Unit 3 Topic 6 Flashcards
Buying a property – an overview
Robert has just made a successful bid to buy a property using the modern method of auction. Completion must now take place within : (6.9.2)
A. 7 days
B. 28 days
C. 30 days
D. 56 days
D. 56 days
With the modern method of auction, the buyer has 28 days to exchange contracts and a further 28 days complete. 56 days in total.
Under the principle of agency, what is meant by ‘ratification’? (6.2.2)
A. The appointment by an individual of an agent to act on his behalf
B. Agreement by a principal where an agent has acted outside their actual authority
C. Agreement by an individual to act on behalf of another
D. The appointment by an individual of a principal to act on his behalf.
B. Agreement by a principal where an agent has acted outside their actual authority
Under the principles of agency, ratification is where the agent acts outside of their actual authority, but the principal then ‘backs them up’ by agreeing that their action was acceptable.
Which of the following is correct in relation to estate agents’ fees? (6.4.1)
A. fees are capped at 3 per cent of the sale price.
B. they are always charged as a percentage of the sale price.
C. they can be charged on a fixed-fee basis, or a percentage of the sale price.
D. they are always paid on a commission basis.
C. they can be charged on a fixed-fee basis, or a percentage of the sale price.
Estate agents can either be paid on a commission basis, which is a percentage of the sale price, or, as is becoming more common for internet-based agents, to charge a fixed selling fee.
Anthony has just exchanged contracts with Declan on a property which Declan was selling
for £300,000; he accepted Anthony’s offer of £280,000. Anthony required a mortgage of £260,000. If the estate agent handling the sale charges 1.5%, how much commission is due to be paid? (6.4.1)
A. Anthony must pay the estate agent £ 6,000
B. Declan must pay the estate agent £ 3,900
C. Anthony must pay the estate agent £4,200
D. Declan must pay the estate agent £ 4,200
D. Declan must pay the estate agent £ 4,200
Declan is the vendor, so he will pay the estate agent’s fee of 1.5% based on the agreed selling price of £280,000. 1.5% x £280,000 = £420,000.
Which of the following steps could a vendor take if the purchaser of a property withdraws after exchange of contracts? (6.8)
A. Insist that the purchaser’s deposit is paid as compensation
B. Insist that the purchase proceeds on the terms agreed
C. Sue the purchaser for breach of contract
D. Sue the purchaser’s solicitor for professional negligence
C. Sue the purchaser for breach of contract
Technically, either party can drop out from a purchase prior to the completion date, but the buyer would lose their deposit if they were to withdraw after exchanging contracts and either party might be sued by the other for breach of contract.
In terms of the principles of contract and property purchase, which of the following would constitute a consideration from the buyer? (6.2.1)
A. The property
B. Money
C. Stamp Duty Land Tax
D. Land Registry Fee
B. Money
A consideration must be given – in property terms the buyer usually gives a consideration of money and the vendor gives a consideration of property
In relation to a mortgaged property, when must buildings insurance cover be put into force? (6.8)
A. once the offer advance has been issued
B. at exchange of contracts
C. shortly before completion
D. at completion
B. at exchange of contracts
It’s important that the buyer insures the building from the point of exchange of contracts, because once contracts are exchanged the buyer is technically responsible for any damage or loss to the building, even though they don’t own it yet.
Which of the following would appear as a standard condition in a mortgage offer? (6.7)
A. A retention
B. Completion of roads and access
C. Redemption of an existing mortgage
D. Satisfactory report on title
D. Satisfactory report on title
One of the standard conditions in an offer letter is that the offer is subject to certain conditions, including a satisfactory report on title.
Fred has £170,000 in cash and equity of £180,000 in an unsold property . He has made a mortgage application for an advance of £165,000. What is the maximum he should bid for a property at auction ? (6.9.1)
A. £170,000
B. £335,000
C. £350,000
D. £515,000
A. £170,000
Because Fred has only a limited amount of time to complete the auction transaction, he should restrict his bid to £170,000 – this is the amount of cash he has readily accessible.
Dora had exchanged contracts on the sale of her flat a week before her kitchen was badly damaged by a fire that caused structural damage. Who was responsible for insuring the property at the time the damage occurred? (6.8)
A. Dora as the vendor.
B. The buyer’s lender.
C. Dora’s solicitor.
D. The buyer.
D. The buyer.
Once contracts have been exchanged, the buyer is technically responsible for any damage or loss to the building, even though they don’t yet own it. For this reason it’s important that they insure the building from exchange of contracts.
Anne is buying a new flat off plan and has made her purchase conditional on a ‘long-stop’ date. In the event that the flat is not ready on that date, she will be able to: (6.8.1)
A. Cancel the contract without penalty
B. Claim compensation up to a specified limit
C. Continue to wait, but she will then be committed to the purchase
D. Insist on a reduction in the sale price up to a specified limit
A. Cancel the contract without penalty
By inserting a long-stop date into the contract, Anne can ensure that if the property isn’t ready by that date, she can void the contract and abort the purchase without penalty.
Which one of the following is correct in relation to the role of estate agents? (6.4.1)
A. They must always accompany prospective purchasers during the property viewing.
B. There are no restrictions on giving advice to both buyer and seller.
C. Their charges are usually on a fixed fee basis, or a percentage of the sale price.
D. They act as agents of both buyer and seller.
C. Their charges are usually on a fixed fee basis, or a percentage of the sale price.
Estate agents are usually paid on a commission basis, expressed as a percentage of the sale price (typically 1–3.5 per cent), with internet agents offering significantly lower fees. It is becoming more common for estate agents, particularly those who are internet based, to charge a fixed selling fee and separate fees for additional services.
