Purchase and Sale Flashcards
Four main methods of sale?
- Private treaty
- Informal tender
3. Formal tender - Auction
How do you determine which method of sale to use? 
Consider clients objectives
Public accountability
Current/future market conditions
Likely level of demand
Likely target market
Timing requirements
Private treaty?
The parties are free to negotiate their own time without commitment. This is the most Popular method of sale used
Advantages
flexibility
Parties control the process
Vendor under no obligation
Confidential
disadvantage
Gazumping or Gazundering
Late decision not to buy
Abortive costs
Informal tender (Best bids)
Used when there is a good level of interest either at commencement of marketing or to bring negotiations to conclusion.
This best bits procedure is not legally binding.
And Agent invites in writing all interested parties to submit the best and final offers in accordance with the prescribed timescale.
Such a letter would include
Deadline for offer
Solicitor details
Financial arrangements
Details of any conditions
Escalator bids is not considered
The vendor reserves the right not to accept the highest or any offer
Formal tender (sealed bids)
Often used by statutory body to give control and transparency over the marketing process.
The vendor can state they are under no obligation to accept the highest bid
Full marketing material to include a comprehensive legal plaque must be provided in advance of the tender process and a clear letter sent to all prospective purchaser setting out the information required accompanying the written offer.
Which should be open in front of the client or independent witness.
No opportunity for the prospective purchaser to change your increase their bid after the submission of their offer. 
Differences between formal tender and informal tender
Formal tender
Single chance to bid
High level of accountability
Detailed terms/conditions for the sale prepared in advance
The highest figure is accepted unless the vendor reserves the right to refuse any overall offers
Is possible for four more tender to lead directly to a contract for sale
Informal tender
Can be used during private treaty negotiations to obtain the best offer
Further negotiations can follow
Informal tender will not lead directly to a contract for sale
Sometimes used as a negotiating mechanism
The vendor usually states they are under no obligation to accept the highest offer

Summary of differences between formal and informal tender
Formal tender only - Sale
Private treaty - Informal tender -
Perhaps negotiations - Sale
Auctioneering why is it used?
Advantages
1. To sell a property quickly
2. Are useful method of self and unusual property which is hard to accurately value
3. Useful property which is likely to generate a strong level of interest
Disadvantages
1. Cost of promotion and publicity
2. Lack of confidentiality over the price
3. Vendo cannot choose purchaser
4. Less potential buyers able to act
The auctioning in procedure
The procedure
1. Terms of engagement must be agreed in writing in advance
2. Conflict of interest checks to be undertaken prior to accepting the instruction
3. AML checks completed for all vendors and potential purchases
4. Call relevant documentation regarding the property to be so it must be available for inspection in advance
5. General conditions of sale memorandum of sale and any notices to bidders or be published by the auctioneer
6. A reserve price has to be agreed with the vendor
7. Contracts exchanged at the fall of the gavel
8. Auction particulars in the catalogue must be prepared in accordance with requirements for the CPR 2008 and the misrepresentation act
Actions required by a purchase before the Sale day
View the property and consider a structural survey
Take legal advice and complete do diligence
Read the notice to prospective buyers
Arrange a deposit of 10% and insurance for exchange
Provide ID for AML procedures
Types/bases of estate agency
There are three types of estate agency
1. Sole agency - One Agent
2. Joint agency - Two or more
3. Multiple agency - Multiple only the successful one gets the fee
Timeline for sales instruction
- Receive instructions from the client
- Check competency and independence
- Issue agency terms of engagement
- Receive agreement signed by the client. (S. 18 Estate agent at 1979)
- Complete and record money laundering checks
- Gather information E.g Planning status, floor plans, LR title.
- Undertake due diligence
- Check the VAT status
- Inspect and measure take photos
- Research the market in assemble comparables
- Undertake a valuation (not red book)
- Prepare marketing report to the vendor
- Written approval of marketing CPR and misrepresentation act 1967
14. Undertake marketing campaign as agreed - Negotiate the sale draft HOT instruct a solicitor
- Liaise with the vendors solicitor
- Assist with queries
- Issue the invoice upon completion of the transaction and retain file
Agency instruction and agreements
Requirements of the RICS rules of conduct and the estate agents act 1979 (sections 18 and 21) remember the statutory cooling off period of 14 days.
Must clearly set out the following information
- The agency basis (sole/joint agency)
- Agency rights (Sole selling or sole agency)
- Proposed fee
- Marketing costs and disbursements
- Confirmation of conflicts
- Money laundering regulations
- Timescales for the payment of fees and disbursements
- Details of the complaint handling procedure
** Must be signed and returned before marketing can commence**
So selling rights and soul agency rights
If contracts are exchanged in a period when sole selling rights exist, even if the purchaser is not found by the agent but by another party the agent is due a fee.
Sole agency rights mean the fees is only due if the Agent introduces the purchaser.
What is a ready able and willing purchaser clause?
As defined by the estate agency act 1979
This clause is often included so that when an applicant is ready and able to proceed with the purchase but the client then decides to withdraw an abortive fee may be charged by the agent.
Failure to complete a transaction
- The vendor can serve notice to complete on the proposed purchaser giving them a deadline to complete
- If this deadline has passed the window can rescind the contract and remarket the property
- any deposit can be retained by the vendor
- The vendor may be able to see the damages following the sale of the property to another party at a lower price
