to the offer (e.g. subject to planning)
Track record of the bidder
Timescale (e.g. Sale & leaseback or delayed completion).
What is the Misrepresentation Act (1967)?
Relates to misinformation / false statement made during the PRE CONTRACT ENQUIRIES which has the effect of inducing the party to purchase.
Agent has a duty to check info is reliable. Disclaimer clauses can protect agent who has done sufficient due diligence.
Misrepresentation can be either: Fraudulent, Negligent or Innocent.
It is a civil offence actionable by tort (not criminal).
How mortgageable is a Long-Leasehold property? What are lenders views on such investments?
Generally long leasehold properties under 90 years tend to find mortgaging more difficult.
Shorter the lease = more diffcult to secure a mortgage.
What are the differences between Sole Selling Rights and Sole Agency?
Sole Selling Rights = PRIVATE INTRODUCTIONS are included (fee is due even if agent does not find purchaser).
SOLE AGENCY = Exlusive right to intro a tenant but does NOT include private introductions (so fee only due if agent intro’s).
What does the RICS Real Estate Agency & Brokerage (2016) Professional Statement set out and what is it’s purpose?
Mandatory Professional Statement outlining principles of FAIRNESS & TRANSPARENCY that underpin all activities undertaken by real estate agents.
It covers various stages, including:
- Ethics
- Securing Instructions
- Acting for the seller (marketing the property)
- Acting for the seller (agreeing sale of lease)
- Acting for buyer (property searching)
- Ending instruction (Invoice)
- Safety & security (data protection, H&S)
- Agency management (handling client money)
It also sets out 12 core principles such as acting honestly, due diligence, clear terms, no discrimination.
What documentation, if any, did you request from the prospective purchaser to show your client?
I requested information from the buyer to include:
Proof of Funds (Cash or reliance on third-party finance)
Company details / Track record of the bidder
AML Check on the purchaser once the offer was accepted (Private Company = company name, company number, address of registered office, names of directors/shareholders with 25% of more holding).
