What are the four main methods of sale?
Private Treaty Informal Tender Formal Tender Auction
When would you use each of the four methods of sale?
Auction is suitable when you have an unusual property that is hard to accurately value. Also good if you want a quick sale and certainty of sale Formal Tender is often used by Statutory Bodies Private Treaty is usually used to sell residential property. It can also often morph into informal tender as a way of bringing negotiations to a conclusion.
How would you choose which method of sale to use?
I would consider the client's objectives, current and future market conditions, the likely level of demand (and the target market) and timing requirements.
Why does the RICS Rules of Conduct 2007 apply?
RICS Rules of Conduct 2007 for members states that individuals must act with integrity and avoid conflicts of interest (ethical behaviour). They must also carry out their work with due skill, care and diligence (competence). Individuals must also work in a timely manner and with proper regard for the standard of service and customer care (service). These are all extremely important qualities when undertaking agency work.
What is so important about the Estate Agents Act 1979?
The Estate Agents Act 1979 promotes 7 key principles:
- Clarity as to the terms of agency (section 18)
- Honesty and Accuracy Agreement and liability for costs
- Openness regarding personal interests (section 21)
- Absence of discrimination
- Legal obligation to tell the client about offers received
- Keep clients money separate
- Most importantly it sets out how you must specify all costs/fees in advance and in writing and also you must specify the nature of agency and selling rights and disclose any 'connected persons'.
Why must you complete a conflict of interest check?
I must complete conflict of interest checks because the RICS Global Professional Statement of Conflicts of Interest 2017 states that you must no advise or represent a client where doing so would involve a conflict of interst or a significant risk of a conflict of interest, other than where all those who are, or may be affected have provided informed consent. However, under the RICS Professional Statement Conflicts of Interest - UK commercial property market investment agency identifies specific risks and prohibits the agent acting for the buyer and the seller.
Why must you complete AML checks?
Under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 you must complete AML checks on all estate agency work.
What AML checks do you do?
I complete Customer Due Diligence Checks. This is where I identify the client and verify their identity. I would look at photo ID including passports and driving licenses. I would also need proof of address in terms of a utility bill from the last 3 months. If I am completing AML checks on a company I need the company name, number and registered address and then if the company isn't listed on a regulated market like the London Stock Exchange, I would also need the names and details of all the directors who hold over a 25% share/stake in the company. I would also need to obtain information on the purpose and intended nature of the business and proposed funding agreements.
Is there any other due diligence you complete?
If I suspect that the transaction or business relationship involves a person established in a 'high-risk third country' or a 'politically exposed person (or a family member/business associate) I would need to complete enhanced due diligence but this is escalated to my company's compliance team.
You say you understand the conditions of sale for properties sold at auction. What are these?
Contracts are exchanged on the fall of the gavel. Therefore prior to auction day, the purchaser must read the notice to prospective buyers, arrange a deposit of 10% and insurance for exchange and provide ID for AML checks. Whereas the seller/agent must confirm with the Auctioneer their right to refuse bids, the reserve price the right to sign the contract on behalf of the vendor.
You say you were involved in providing advice to a private developer on the price reduction of a residential scheme in Mill Road. How did you come to this analysis?
I referred to our billing spreadsheet and competitor report. The evidence showed that net prices were largely below asking prices and that nearby schemes were reducing their asking prices. I also outlined that typically two bed flats include a parking space and that the exclusion to this flat was problematic. I advised a 20k which reflected the 5% market drop plus £10k parking space.
You say you were involved in providing advice to a private developer on the purchasing strategyof a development opportunity in Malborough. Why did you advise them to produce an offer pack and provide a track record?
The offer pack and track record provided more credability / weight to their offer. From my experience, vendors appreciate this extra level of detail.
You say that you advised on the most advantagous method of sale for a small development opportunity on the outskirts of Bristol City Centre. What advise did you give? Why did you not choose Auction or Private Treaty?
I could have used either Auction or Private Treaty. However, informal tender provided more certainty in time scales compared to Private Treaty. Auction would have allowed for a quick sale but there is the risk of not generating enough interest on the day and the vendor would have had no choice over to purchased the site.