Case Study COPY Flashcards
(117 cards)
1
Q
Why did you choose a residential disposal for your case study?
A
I thought it was a good example to show the breadth of my experience. The pathway guide stated that up to 30% of my experience could be in different property sectors and I thought it was a good example to show I had exposure to that, in a process which I had control over from start to finish.
2
Q
What pre-instruction checks did you carry out?
A
Internal conflicts of interest check – asked within my firm and I considered my own interests, personal and financial.
3
Q
What were your aims and did you meet these?
A
To provide a high standard of service throughout which would meet my client’s objectives of;
- Secure exchange of contracts by 31st of March 2018, being my client’s financial year end
- Secure best price
- Reduce holding costs
4
Q
How did you strike a balance between these?
A
The offer eventually accepted was in line with Montagu Evans assessment of value – but also achieved exchange of contracts prior to the end of March. Whilst it may have been possible to achieve a higher price, this was not guaranteed and so I feel an appropriate balance between the two was struck.
5
Q
What was included in your internal ToE?
A
- Identification of the surveyor
- Scope of services
> Review of legal due diligence and title docs >Inspection and Measurement
> Appointing and managing a marketing agents
> Overseeing legal process to completion
- Period of engagement
- Confirmation of terms (signature)
6
Q
Talk me through the key characteristics of the property that affected value.
A
Location, Condition, fixtures and furnishings, size
7
Q
What tenure did your client hold?
A
As the term of the lease was over 100 years it was thought not to have a material affect on value. I reviewed the lease terms of the comparable properties, which were all similar in nature in terms of ground rent/service charge.
8
Q
How did the planning use affect value?
A
As the Property was C3 use in a self contained apartment block I do not feel the planning use affected value
9
Q
Do you think tenure had an effect on value?
A
No. under the Leasehold Reform Housing and Urban Development Act 1993. Subject to owning the flat for two years, the leaseholder can force the landlord to grant a new lease for a term expiring 90 years after the end date of the existing lease.
- The leaseholder will no longer pay peppercorn
- Will have to also pay landlord half of the uplift in value from new extension.
10
Q
Do you have to pay the landlord for this? (long lease extension)
A
Yes price for leases extension should be calculated by a professional valuer, designed to compensate the landlord for loss of ground rent and the right to get the flat back at the end of the term postponed. Landlord also entitled to half the ‘marriage value’/uplift in value as a result of the extension.
11
Q
Why had the property not previously sold, in your view?
A
I believe the marketing period was too short to generate the required interest and market conditions had declined.
12
Q
Talk me through your review of previous marketing efforts.
A
I requested information relating to the previous marketing efforts, for example the Auctioneer’s interest report I saw that only 2 people had downloaded the legal pack and there were no viewings. I confirmed with the agent the previous marketing channels used, which included an auction catalogue and the auctioneer’s website and targeted marketing for individuals who had previously expressed interest in similar properties. They also confirmed they had not marketed on the major property search portals/local property blogs.
13
Q
What areas did you consider needed to be improved on? (Marketing)
A
- The marketing period – by nature couldn’t be improved by Allsop though I felt this is something that we could improve as a team.
- Marketing channels – I thought that marketing on local property blog websites would increase the audience.
14
Q
Talk me through your desktop due diligence.
A
I reviewed the title documents and the report on title to ensure a clean and marketable title. I wanted to ensure a title restriction wasn’t the reason for the lack of interest.
Read the lease, environmental (flooding), planning, legal, contamination, to ensure that there are no materials which may be detrimental to the sale of the property.
15
Q
Talk me through your safe inspection.
A
- In accordance with surveying safely, 2011
- I carried out a desktop pre-assessment
- Print off floorplans / site plans
- Planned my journey
- Told someone I was going & put it in my outlook calendar
- Consider the location
- Consider the external property (flat roof
- Consider the internal of the property
16
Q
How did you know the property was piled foundations?
A
This is typical for when there are high loads, particularly in South East London where there are less good less good load bearing ground conditions/high loads. This was also confirmed by the developer after inspection.
17
Q
How did you know it was a cavity brick wall?
A
No Headers were used.
18
Q
How else can you tell if its a cavity brick wall?
A
Evidence of a cavity tray
19
Q
Did you inspect the roof?
A
I did not but I am aware it is made from felt.
20
Q
Why did you not take PPE?
A
I didn’t deem it necessary as it was a secure, modern residential block which appeared to be in excellent condition, after speaking with the property manager who had visited recently it was not deemed necessary.
21
Q
How did you assess comparables?
A
I assessed my comparables on a number of criteria including
- Specification
- Location
- Condition
- Car Parking
- Date
22
Q
How did you apply the hierarchy of evidence?
A
I focussed on recently completed transactions for which full data was not available but which sufficient evidence could be obtained.
I did not use any asking prices or historic evidence
23
Q
How did you calculate net effectives?
A
I did not calculate net effectives
24
Q
What specification did the property have?
A
The property was of reasonably high specification with high quality fixtures and fittings.
25
Why did you measure to GIA?
As per the information paper, comparable evidence in property valuation, 2012“ Whatever the property type and the basis of measurement, it is essential to ensure that the valuer applies the same method of measurement to the property being valued as is used in analysing the comparable evidence.” – This has since been corroborated by the latest comparable evidence guidance note – comparable evidence in real estate valuation (1st edition 1st October 2019, effective 9th October 2019)
26
What is the definition of GIA (resi)
Gross Internal Area is the area of a building measured to the internal face of the perimeter walls at each floor level
27
Whats the difference between GIA and IPMS 3B?
- Measured to IDF as opposed to surface wall.
- Areas occupied by the reveals on windows if assessed as IDF included
- Balconies – Included but stated separately
- Accessible roof terraces included but stated separately
28
Why would you use IPMS 3B and not IPMS 2?
| .
Because I was measuring the area in exclusive occupation
29
How would your measurement differ with the introduction of IPMS?
I would measure using IPMS 3B, I would measure to the internal dominant face which would have been the surface of the large longer window in the reception room and bedroom.
30
What did you include in your GIA measurement?
Measured to the surface of the wall, above the skirting board, included the kitchen units and built in cupboards included this in part of the room measurement but identified it separately, as per residential agency guidelines within code of measuring practice within property measurement second edition.
31
How did you ensure accuracy? (measurement)
I checked my measurements with the existing floorplans
32
How did you assess current MV?
I analysed my comparable evidence and made adjustments in relation to the subject property. Once I had analysed the information available I applied a rate psf and multiplied this by the GIA of the property. I then sense checked the value with other similar transactions to ensure I was happy with the valuation.
33
Talk me through your assessment of market conditions.
Royal Woolwich Military Academy is a site which provides a setting desirable to prospective buyers. Woolwich is soon to benefit from Crossrail and whilst prices saw an initial jump as a result of this they have since stagnated, consummate with the wider London property market.
- The academy has not seen the same level of continued house price growth as houses closer to the Crossrail station due to 33 minute walk.
34
What is a ‘base value’?
The value used for the business case for the disposal of the Property.
35
What are your client’s requirements around disposal business cases and base values?
Disposal business case should never be set at a price below the external market valuation.
36
Why had the property been listed at auction?
In the hope of achieving certainty of sale and a relatively short timetable for the disposal of the property.
37
Why had it failed to sell even at a reduced guide price?
I believe this was due to the intensive nature of the marketing period and the property did not appeal to a national audience, such as the typical auction purchaser.
38
How did the Red Book apply to your advice?
PS 1-2 applied as with all written valuations however VPS1-5 I was exempted from as it was for internal agency purposes.
39
Why did you use the comparable method?
Because the property had no development potential, wasn’t an investment property or niche property.
40
Do you know of any recent guidance relating to the use of comparable evidence?
Yes. RICS Guidance note comparable evidence in real estate valuation (1st edition), October 2019.
41
What was included in that? RICS Guidance Note 'Comparable Evidence in real estate valuation (1st Edition) October 2019
General principles of comparable evidence e.g. should use several comparables rather than single transaction, should be recent or similar, verifiable, consistent with local market practice
42
What does it say specifically about analysis of comparables (2 things)? RICS Guidance Note 'Comparable Evidence in real estate valuation (1st Edition) October 2019
1. Establishing a common measurement or other comparison standard (i.e. measuring on GIA for my case study in line with comps – will be IPMS going forward).
2. Making adjustments – Need to consider how purchaser in the market would respond i.e. to a refurb/renovation – simple cost adjustment or further adjustment to reflect cost and time uncertainty to undertake works?
43
Why is an external valuation required?
An external valuation is required in line with internal governance. To demonstrate accountability as a public body that market value is always achieved for the disposal of NHSPS sites.
44
How did you liaise with Montagu Evens to establish a new valuation?
I critically analysed their valuation, gathered my own comparable evidence and formed my own opinion of value. I believed market conditions had declined in the six months since Montagu Evans last valued the property. I emailed my comparable evidence to Montagu Evans and asked them to refresh their valuation in light of the new evidence which they duly did resulting in a revised valuation of £240,000.
45
How did you apply your understanding of the Blue Book?
- I reported all offers as soon as was reasonably possible until contracts exchanged
- I kept a record of all offers received
- I kept my client unformed of negotiations and continuously sought instructions during this process
46
What recommendations did you give on marketing and route to market?
I recommended selling by private treaty due to the flexibility it would provide relating to the marketing period, which I considered would be key to successfully disposing of the property in the desired timeframe.
47
What sale method did you recommend?
I recommended selling by private treaty due to the flexibility it would provide relating to the marketing period, which I considered would be key to successfully disposing of the property in the desired timeframe.
48
Why did you reject auction as the continuing method of sale?
- A fixed marketing period would likely be insufficient to generate the interest required for a successful sale;
- The only offer received at £230,000 was still below the revised valuation; and
- A third unsuccessful entry into the auction could adversely affect value.
49
What agency basis did you agree to avoid a dual fee liability arising?
Sole agency (without sole selling rights).
50
What is gazundering and when might it happen?
To lower the amount of an offer that one has made to (the seller of a property), typically just before the exchange of contracts. It is likely to happen on properties with limited interest as the purchaser will still think there is a good chance of the revised offer being accepted.
51
Why did you recommend private treaty?
Due to the flexibility it would provide relating to the marketing period, which I considered would be key to successfully disposing of the property in the desired timeframe.
52
Who was the likely purchaser?
I thought owner occupier was the likely purchaser, being at the lower end of the London property market.
53
Why did you appoint a local agency?
Because I thought a local marketing agent may be more beneficial than a national auction firm, as the property had not appealed to their typical buyer. I advised that a more local approach to the marketing could assist with securing a sale
54
How did you tender and select an agent?
I undertook reference and credit checks to ensure they were solvent and confirmed the tender brief to market the property on a sole agency basis without sole selling rights.
55
What company did you undertake credit check with?
Experian.
56
Do you know of any others? (Credit check)
Dun and Bradstreet but I do not have experience using them.
57
What factors did you consider in assessing the tenders?
1. Price (sliding scale from cheapest)
2. Consultant level
3. Relevant experience
4. Quality of proposal (inc marketing strategy)
58
What supplier checks did you carry out?
Experian credit and reference check
59
What marketing strategy was employed?
- A3 window card in agent’s office
- Zoopla and Rightmove
- Local websites and property blogs to capture widest possible audience
- *V board at the entrance to red lion lane (other boards placed here, just outside of the conservation area)* - only if asked.
60
What was the outcome of the marketing?
1 offer of £240,000 after 12 weeks of marketing
61
How did you assess and make recommendations to your client based on this? (the offer)
I recommended accepting the offer as it was above my assessment of MV and in line with Montagu Evans assessment. I advised that accepting this offer would offer us the best change of exchanging contracts within my client’s desired timeframe.
62
How did you manage the agent?
I agreed weekly update with the marketing agent within their terms of engagement. I was able to oversee the process, listen to any recommendation they made and consider it before making a decision as to what to instruct them to do. E.g. marketing strategy.
63
What is Market Value defined as?
the estimated amount for which a property should exchange;
- on the date of valuation
- between a willing buyer and a willing seller
- in an arm’s-length transaction after proper marketing - wherein the parties had each acted knowledgeably, prudently, and without compulsion
64
Who was the managing agent for the property?
Rendall and Rittner
65
What was included in the Memo of Sale?
A memorandum of sale is a document that is created once a sale has been agreed on a property. It's not a legally binding document but it does set out the agreed price and declares the intention of both the buyer and seller to complete the transaction.
- Names and contact details of both the property seller and buyer
- Details of the solicitors acting for each party
- Property address, tenure, details of lease, condition (exchange by 31st march)
- The agreed price for the property including proposed deposit amount (£24,000)
- Conditions
66
Were there any special conditions in the contract?
1) The contract incorporates the Standard Conditions of Sale (Fifth Edition)
(b) The terms used in this contract have the same meaning when used in the conditions
2) Subject to the terms of this contract and to the Standard Conditions of Sale, the seller is to transfer the property with either full title guarantee or limited title guarantee, as specified on the front page.
3) The property is sold with vacant possession
67
What legal enquries were raised?
1) No internal of external alterations have been made since original construction
2) Whether ecountered any problems with neighbouring flats
3) If any experience with issues in utilising the parking space
4) Details of electrivity and water suppliers
5) Whether the hobs, extractor hood, oven/grill and washing machine/tumble dryer are included in the sale.
6) Services will not be disconnected but seller will arrange meters to be read and request final bills with service providers to forwarding address
68
How did you monitor the deal to completion within the desired timescale?
I kept in regular communication with the agent and the solicitor and responded to legal enquiries promptly.
69
What were your key achievements?
The resolution to key issue one – increased my understanding of the RICS Valuation – Global Standards, 2017. I now better understand when VPS 1-5 applies for a valuation (and when its excluded)
I also feel that analysing the previous marketing history, identifying reasons for lack of success and providing reasoned advice in relation to the method of sale, selling rights and marketing strategy to achieve my clients objectives was a key achievement.
I increased my breadth of experience and improved my understanding of inspecting properties for marketing purposes measuring properties on a GIA basis and valuing properties using the comparative method.
70
What would you do differently next time?
Explore in more detail other methods of sale, for example marketing more heavily towards buy-to-let investors may have generated the required interest required for an informal tender/auction
71
How did you act ethically?
When informing the unsuccessful agents, I ensured that I acted with integrity and explained clearly to them how the proposals were scored and where I felt their proposals fell short.
72
Why did you not market more towards BTL investors?
At the time I thought the property was more suited to an owner occupier, as information presented itself I realised that BTL was also a possibility in the area.
73
How might this have increased sale value? (marketing towards BTL)
Created competitive tension to drive up the price.
74
Did you consider value on the basis of a BTL?
I didn’t but on future instructions I would bear this in mind by using the investment method of valuation capitalised at an appropriate yield.
75
Did lease terms affect value?
The lease was non onerous in terms of disposal provisions, however Landlord consent was required before any transfer of the lease could be registered with the Landlord. In order to ensure that this would be provided, I ensured that the ground rent, service charges and any other sums due under the lease, including any interest that may have arisen was paid. I also reviewed the lease terms to see if we were in breach of any of the tenant liabilities such as decoration and determined that the property was in a condition in compliance with the lease.
76
How did car parking affect value?
5/6 comparables had car parking – as is is common for this area as you are over one mile from nearest station. Not having a space would have devalued the property around £7,500 - £10,000
77
Age and construction of the development?
Woolwich Military Academy Built 1805. Wyatt's Academy was built of yellow brick in the Tudor Gothic style.
78
Age and construction of your property?
Constructed in 2011, constructed with a yellow brick cavity brick wall, on piled foundations with a flat roof and double glazed windows.
Reinforced concrete frame and floors with a flat felt roof.
79
What did RICS information paper comparable evidence in property valuation set out?
- The hierarchy of evidence
| - How to analyse comparables (ensure you compare like with like by using same measurement basis)
80
Did ground floor influence your valuation?
Yes upper floor flats are viewed as more desirable in the market and I made adjustments to reflect this.
81
Comps include any communal space?
Some of the comps included amenity space - adjustments were made in relation to this if they did.
82
How could you check if market conditions had declined?
With marketing agents and marketing reports for the area.
83
Was the value at £255,000 the problem or method of sale?
I believe it was a combination of both.
84
Why is purpose built deemed less desirable than a period conversion?
This opinion was formed from conversations with local agents.
85
Comparables had longer leases – was this included in your valuation?
As all leases had over 100 years I didn’t feel this had a material affect on the value.
86
What if lease was 60 years?
If less than 60 years there would be an issue because some mortgage providers would refuse.
Under the Leasehold Reform Housing and Urban Development Act 1993. Subject to owning the flat for two years, the leaseholder can force the landlord to extend the lease and on attractive terms.
87
Aware of service charge or ground rent in respect of your valuation?
I obtained the leases of my comparable evidence from the Land Registry and all leases were on similar terms and so I didn’t apply any adjustments to them in respect of this.
88
Difference between sole selling and sole agency?
Sole agency is where one agent is instructed and only receives a fee if they introduce the purchaser. Sole selling rights is where a fee is payable in the event of a successful sale during the period of instruction no matter who the party is introduced by.
89
What were the holding costs made up of?
- Service charge £150 per month
- Rental void (charged to CCG) - £800 (assessed in 2011 by DV)
- Council tax £100 per month
90
What would happen if it was more than 6 people living together receiving care?
Would be a C2 use, and would’ve required planning. Likewise if there was a permanent carer living in the flat it would’ve also been considered a C2 use. This would not have been permitted under the head lease.
91
Why was it only marketing for 2 relatively short timeframes (auction) to the market?
There were various attempts by the CCG to fill the space but nothing materialised and so it was put back into the auction 12 months later and subsequently withdrawn. I was then instructed.
92
When did the sub lease expire?
June 2016
93
When was it first offered to the market?
September 2016
94
What flood zone was the property?
Flood zone 1
95
Is the property in a conservation area?
The majority of the development is in a conservation zone but not the most eastern entrance on red lion lane. This was confirmed by conversations with the council when erecting the board.
96
Where exactly was the V board placed?
There was a sign relating to a property to let on the entrance to the development on Red Lion Lane. I was mindful of the he Town and Country Planning (Control of Advertisements) (England) Regulations 2007 so I wanted to obtain professional planning advice to ensure this sign placement was lawful.
Professional planning advice stated that this would be allowed as it was not in the conservation area and deemed far enough away from any listed buildings not to detract from the setting. It was allowed to be placed here as long as the building to which it related was also identified.
97
What EPC rating was the property?
D
98
Were the lease terms onerous? Did this affect the disposal?
The lease was non onerous in terms of disposal provisions, however Landlord consent was required before any transfer of the lease could be registered with the Landlord. In order to ensure that this would be provided, I ensured that the ground rent, service charges and any other sums due under the lease, including any interest that may have arisen was paid. I also reviewed the lease terms to see if we were in breach of any of the tenant liabilities such as decoration and determined that the property was in a condition in compliance with the lease.
99
How much was the ground rent?
£100 a year
100
When did the service charge require paying?
1st day of every month with the ground rent
101
What was the alienation clause?
- Not to assign the whole of the premises without placing an obligation on the assignee to comply with Clause 3.20 (Register disposals) and clause 3.24 (Heating and Hot Water)
102
What websites and blogs did you market the property on?
Greenwich webpage for mylocaladvertiser.co.uk
| Greenwich.co.uk - 35,000 views a month
103
How is service charge charged under the lease?
Service provision is calculated by an authorised at the start of the account year and charged to the tenant in the same way as the ground rent (1st of each month)
104
How was service charge apportioned? What are the other ways it can be apportioned?
- Floor area (kitchener)
- Fixed percentages
- Rateable value - difficult if RVs change or are appealed
- Weighted floor area - such as for department store in a shopping centre.
105
What could you do if you were unhappy with the amount the landlord was charging in service charge?
- An application to the FTT (First Tier Tribunal) for residential property matters
106
What management code is relevant to residential service charge?
- service charge residential management code (third edition, 2016).
107
What do service charge demands need to include under Section 47 of the Landlord and Tenant Act 1987?
- Each demand needs to include landlord’s name and address where the landlord could be found.
108
What is the primary piece of legislation which covers service charges?
The Landlord and Tenant Act 1985
109
Did you take any actions due to it being vacant?
- Still inspected regularly
| - Planned maintenance programme
110
What does RICS - UK Residential Real Estate Agency, 2017 (6th Edition) set out?
* Relevant estate agency legislation
* Standards and ethics
* Before securing instructions
* Property marketing - describe in line with CPR
* Acting for the vendor, purchaser and landlord
* Ending the instruction
111
What are some things that should be included in an agency ToE?
Some of the terms you should include are:
* property address
* full names and contact details of client (with legal right to sell property)
* type of agency
* commission
* method of payment and trigger for payment • expenses
* marketing programme
* personal interest
* services to prospective purchasers or tenants
* unoccupied premises
* Energy Performance Certificate (EPC)
* complaints handling
* right to cancel
* acceptance of terms.
112
What is the difference between The RICS Purple Book UK Commercial Estate Agency, 2016 and the Residential Real Estate Agency Professional
Statement, 2017
- Very similar
- UK real estate has updated instructions in relation to the latest professional statements on conflicts of interest
- Different instructions regarding the sizes of marketing boards
- 2016 v 2017
113
What is a grade 2 listed building?
A Grade 2 listed building is defined as a UK building or structure that is "of special interest, warranting every effort to preserve it"
114
Did the fact it was in a conservation area affect your disposal advice?
Not other than the board placement.
Due to the nature of the property with no development potential the conservation area didn't impact on my advice.
It provides a desirable setting for potential purchasers
115
How has Crossrail affected your flat?
Initially Woolwich saw huge house price increases, with properties in Woolwich rising around 70% from 2009 - 2017.
Since then growth has slowed, and from speaking to local agents it became apparent that those properties further than 15 minutes walk from the station were seeing house prices fall from their peaks.
116
Cold you have informed your client to hold on to the property?
My client's remit does not extend to such activities, once declared surplus it is my clients obligation to dispose of the property.
117
What were some of the key lease terms?
- Ground rent and service charge payable on the first day of each month
Repair - to keep premises in good and substantial repair
Alterations - no structural alterations to exterior or interior.
Yield up - quietly yield up at the end of the lease in accordance with the covenants
Use - private residence only
Alienation - assign only if placing same obligations on assignee as under original lease
Restriction - no disposition without a certificate signed from landlord
