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Common Real Estate Terms

Acceptance
In most cases, acceptance of an offer according to its terms creates an enforceable agreement or contract.
Agency Agreement
An agency agreement is a legally binding contract where the vendor legally engages the services of an agent for a negotiated fee. This is a compulsory document.
Agent
A person authorised to act on behalf of another person in the sale, purchase, letting or management of property. The relevant authority in his or her State/Territory must license a real estate agent.
Allotment:
When a larger area of land is subdivided into smaller pieces, these smaller parcels of land are known as allotments. Also referred to as a “lot”, “building block” or “block of land”.
Amenity
Is a characteristic or feature of a neighbourhood. For example, a public swimming pool is an amenity.
Apartment
See Home Unit.
Appraisal
An agent’s view of the reasonable selling expectation of a property. It is not a valuation in NSW.
Auction
A public sale of property in which the highest bidder acquires the property subject to a reserve price. See buying at auction.
Authority to Sell
A legally binding document which is signed by the seller. It details the agreement between the seller and the agent. Many aspects of the authority to sell, such as commission and advertising costs, are negotiable between both parties.
Battleaxe
A block of land shaped like an axe, where the handle is in the approach. Generally situated between other blocks, thus having no apparent street frontage.
Body Corporate
The collective ownership of the common areas in a block of apartments or multi-dwelling complex. The council of the Body Corporate, which is elected by the members, meets regularly to discuss various matters relating to the administration of the building (for example, upkeep of common property).
Boundary
A line separating adjoining properties.
Breach of Contract
The breaking of one or more of the terms and conditions of a contract.
Brick Veneer Construction
In housing, brick veneer construction is a system in which a structural timber frame is tied to a single brick external wall.
Bridging Finance
A short-term loan (approximately six to twelve months or less) that is used to fill the time gap between buying another property and either selling the one you own or obtaining a long-term loan. This type of borrowing is usually at a higher interest rate.
Building Regulations
Rules of a legal or statutory nature by which local councils control the manner and quality of a building. They are designed to ensure public safety, health and minimum acceptable standards of construction.
Buyers Advocate (buyer’s agent)
A licensed Real Estate Agent who acts solely for the buyer by sourcing suitable properties and representing the buyer throughout the buying process.
Capital Gain
Profit you make from the sale of your property.
Caveat
“Beware” – if a caveat is lodged on a title to land, it warns a person buying the property that a third party (the party that lodged the caveat) has some right or interest in the property.
Caveat Emptor
“Let the Buyer Beware” – this principle of law requires the buyer to be satisfied with the item they wish to buy before buying. The buyer purchases the property “as is”.
Certificate of Occupancy
The document issued by a building surveyor, which shows that the building is suitable for occupation. It is not evidence that the building complies with building regulations.
Certificate of Title
A document that shows who owns the property, the size of the land and whether there are any limitations on the title such as mortgages, easements or encumbrances.
Chattels
Movable personal property or furniture
Clear Title
A vendor has a clear title when there are no interests (like an outstanding mortgage) on the vendor’s title.
Cluster Housing
Detached group of houses that share open space.
Commission
Paid by the seller to the Real Estate Agent, normally when the property is sold. It is usually a percentage of the selling price of the property. The amount of commission is negotiable between the seller and Real Estate Agent.
Common Property
Areas of a property that are used by and belonging jointly to all of the owners of a property. This applies to such property as apartment blocks or multi-dwelling complexes.
Common Law Title
Usually referred to as “old system title”, it consists of a series of title documents called “a chain of title”. The title to a property held under this system is “clear” only if every document in the chain is available and complete (ie, the chain of title is unbroken). Legal costs associated with a purchase of Old System Title land are higher than those on a purchase of Torrens Title land, because making a thorough investigation of the chain of title can be complicated and time consuming. Old System Title may be converted to Torrens Title, and often can be automatically converted to Torrens Title following a sale.
Company Title
Each owner in a block of flats has shares in a company which has total ownership of the land and building of these flats. The owners receive a parcel of the shares with rights attached. Each owner is entitled to exclusive occupation of a flat, but this is subject to the company’s Memoranda and Articles of Association. These should be carefully examined for restrictions and the like.
Comparison Rate
A tool that allows the true cost of a loan – interest rate, fees and charges – to be compared with other loans using a single figure percentage.
Compulsory Acquisition (resumption)
The power of a government authority to purchase (resume) property from an owner without the owner agreeing to sell.
Consumer Credit Code
Regulates all credit for personal, domestic or household purposes. To ensure fair dealing and to protect the interest of consumers, all lenders must comply with the Consumer Credit Code.
Consumer Credit Insurance
An option for borrowers to guard against losing their property in case they default on the loan repayments. This will safeguard the loan if repayments cannot be made because of sickness, accidents or unemployment.
Contract Note
A document given to a prospective buyer who is making an offer. The contract note is legally binding when signed by both parties. It may or may not precede a more detailed contract of sale document.
Contract of Sale
A legal document prepared by the seller, usually with the aid of a solicitor, that outlines the details of the sale. The contract of sale is legally binding when signed by both parties.
Conveyance
Transferring the ownership of a property from the seller to the buyer. It is often performed by a solicitor or a conveyancer.
Cooling Off Period
Usually a five business day period available to a purchaser to withdraw from a contract for the sale of residential land. The five days is a default period that may be waived by virtue of a purchaser completing a Sec 66W certificate or can be varied by mutual agreement between the vendor and purchaser.
Covenant
An agreement noted on the title to a property requiring the property’s owner to adhere to certain terms, conditions or restrictions regarding the property. The nature of any covenant over a property should always be established before you enter into a contract to purchase the property.
Cover Note
A document issued by an insurance company to temporarily insure a property until a formal policy is issued, following payment of the requisite premium.
Deed
A formal document including special signing requirements recording an agreement, obligation or conveyance of property.
Deposit
A non-refundable percentage of the purchase price paid by the buyer when contracts are signed and exchanged. It is usually ten percent. The deposit must be held in a trust account by a Real Estate Agency or by the seller’s solicitor, or held jointly in a trust account by the seller and buyer.
Deposit Bond
Offered by some lenders as an alternative to a cash deposit. This should be used with caution. It is also known as a deposit guarantee.
Disbursements
Additional charges by some solicitors and conveyancers on top of their fee for extras such as postage, phone calls and government charges.
Dual Occupancy
A block of land or existing dwelling that is zoned in a way that allows the owner to erect a building that has two distinct living arrangements (for example, a duplex or a house with a granny flat attached).
Dummy Bid
A false bid made or accepted by the auctioneer. Dummy bids can include bids made by a non-genuine bidder and ‘fictitious’ bids pulled out of the air by the auctioneer. Any bid made on behalf of the vendor by anyone, other than the auctioneer under the auction rules, is considered a dummy bid. Dummy bidding is illegal.
Duplex
A dwelling having 2 apartments with separate entrances for each apartment.
Easement
A right held by one person to make use of the land of another. Drainage and sewerage pipes are examples.
Encroachment
The use of, or intrusion onto, another person’s property without consent. This usually refers to a structure.
Encumbrance
A third parties right that obstructs the unencumbered use or transfer of a property. Examples are easements, mortgages or caveats.
Estimated Selling Price
The price an estate agent estimates a property will attract. It must be recorded on the authority to sell either a single figure or as a range where the difference between the top and bottom figures does not exceed ten percent. For example, $400,000 – $440,000.
Equity
Having ‘equity in your own house’ refers to the difference between the market value of your property and what is still owing on a mortgage. This will increase as the loan is repaid or as the property’s market value increases.
Exclusions
Any item that is specifically not included in the sale.
Fittings
Goods or articles that can be removed from a property without causing damage to it.
Fixtures
Items such as built-in cupboards, bath, toilets and stove that are intended to form part of a property and that usually cannot be removed from a property without causing damage to it. They must be listed in the contract of sale if the buyer wants them to remain with the property.
Free Standing
A dwelling that stands independently of others.
Fixed Interest Rate
An interest rate that remains unchanged for a set period.
Gazumping
Where a vendor accepts an offer for a property for sale from one purchaser, and another purchaser betters the offer in an attempt to win over the vendors favour. An agent must submit all offers.
General Law Title (old system title)
The original system of land titles. A General Law title is comprised of all the documents that show a property’s complete historical record of title ownership. For the title to be ‘clear’ it must be traceable without a break up to and including the current ownership. Such a title must now be converted to a ‘Torrens title’ when such a property is resold.
Goods and Services Tax (GST)
A consumption tax of ten percent levied on the final consumer of the goods or services. The supplier of the transaction is responsible for collecting the GST and sending it to the Australian Taxation Office (ATO).
Gross Income
Total income before income tax and expenses are deducted.
Holding Deposit
An amount given by the buyer who is making an offer on a property to the estate agent acting for the seller. This is not compulsory and is refundable if the offer is rejected.
Home Unit
A residential dwelling grouped with others, having shared common areas and owned under Strata Title, Company Title or other group title system.
Inclusions
Any removable item that the vendor has agreed will be included in the sale.
Interest Only Loan
Throughout the term of the loan, only the interest is paid off. The loan itself (the principle) is repaid at the end of the time limit of the loan.
Investment
The purchase of an asset (like real estate) in order to produce capital gain on resale or to earn income or both.
Inventory
A list of items included with a property, usually furniture, furnishings and movable items.
Joint Tenants
The form of ownership where two or more people purchase a property in equal shares. If one dies, his or her share of the property passes to the surviving owner/s.
Land Tax
A State government tax payable by owners of property based on the unimproved capital value of the property.
Lease
A lease is a document granting possession of a property for a given period, subject to the payment of rent, without conferring ownership. The lease document specifies the terms and conditions of occupancy and rent payable.
Lender’s Mortgage Insurance
There are a number of variables that influence whether or not lender’s mortgage insurance is required. Generally, it is required if you are borrowing more than 80% of the value of the property, however this condition varies depending on property type, location of the property, loan type, etc. Lender’s mortgage insurance protects the lender, not the borrower(s), against loss in the event that you default on the loan. This should not be confused with mortgage protection insurance for borrowers. In the case of foreclosure, if the property is subsequently sold by the lender at a price that does not cover the outstanding amount of the loan in full, lender’s mortgage insurance will cover the difference in the debt still owed to the Bank after the sale of the property.
Lessee
A person who obtains possession of a property under a lease.
Lessor
A person who owns a property and allows another to occupy it under a lease.
Mortgage
A legal document that gives a lender an interest over a property to secure the payment of money, or the performance of an obligation owed, to a lender.
Mortgage Guarantee Insurance
Paid by the borrower to protect the lender against failure by the borrower to keep up mortgage repayments or to pay back the loan in full when it is due. Such insurance normally applies where the borrower’s loan exceeds 80% of the value of the property. This type of insurance is taken out by the lender with the cost passed on to the borrower. The borrower remains liable for any shortfall. For example, if the property is sold and the proceeds do not cover what is owed to the lender.
Mortgage Sale
If the borrower defaults, the lender can seek to recover the debt by selling the property, which was the security for the loan under the mortgage.
Mortgagee
Organisation that lends money to a borrower by a mortgage agreement.
Mortgagor
A person who takes out a mortgage on a property he or she is buying. The property is assigned to the lender as security for the loan.
Old System Title
See Common Law Title, General Law Title
Net Income
Your income after income tax and mandatory levies have been deducted.
Off The Plan
Purchasing ‘off the plan’ involved buying a property before it has been built. Such purchases are usually based on the architect’s plans and models.
On The Market
The point at an auction where a price is reached at or above which the seller is prepared to sell.
Option To Buy
A legal document giving a person a right to buy. The price of the option and the period in which it must be exercised are specified in the option. Usually, a fee is paid and if the person proceeds to buy, the amount paid for the option is deducted from the purchase price. Where the person does not proceed to buy the property, the option fee is not refundable.
Outgoings
Any costs incurred by the seller on top of the agent’s commission. For example, advertising costs. All outgoings are negotiable.
Overquoting
The illegal practice of overstating the estimated selling price of a property. This is usually done to encourage a seller to list.
Passed In
The circumstances where a property for auction is not sold, usually because it has not reached the sellers reserve price.
Principal and Interest Loan
A loan made under a principal and interest repayment condition is the most common form of housing loan. The repayments are calculated so that over the term of the loan, both the principal amount borrowed initially and the interest payable over the term of the loan, are repaid in full by the end of the loan’s term.
Private Sale
The seller (vendor) does not engage a real estate agent, but acts for him or herself and so avoids paying agent’s commission. The seller deals directly with the buyer.
Private Treaty Sale
Sale of property through an estate agent, other than by auction.
Progress Payments
Payments/installments advanced on a construction loan which, during the construction period, are paid by the lender to a builder as the building progresses. Progress payments are made on completion of pre-determined and agreed stages of construction.
Property Management
The management of a property on behalf of the owner
Rates
The amount charged by the local council or water authority to provide services to a property.
Real Property
Land with or without improvements on it.
Rebates
Discounts received, usually for bulk purchases such as advertising. Any rebates received by an agent must be passed onto the seller.
Requisitions on Title
A set of questions about a property that the buyer asks the seller after the contract has been signed. Usually with the help of a solicitor.
Reserve Bank of Australia
Australia’s central bank with responsibility for regulating monetary policy including the official interest rate.
Reserve Price
This is the minimum price a seller has specified that they will accept to sell their property at auction.
Search (title)
The process of investigating or examining title to land, to ascertain if the vendor has the right to transfer ownership. A title search reveals the names of the owner and other precise details of the property, like the existence of any restrictive covenant, encumbrance or caveat on the title.
Semi-detached
Two houses joined together by a common wall.
Settlement
The occasion when ownership of a property passes from the seller to the buyer and the balance of the sale price is paid to the seller. (b) The subsidence (or sinking) of a wall or house, or of the soil supporting the dwelling.
Solicitor
A legally qualified and licensed person who undertakes legal work and provides legal advice for a fee. A solicitor may specialize in conveyancing and property law.
Stamp Duty
A State Government Tax. For contracts of sale it is calculated according to the sale value on the contract, and paid by the buyer when property ownership is transferred. For mortgages, it is calculated on the amount to be advanced and secured by a mortgage.
Strata Title
Individual ownership of an apartment or unit within a block or multi-unit complex. This is separate from an additional to the joint ownership of common areas shared by all the property owners in the building complex.
Stratum Title
Each owner has a certificate of title and is absolute owner of a freehold flat. A service company has the title to the common property and each flat titleholder has a responsibility to the service company. The service company, in which each flat titleholder has shares, administers, managers and maintains the property in which each owner’s flat is registered.
Survey
Shows dimensions and boundaries of land and location of buildings.
Tenancy
The right to occupy land or buildings as provided by the terms of a lease or other agreement.
Tenants in Common
A form of joint ownership of a property in which each person owns a share of the property, equally or unequally. On the death of one owner, the deceased’s share passes to his or her heir/s, who assume/s the role of the tenant in common with the other existing owner/s.
Terrace
One of a row of houses joined together with common walls.
Title
A legal document that identifies who has a right to the ownership of property.
Torrens Title
The name given to the government system of recording ownership of land. It’s by far the most common land title in Australia and the cheapest title to buy or sell. Once you are registered on the title you are taken to be the owner.
Town House
Two-storey attached dwellings usually registered under Strata Title.
Transfer of Land
A document registered at the Land Title Office recording he change of ownership of a property from the seller to the buyer.
Underquoting
The illegal practice of understanding the estimated selling price to prospective buyers, either directly or through advertising, to encourage greater interest in property.
Unencumbered
Usually describes a property free of mortgage interests.
Unfair Contract Terms
A term that is not in good faith and causes a significant imbalance in the rights and obligations of both parties to the detriment of the consumer.
Valuation
An estimate of the value of a property by a registered valuer, usually for a fee.
Vendor (seller)
A person who offers a property for sale.
Vendor Bid
A bid made on behalf of the vendor. Vendor bids can only be made by the auctioneer and only when the auction rules allow it. The auctioneer makes this statement before bidding starts and announces each vendor bid as, or before, it is made.
Vendor’s Statement
Information which the seller must provide to the buyer advising of restriction such as covenants and easements, outgoings such as rates, and any other notices such as compulsory acquisition.
Vendor’s Terms of Contract
Also known as terms contract, where finance is supplied by the vendor rather than by an established credit provider.
Villa
Single-storey dwelling usually registered under strata or community title.
Zoning
Description of the allowable uses of land, as set out by local councils or planning authorities.