Topic 6 Buying a Property: An Overview Flashcards
The typical property buying process is in what order?
- Establish a budget
- Find a property
- Make an offer
- Formal mortgage application
- Exchange of contracts
- Completion
What principle of a contract is this?
An agreement between 2 or more people to enter into a legal agreement
Agreement
What principle of a contract is this?
- One party will make an offer the other will accept
- Both offer & acceptance put legal obligations on both parties
Offer & Acceptance
What principle of a contract is this?
- A Consideration must be given.
Buyer gives a consideration (money)
Vendor gives a consideration (property)
Consideration
What principle of a contract is this?
All parties must have capacity to enter a contract
- Age 18 or over (16 Scotland)
- Legally able to buy or sell property (either as principal or agent with authority)
- Of sound mind
Capacity
What principle of a contract is this?
- Must be clear that both parties intended to enter into a legal binding contract
Intention
What principle of a contract is this?
- Once a contract has been agreed and put in place both parties are bound by its terms
- Can be sued if they breach a contract by the other party
Bound by terms/Legally binding
The Agent does what?
Acts on behalf of the principal who grants the agent powers to act for them
What is “Apparent Authority”?
Agent acts outside their authority but claims the principle gave them authority to act in this way
What is “Ratification”
Where the Principal agrees with the actions an agent has made that is outside of the agents authority
Who is required to fill out a “Law Society Property Information Form” (TA6)?
Buyer or the Vendor?
Vendor
What happens if a Vendor does not accurately complete a “Law Society Property Information Form” (TA6)?
They could be prosecuted
How is the Principal-Vendor process for an estate agent different from most Principal-Vendor relationships?
Vendor makes decisions on whether to accept a offer to buy a property. The agent has less authority
These factors determine a buyer’s what when a look a buying a property?
- Price range of the property they can afford
- Can afford associated purchasing costs
- Whether they can fund the deposit required
Buyers budget
An estate agent is normally appointed by who?
Buyer or Vendor
Vendor
The asking price is what relation in to a property sale with an estate agent?
The price at which the property will be marketed
Once a provisional offer has been made on a property through an estate agent. Who will the estate agent liaise with to make the sale process official?
Vendor’s solicitor
An estate agent’s fees are paid on commission but at what percentage of the sale price are they traditionally based?
1 - 3.5%
What rights are these that an estate agent has?
- Agent has exclusive rights to sell the property
- Will receive a fee even if the vendor or 3rd party finds a buyer
Sole selling rights
What rights are these that an estate agent has?
- Have exclusive rights to sell the property
- Will not receive a fee if the vendor finds a buyer
- May charge less if they are given this arrangement
Sole agency
What rights are these that an estate agent has?
- Two agents agree to market the property exclusively
- Split the commission when a sale is made
- Commission is likely to be higher
Joint sole agency
What rights are these that an estate agent has?
- A number of agents market the property
- Agent who sells the property will receive the fee
- Fees nowadays are standard
Multiple agency
These are what in relation to Estate agents?
- Auctioneering
- Property Listings
- Removals
- Property management & letting agency services
Services an Estate agent could offer
These are what in relation to Estate agents?
- Arranging mortgages & associated financial advice
- Insurance services
- Relocation services
- Survey & Valuation services
Services an Estate agent could offer
What is an Energy Performance Certificate (EPC)?
Certificate that details a building’s energy efficiency. It is required when a property is:
- A new build
- Marketed for sale or rent
How long is an Energy Performance Certificate (EPC) valid for?
10 years
Is it Legal or Illegal for rentals to be arranged on residential properties if they has an Energy Performance Certificate (EPC) rating of F or G?
Illegal
(Unless a landlord has an exemption)
In England & Wales it is common for houses to be sold by what?
Private Treaty
An offer on a property is only binding when?
Contracts have been exchanged
What is ‘Gazumping”?
When a vendor who has accepted an offer on their property accepts a better offer from another prospective buyer
Is “Gazumping” legal in Scotland?
No unless the sale is based on a conditional offer
What is an “Offer of Advance” (Offer Letter)?
Invitation to the applicant to enter into an agreement
Is the “Offer of Advance” (Offer Letter) the final legal contract?
No
The “Offer of Advance” (Offer Letter) is binding on who?
Borrower or Lender?
Lender
These are situations that could do what with a lender’s “Offer of Advance”?
- Buyer knowingly provided false information
- Material changes to a buyer’s circumstances
- Material changes affecting a properties condition or value
Circumstances when a lender can withdraw a “Offer of Advance”
What would a lender’s Offer Letter contain?
- General details of the applicant, property & loan
- Standard warranties & conditions (available to most mortgages)
- Special considerations that might be applicable
How long is the cooling off period when a mortgage offer letter is issued to a borrower?
7 days
When a vendor has accepted an offer & a mortgage offer is in place. It is the work of who to do the below points?
- Property is what it is claimed to be
- Vendor has the right to sell the property
- Nothing that will prevent the buyer from obtaining good title to it
Conveyancer or solicitor
Before the exchange of contracts the vendor’s solicitor will send what to the buyer’s solicitor?
Contract of sale & purchase
When contracts have been exchanged who is technically responsible for damage or lose to the building.
Vendor or Buyer?
Buyer
The typical period between exchange of contracts and completion is normally how long?
28 days
What does a “Conditional Exchange” mean?
That either party to a house exchange contracts conditional on a specific event and if this condition is not met they can pull out of the transaction without penalty
The below are examples of what in relation to an exchange of contracts?
- Completion of another property transaction
- Subject to satisfactory search results
- On a “long stop” date
Examples of “Conditional Exchange”
When might a “Long Stop” date be used?
When a buyer is purchasing a new build that doesn’t have a definite completion date
What is an advantage of buying a property at an auction?
- Bargain could be found
- Process is quick
The process for buying at auction is what?
- Successful Bid
- Contracts exchanged that day
- 10% deposit paid same day
- Completion within 28 days
When buying at auction what is the required non-refundable deposit?
10%
Because at auction contracts are exchanged on the same day the buyer will need to complete (survey, mortgage application & offer, preliminary Legal work) before the auction
These a part of a pack for potential bidders completed by who?
- Memorandum of sale
- Special conditions of sale
- The local search (if and when available)
Vendor’s solicitor
Because at auction contracts are exchanged on the same day the buyer will need to complete (survey, mortgage application & offer, preliminary Legal work) before the auction
These a part of a pack for potential bidders completed by who?
- Land Registry search
- Proof of title
- Copy of any lease affecting the property
Vendor’s solicitor
If a buyer reneges on a contract for a property bought at auction the vendor is entitled to keep the deposit?
True or False
True
What does a person need to consider before buying at auction?
- All investment fees (legal, valuation etc) would be lost if bid is unsuccessful
- Extra funds may be required to make the property habitable
- Lender make hold back fees if property requires substantial work
What is the non-refundable reservation fee on the day of auction that a buyer has to pay?
5%
What is the “Modern Method” of auction?
Auction carried out online
The “Modern Method” has a non-refundable deposit of how much?
5%
How long does the buyer have to exchange contracts and complete on the property?
28 days to exchange contracts & a further 28 days to complete on the property
Is a Lender’s “Offer of Advance” able to be withdrawn by a lender?
Yes but only in certain circumstances
