Purchase & Sale Flashcards
(39 cards)
What are the four methods of sale?
- Private Treaty
- Formal Treaty
- Informal Treaty
- Auction
Explain sale by Private Treaty?
A private matter between parties with full freedom to negotiate in their own time and without commitment in the open market.
What are some of the benefits and disadvantages of sale by Private Treaty?
+ Flexible, confidential, vendor not under obligation to sell.
- Late decisions not to buy, abortive costs and potential for gazumping and gazundering.
What is gazumping?
Where a bidder makes a last minute higher offer to outbid the top buyer.
What is gazundering?
Where an offer is reduced just agreement.
Explain sale by Informal Tender.
- Bids opened in front of client or line manager or independent witness.
- Agent invites interested parties to submit their best and final offer or best bit in accordance with prescribed timescale.
- Can include shortlisting stage.
What should be included in an Informal Tender offer letter?
- Date and time of receipt of offer
- Name and address of applicant’s solicitor
- Confirmation of finance arrangements
- Details of offer conditions
What should an Agent be careful to state during an Informal Tender?
- Confirmation that offers of a variable nature will not be considered
- That Vendor reserves right not to accept the highest or any offer (important otherwise it could be a binding tender)
Explain sale by Formal Tender.
- Applicants bid blindly in a prescribed form, without knowing what other parties are bidding.
- All bids opened in front of client, independent
witness, or line manager. - No opportunity for further bid increases.
- No immediate exchange of contracts upon opening highest bid, but client can use blind process to identify the winning offer and more to exchange.
What should an Agent be careful to confirm during a Formal Tender?
Whether the Vendor is obligated or not obligated to accept the highest bid.
What are the benefits of the Formal Tender process?
High transparency and accountability (good for statutory body or charity).
Vendor can state that they won’t accept highest bid.
Full marketing and legal pack sent to prospective purchasers setting out all information required with written offer ahead of bids.
Explain sale by Auction.
Purchasers bid in an auction house, where there is a reserve price set, and the highest bid wins the purchase.
What are the benefits of sale by Auction?
- Relatively short timeframe (i.e. exchange of contracts on gavel down).
- Certainty of sale assuming reserve met.
- Useful for unusual properties which are hard to value.
What must be done prior to a sale by Auction?
- ToE agreed in advance.
- Conflict and AML checks done in advance.
- Clarity on auctioneer’s rights to refuse bids and regulate increments, accept proxy, telephone and sign contract on behalf of Vendor.
- General conditions of sale, MoS, notices, etc should be set out and agreed before auction.
- Auction particulars must be prepared in accordance with Consumer Protection and Misrepresentation Act.
What are the disadvantages of sale by Auction?
- High costs of promotion and publicity.
- Lack confidentiality.
- Vendor can’t choose purchaser.
- Intensive nature of short marketing period.
What are the three types of Agency?
- Sole Agency: only one agent.
- Joint Agency: two or more joint agents share a fee.
- Multiple Agency: any number of agents but only successful gets fee.
Outline the timeline of a sales instruction and process.
- Receive instructions.
- Check competence and independence.
- Issue agency instruction agreement, ToBs, ToEs.
- Receive signed agreements (s.18 of Estate Agency Act 1979)
- Complete and record AML checks (AMLR 2007)
- Gather information
- Undertake DD on property
- Check VAT position
- Inspect and measure property, photos etc
- Confirm fixtures and fittings
- Research market and assemble valuation - verify and analyse comps
- Prepare marketing report
- Obtain written approval of marketing material (particulars) (Consumer Protection)
- Marketing campaign
- Negotiation
- MoS, Liaise with solicitors
- Assist with queries
- Issue invoice on completion and retain file for minimum of 6 years.
What do the RICS require you to issue and have signed before proceeding with a sale instruction?
Agency Instruction Agreement
(Estate Agents Act 1979)
What is the statutory cooling off period?
A 14-day period where work isn’t undertaken (except for authority to commence which can be cancelled within the period) which allows a client to cancel instruction without any charges or repercussions.
(Consumer Protection Act 2015)
What must be included in an Agency Instruction Agreement?
- Agency basis
- Agency rights
- Proposed fee
- Marketing costs and disbursements
- Confirmation of no conflicts of interest
- Money Laundering Regulations requirements
- Timescale for payment of fees and disbursements
- Details of Complaints Handling Procedure
MUST BE SIGNED AND RETURNS BEFORE MARKETING CAN COMMENCE.
Explain Wells v. Devani [2019]
Supreme Court held that “sketchy oral agreement” made by telephone between an Agent and his Client for a residential sale was legally binding within the context of the case and taking into account each party’s behaviour.
What are Sole Selling Rights?
Remuneration payable to agent if contracts are exchanged within a period where sole selling rights exist, even if agent doesn’t find purchaser.
What are Sole Agency Rights?
Remuneration only payable if agent introduced purchaser within term of instruction agreement. Fewer advantages for agent.
Outline the Estate Agency Act 1979.
A law which outlines the duties that Estate Agents owe to clients and third parties. These include:
- Breakdown of fees & charges
- Declaration of interests
- Calculation of fees
4, Record keeping
