Unit 3:6 Buying a Property Legal Terms

Question 1

Elements of a Valid Contract

Answer 1

1. Agreement (offer and acceptance)
2. Consideration (something of value exchanged, money etc)
3. Capacity (legal ability to enter contract)
4. Intention (must be able to show you actually want the property)
5. Bound by terms (clear and certain terms)

Question 2

Gazumping

Answer 2

• when seller accepts a higher offer from a new buyer after verbally agreeing to sell to the original buyer but before contracts are exchanged
• legal in England and Wales (not scotland)

Question 3

Gazundering

Answer 3

• when buyer lowers their offer just before exchange of contracts, forcing seller to accept lower price or restart the selling process. Legal but considered unethical tactic to exploit seller’s position
• puts seller in difficult position (accept lower price or restart process)

Question 4

Caveat Emptor Rule

Answer 4

• “let the buyer beware” legal principle placing responsibility on buyer to discover defects before purchase; seller not obliged to point out all flaws unless directly questioned
• buyers solicitor might use TA6 form to find things out

Question 5

Agent

Answer 5

• legal relationship where one party (agent) acts on behalf of another (principal or vendor)
• in property, estate agents act for sellers

Question 6

Apparent Authority

Answer 6

• occurs when the principals words or actions suggest a broader authority for the agent
• created by principal’s words/conduct suggesting agent has authority

Question 7

Ratification

Answer 7

• In this situation, the principal approves the agents action after the fact

Question 8

Estate Agency

Answer 8

• usually earn commission of sale price (1-3.5%)
• internet based agents usually opt for fixed selling fees
• work on behalf of the seller

Question 9

Sole Selling Rights

Answer 9

• Agent holds exclusive rights to sell the property
• Fee is guaranteed even if vendor or someone else secures a buyer
• Uncommon arrangement due to its exclusivity

Question 10

Sole Agency

Answer 10

• Agent enjoys exclusive selling rights
• No fee owed if vendor independently finds a buyer
• Often comes with reduced charges, making it a popular choice

Question 11

Joint Sole Agency

Answer 11

• Two agents collaborate exclusively to market the property
• Commission is divided when a successful sale occurs
• Generally entails a higher commission

Question 12

Multiple Agency

Answer 12

• Several agents actively market the property
• The agent completing the sale claims the fee
• In today’s competitive market, fees are usually comparable to standard rates

Question 13

Additional services estate agents often provide

Answer 13

• Auctioneering
• Property listings
• Property management and letting agency services
• Removals
• Mortgage arrangements and financial advice (some have in-house independent financial advisers
• Insurance services
• Relocation services

Question 14

Energy Performance Certificate (EPC)

Answer 14

• legally required document showing property’s energy efficiency rating (A-G)
• valid for 10 years and must be available before marketing for sale/rent
• legally required before marketing property for sale or rent
• includes energy costs and improvement recommendations
• minimum E rating required for rental properties

Question 15

Mortgage/Offer in Principle

Answer 15

• initial lender assessment of borrowing potential before full application
• shows sellers you’re a serious buyer with potential financing
• typically valid for 60-90 days but not a guaranteed mortgage offer

Question 16

Offer Letter

Answer 16

• formal, legally binding offer from lender to provide mortgage
• details loan amount, interest rate, term, and conditions
• typically valid for 3-6 months
• follows full application, credit checks, and property valuation
• last step before exchange of contracts

Question 17

Mortgage Offer - 7 day reflection period:

Answer 17

• mandatory cooling-off period giving borrowers time to review terms
• starts when offer received, lasts 7 days before proceeding
• can be waived for re-mortgages or urgent situations

Question 18

Exchange of Contracts

Answer 18

• legally binding agreement where buyer/seller swap signed contracts
• deposit (usually 10%) paid by buyer at this point
• sale becomes legally binding with financial penalties for withdrawal
• completion date is formally set (typically 1-4 weeks / 28 days later)
• marks the point of no return in the transaction before exchange buyer can pull out
• buyer must insure here

Question 19

Auction Property

Answer 19

• must have mortgage in place before bidding (not after winning)
• all surveys and conveyancing done before auction day in buyers pack
• successful bidders pay 10% deposit immediately and exchange contracts
• completion must happen within 28 days or deposit may be lost
• contracts exchanged on same day as auction (no cooling-off period)
• requires much faster preparation than traditional purchases
• higher risk but potentially better value for buyers

Question 20

Modern Property Auction

Answer 20

• all done online
• successful bidder must pay a non-refundable reservation fee, 5% of property price
• buyer has 28 days to exchange contract and 28 days more to complete
• if the seller pulls out the reservation fee gets returned to them