Purchase and Sale Flashcards
What are the four methods of sale?
- Private treaty
- Auction
- Informal tender
- Formal tender
How do you decide which method to use?
- I would get to understand my clients’ objectives, current and future market conditions and timings.
What is private treaty?
It is when parties are free to negotiate in their own time and without commitment in the open market
What are the advantages and disadvantages for private treaty?
Adv
- Flexibility
- The parties can control the process
- Vendor under no obligation to sell
- Confidential
Disadv
- The potential for gazumping or being gazumped
- Late decisions not to buy
- Associated abortive costs
What are the advantages and disadvantages for auction?
Adv
- Is a quick method of sale
- Certainty of sale. Assuming a reserve figure is achieved
- A useful method of sale for an unusual property
- Used for a property that is likely going to generate a high level of interest
Disadv
- Cost of promotion and publicity
- Vendor cannot pick the purchaser.
- Intensive nature of a short marketing period
What is informal tender?
When you call for best bids on a property. Best bids are not legally binding so either party can withdraw. Used when there is good level of interest in a property.
What’s the process of calling for best bids?
The agent invites all interested parties to submit their ‘best and final offer’ or ‘best bids.’ Important that you must state that the vendor reserves the right not to accept the highest or any offer made.
The details in their letter should include:
- Name and address of applicants solicitors
- Their financial arrangements
- Details of any conditions attached to the offer
What is formal tender?
It is a process often used by a statutory body to give control and transparency over the marketing process.
What is the process of formal tender?
- The vendor can state they are under no obligation to accept the highest bids
- Full marketing material, to include comprehensive legal pack must be provided in advance of the tender process and a clear letter sent to all prospective purchasers
- Applications must bid blindly in a prescribed form without knowing what other parties have bid.
- All bids should be opened in front of the client or independent witness/line manager
- No opportunity for perspective purchaser to change their bid
- Highest figure is accepted
What does the estate agency act cover 1979?
The Estate Agency Act 1979 relates to principals agents must abide by when carrying out FH/LH acquisition/disposal in property interest. Key points include
- Clarity in ToE
- Legal obligation to tell the client about all the offers received
- Must disclose any personal interest
What does the misrepresentation act 1967 cover & what’s the offence?
- Relates to false statements made during pre-contractual enquiries, which has the effect of inducing the party to purchase
- The vendor and the agent can be sued for damages
- Agent has a duty of care to check that the advice, information or opinion is reliable
-Exclusive/disclaimer clauses may be effective in protecting the vendor and their agent.
Civil offence - sued for financial damages
What does the consumer protection for unfair trading regulations 2008 cover?
- Prohibits unfair business to consumer commercial practices.
- E.G. misleading information, pressuring consumers, omitting information
- Agent has duty of care to client and interested parties (anyone defined as a consumer)
- Unlike the misrepresentation act- this is a criminal offence
What is the Anti Money Laundering Regulation?
Money Laundering Regulation 2017 – sets out obligations of private sector firms working in areas at risk of money laundering. Aim to stop criminals using professional services to launder money.
- Conduct a money laundering risk assessment
- Implement systems and procedures to prevent it
- Provide staff training
- Customer due diligence
What anti-money laundering regulations do you undertake?
Before accepting the instruction I ensure that I carry out the checks
Request Id and proof of address within the last month which I send to Smart Search. Smart Search checks they are who they say they are and also assesses whether they are a PEP, a politically exposed person I also carry out my own checks whereby I check companies house and any associated companies.
Many PEPs hold positions that can be abused for the purpose of laundering illicit funds or other predicate offences such as corruption or bribery. Because of the risks associated with PEPs, the FATF
What is a MLRO?
Money laundering Reporting Officer
Who is the FG Money Laundering Reporting Officer
Christian Flishman
Level 2 – Carrington
What was included in your offer letter?
In the offer letter I included:
- Purchase price
- Purchaser background
- Source of fiancne
- Timescales and approvals
- Deposit
- Other conditions i.e. subject to contract, subject to planning, subject to satisfactory searches
Level 2 – Tooting
Why did you decide auction was the best method of sale?
- The client was looking raise the capital within a fairly short timescale.
- We reviewed lot sizes of this nature and saw they were well received in the market when offered via auction]
- We were aware it would generate a strong level of interest due to the location.
Talk me through the procedure of taking the property to auction?
- ToE were agreed in writing before
- COI undertaken prior to accepting
- Money laundering checks done
- Inspected and carried out due diligence
- Appraised the property
- Instructed the property manger to carry out the CPSE’s and the solicitor to carry out the searches
- A established the reserve and guide price with the client
- The contract was secured at the fall of the gravel
What is the reserve and guide price?
Guide price is what is outlined on particulars and starting price at auction
Reserve is the lowest price that a seller is willing to go.
Level 3 – Henley
How did you decide on the credibility of the investor?
I carried out further research into the property portfolio each investor had. Credibility also came down to whether they were cash or debt funded. As one of the investors had cash funding, I knew they would be able to transact quicker.
Level 3 – Henley
What goes into HoT?
Vendor
Purchaser
Property
Purchase price
Timing - in this case was 20 working days until exchange and completion as soon as possible - 3 months after issue of the legal pack.
Deposit - a non refundable 10% deposit
Conditions i.e. was subject to contract, legal due diligence, both parties to cooperate with AML, whether or not VAT, each party to be liable for their own costs, it was to be treated as a TOGC.
Details of the solistor
Level 3 – Henley
How did you market the property?
Through private treaty
Level 3 – Henley
What goes into particulars?
Level 3 Henley
What yield was achieved
6%
