When it’s time to start looking for your next property purchase, you’ll come across a lot of jargon you might not have heard before.
Saving for a deposit or house hunting is time-consuming enough, so when it comes to deciphering some of the real estate market code and industry lingo you could probably do with a little help.
Here is an A to Z of all the real estate jargon terms that you need to know before embarking on your next purchase.
An owner or sub-lessor who does not reside in the place or area in which he/she owns real estate from which he/she derives rental income.
Abstract of auction
A summary of the auction advertisements which appear on the property page of a newspaper.
Abstract of title
A chronological summary of conveyances, mortgages or leases and other deeds giving the names of the parties and the description of the land, arranged to show the continuity of ownership of general law land not under the Torrens system.
A clause in a mortgage document that requires the immediate repayment of the entire balance due under the said mortgage at any given time should there be a breach of the conditions of the mortgage e.g. repayment default.
A dwelling designed to allow easier access for physically disabled or vision impaired persons.
A government department, local authority or other body empowered by statute to acquire land compulsorily.
Apportionment of rates, taxes, body corporate fees, rent, insurances etc up to the date of possession or settlement on a sale or letting.
A person authorised to act for another (usually for the owner) in the selling, buying, renting or management of a property.
Commonly used to refer to licensed real estate agents and real estate representatives.
Agents in conjunction
Two or more agents are employed by a principal to sell or let real estate and share commission.
This is the length of time it would take to pay off a mortgage in full, based on regular payments at a certain interest rate.
A longer amortisation period means you’ll pay more interest than if you got the same loan with a shorter amortisation period.
A property appraisal is when a real estate agent determines and quotes the estimated sale price of your property based on their experience of the area, similar sales, and their knowledge of buyer demand.
It will typically take into consideration things like ‘street appeal’, the property’s interior and exterior, and the size of the land.
The real estate agent will compare these factors to similar homes that have recently sold in the area and give an estimated figure.
The appreciation is the amount the property value has increased over time.
Arrears are unpaid debts.
An auction is a property sale held by an auctioneer and sold to the highest bidder.
These are usually done in public (either on- or off-site), virtually or on the phone.
Auction agency agreement
An agreement that the vendor must sign when a property is listed for auction.
Details the reserve price and the costs of the auction, including advertising and the agent’s commission.
Usually includes a condition that one agent will have the exclusive right to sell the property for a period during and after the auction.
A professional who is licensed to sell, or offer for sale, real estate where persons become purchasers by competition, being the highest bidders.
One per cent (1%) is the equivalent of 100 basis points.
A verbal or written offer to purchase.
This is the managing body that administers common property or common areas in multi-unit developments.
Common property or common areas can include things such as the driveway, facilities, foyer and stairwell, gym, pool or any other common area in the building.
By buying an apartment, townhouse, or duplex the owner is automatically part of the Body Corporate for that complex.
A treasurer, secretary, and chairperson are then elected, and these spots can be filled by any owner.
A bond is used for rental properties and acts as a security deposit to give landlords some financial security in the event that something is damaged or the rent isn’t paid.
The bond is usually 4 times the weekly property rent, paid upfront.
A bridging loan bridges the gap between securing a mortgage for a new property before an existing property is sold.
They offer short-term access to funds at a sometimes higher rate of interest or more likely, just at the standard variable rate, with no discounts applied.
Your credit history will go a long way when it comes to securing a bridging loan with your lender but there are a number of other factors that will affect approval.
These factors include the risk associated with the loan, the value of the property you currently own, the amount of the one you’ll be purchasing and the amount of time the loan needs.
Building code of Australia (BCA )
Sets minimum community standards for buildings in terms of health, safety and amenity in buildings for regulatory purposes.
Produced by the Australian Building Codes Board (ABCB), refer to www.abcb.com.au
An authorised person who is responsible for checking buildings in the course of construction and completed buildings to ensure that they have been constructed in accordance with building control provisions.
The setback from the site boundary is required by statutory authorities for buildings.
The Building Code of Australia and other regulations stipulated by local authorities relating to the design and construction of buildings.
Planning and development controls that limit the use, size and location of buildings or other improvements on land.
An estate agent licensed and certified to sell businesses.
A buyer’s agent is a real estate professional who represents the buyer and helps secure them the right property at the lowest price.
This includes negotiating with the vendor or their agent.
A buyer’s market is simply a market condition where there is high supply and low demand, driving down prices in favour of the buyer.
Capital gains and capital gains tax (CGT)
A capital gain or capital loss on an asset is the difference between what it cost you and what you receive when you dispose of it.
You pay tax on your capital gains but not a separate tax by itself.
Instead, the capital gain you make is added to your assessable income in whatever year you sold the property.
A caveat is a legal claim of interest on a property.
It’s a notice on the title which alerts you to the fact a party other than the owner has an interest in the property.
‘Caveat emptor means ‘buyer beware’ in Latin and alerts the buyer that the risk in a property transaction lies with them.
Certificate of title
A document issued under the Torrens System of Title, showing ownership and interest in a parcel of land.
A commission is a fee or payment, usually calculated as a percentage, made to an agent for their services in selling a property.
Typically it is only collected after a property sells.
A solicitor who specialises in the property law of conveyancing.
They are licensed professional who ensures you meet all the legal obligations involved in your property transaction, including the settlement and title transfer process.
The definition or meaning of conveyancing and conveyancing services is the part of the law involved with preparing documents for the conveyance of property.
In other words, it’s the legal process of transferring ownership of a property from the current owner (vendor or seller) to a new owner (purchaser or buyer).
Generally, a conveyancing transaction consists of three main stages:
These three steps include any work needed when buying or selling a property, subdividing land, updating a title, or registering or changing an easement.
This can include assisting the transfer of ownership, including home loans and any other conveyancing activity.
Contract of sale
This is an agreement about the sale of property, which lists the terms and conditions of sale.
Cooling off period
When you buy a residential property there is a five business-day (for NSW, although it may differ by state) cooling-off period after you exchange sale contracts.
During this period, which starts as soon as you exchange, you have the option to get out of or withdraw the offer with no legal repercussions – as long as you give written notice.
A cooling-off period does not apply if you buy a property at auction or exchange contracts on the same day as the auction after it is passed in.
A counteroffer is a ‘new’ offer made in reply to a prior unacceptable offer – usually, the counter offer terminates the previous offer.
A document executed under seal. For example, a conveyance.
Percentage of total consideration, or an agreed amount, paid on exchange of contract for the purchase of an asset.
Depreciation is the reduction in the value of an asset over time.
Approval from the relevant planning authority to construct, add, amend or change the structure of a property.
For example, in the case of real estate sales, expenses paid by an agent on behalf of an owner, such as advertising, rates and taxes.
A building that represents a completed example of a dwelling type offered for sale.
This is the value accrued on an asset over and above the debt owing.
A charge or liability on a property; for example, a mortgage or a special condition on the use to which it may be put (e.g. easements, restrictions and reservations).
Eviction is the action of expelling a tenant from a rental property.
Exchange of contracts
The legally binding part of the sale process is where two contracts are drawn up and signed by each party and then exchanged so the buyer has the contract with the vendor’s signature and vice versa.
A deposit is usually paid at this time.
Expressions of Interest (EOI)
An expression of interest is like a silent auction or bidding approach, in which the real estate agent will set a due date from the time the property is listed.
By that date, any interested parties are asked to submit their best offer, often with any conditions requested (e.g. the length of the settlement period).
First refusal (right of)
The right granted to a person to have the first privilege to buy or lease real estate, or the right to meet any offer made by another.
Installed items that may be removed from real estate without causing irreparable damage to the land, structure or use of the premises.
Fixed interest rate
An interest rate that remains unchanged for a set period, for example, for the whole term of the loan, or the first year of a loan.
Those parts of a property are affixed to structures or land, usually in such a manner that they cannot be independently moved without damage to themselves or the property housing supporting or pertinent to them.
Fixtures are usually included in a sale and commonly include items such as carpets and awnings.
The person is liable to pay your loan if you default on the mortgage.
A situation where a vendor and buyer agree on a price but then the vendor sells to another party at a higher price/more favourable terms.
The amount paid by a borrower to a lender over and above the main amount borrowed ( also known as the ‘principal’).
The interest rate can be fixed, variable or a combination of the two.
An investment-grade property is a property that is suitable for investment.
The things I look for in any investment (including property) are:
- strong, stable rates of capital appreciation;
- steady cash flow;
- liquidity – the ability to take my money out by either selling or borrowing against my investment;
- easy management;
- a hedge against inflation; and
- good tax benefits.
The rate of return earned on an investment or charged by a lender is expressed in the form of a percentage per annum.
Property (land or a building – or part of a building – or both) held (by the owner or by the lessee under a finance lease) to earn rentals or for capital appreciation or both.
A tax payable annually in respect of the beneficial ownership of land, the rate of which is determined by the assessed valuation.
Usually based on the unimproved value of land.
A lease is a legally binding contract or rental agreement between the lessor (owner) and lessee (renter) where the lessee can occupy the lessor’s property for a set time in exchange for payment under certain terms.
Also known as a tenancy agreement.
(a) A term commonly used by agents for obtaining instruction to sell or lease real estate;
(b) The recording of properties as being available for sale.
Lender’s Mortgage Insurance or LMI is a non-refundable, one-off fee added to your home loan in an instance where you’re wanting to borrow more than 80 per cent of your home’s value.
It protects the lender against higher-risk borrowers.
Loan to Value Ratio (LVR) is your loan amount relative to the value of your home.
For example, a $500,000 home loan secured against a property that is worth $1,000,000 = 50 percent LVR. The higher the LVR, the higher the risk for the lender (which is why when LVR is 80 per cent or more, you’ll be charged Lender’s Mortgage Insurance).
Market value is the estimated amount for which an asset 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.
The middle number is when data is arranged from the lowest to the highest in sequence.
If there are two median scores, they are averaged to provide the true median.
The median is also known as the 50th percentile.
The process by which a third party assists two disputing parties to reach a mutually agreeable solution.
A recommendation made by the mediator is not necessarily binding on the parties.
A type of loan where real estate is used as collateral.
It allows the borrower to buy property or land and is a written and binding contract that provides security to the lender.
Mortgage protection insurance
Insurance is paid by the borrower to protect the lender in a situation where they may not be able to meet their repayments.
When the expenses (including interest repayments) associated with an investment property are higher than the earnings from the property, it is considered ‘negatively geared’ and can reduce tax liability in Australia (for now).
The consideration offered to purchase or lease an asset.
Property sold without public advertising.
On the market
A term used during an auction when the vendor’s reserve price has been reached and the property is now officially for sale to the highest bidder.
If a property is not sold at auction because the owner’s reserve price has not been reached, it is passed in.
Where a tenant continues to rent/occupy the property after the lease has formally expired.
Approval from the relevant authority to use the property for a specified use.
Also known as a conditional approval, this is when a lender has agreed to loan you a particular amount in principle, but nothing has proceeded to final approval.
Pre-approval allows you to know how much you have to bid or offer on a home.
What we traditionally associate with a sale of a property, is where a seller sets their price and begins negotiating with potential buyers through their agent.
Cooling off periods is part of private treaty sales unless the buyer removes this condition to secure the property.
(a) A term used in most Australian contracts in lieu of ‘client’ or ‘proprietor’;
(b) A licensed estate agent holding responsibility for an agency’s legislative compliance activities including legal responsibility for trust accounts.
Where an owner offers a property for sale without engaging an agent.
Private treaty sale
A sale is negotiated directly between the parties or their agents.
A person or firm who manages the upkeep of a property on behalf of its owner.
The minimum price a vendor has agreed to accept during an auction but can be tweaked during the auction process.
A mortgage over a residential property owned by a person (usually over 55 years of age), where repayments are not required until the property is sold or the last homeowner dies.
A situation in which supply is scarce and demand for property is high, leading prices to remain high.
The date when the property sale is finalised and paid and the buyer becomes the official owner of the property.
A government tax is applied to transfers of property and mortgages.
Calculated as a percentage of the contract value, stamp duty varies from state to state, and discounts are available for certain parties, including first-home buyers.
Strata title is a method of facilitating individual ownership of part of a property – generally an apartment, unit, or townhouse.
Uniquely, strata title allows for individual ownership of an actual lot or unit whilst sharing ownership of the common grounds on which it is built.
A property title holds a bundle of legal information about a piece of property, including details about the land and who owns it or has a mortgage on it.
Documents evidencing the ownership of property.
This is the title to land by registration.
Originating in South Australia under the stewardship of R.R.Torrens (later Sir Robert Torrens) and enacted in 1858.
The Torrens titles have superseded the ‘Common Law Title’ system throughout Australia.
Under the Torrens system dealings and ownership of land are managed by registration with the Titles Office.
A separate bank account managed by a real estate agent where funds (such as deposits and rental income) are held on behalf of another party.
An offer for property not subject to any other conditions (things like building and pest inspections or organising finance).
The buyer accepts the property unconditionally. All auction sales are unconditional.
When both parties have agreed on the purchase price and applicable terms and conditions, but the contract hasn’t yet been finalised, a property is ‘under offer’.
Once the conditions have been met, the property is unconditional and then sold.
Normally when a property is under offer no further offers can be made or accepted.
A property valuation is a formal, detailed report undertaken by a certified practising valuer (CPV) that determines a property’s market value and examines the property beyond its size and location.
After a valuer inspects the property in person, they’ll compile a valuation report with details of the zoning, the condition of the property, a review of the property’s land title and identify easements or encumbrances, highlight the highest and best use of the property and address any adverse features about that property which might affect its value.
A big part of the valuation process includes risk ratings, which the bank relies on as part of its decision-making process.
One who sells anything.
In real estate transactions, the person(s) or entity selling the property.
A bid that is set by the auctioneer on behalf of the vendor during an auction, to establish a fair starting price.
An auction term signifying that a reserve price has not been set, such that the highest bid will prevail.
The derived percentage return of a property is assessed from the net income and the market value or price.
It is calculated by dividing the net income by the opening market value or price.
A local planning tool to control the present and future development of land including residential, business and industrial uses.