This is Your Abridged Glossary of Real Estate Terms
When signing a contract, there are always terms that people are not particularly familiar with. Most of us just sign the contract or click “I agree to accept the terms and conditions…” but this isn’t always the most responsible option.
Unusual terminology is aplenty in real estate contracts, and you may run into some of the terms* listed below. This is why you need to make sure you are familiar with their meaning.
Remember, if anything in the contract you are required to sign with your real estate agent is unclear, you have the right to ask for the exact meaning and an explanation of the term in context.
AGENT – 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 employed by a principal to sell or let real estate and share commission.
ASSUMPTION OF MORTGAGE – When a buyer takes ownership of real estate encumbered with a mortgage and has assumed the responsibility as the guarantor for the unpaid balance of the mortgage. Such a buyer is liable for the mortgage repayment.
BODY CORPORATE – (a) A term used in the Strata Titles Act to describe the body representing the building owners; (b) The control and administration of common property is vested in a statutory Body Corporate which comes into existence automatically on the registration of the plan, and to which the provisions of the Companies Act do not apply. The registered proprietors of the units are the only members of the Body Corporate.
BUYER’S MARKET – The condition which exists when, under competitive conditions, the pressures of supply and demand are such that market prices are at a relatively low level, giving the buyer an advantage. An over-supply causing prices to decline.
BUYER’S AGENT – Represents a property buyer in negotiations with a vendor or his/her agent. The buyer’s agent is paid by the buyer. Buyer’s agents should be licensed and certified to act as a buyer’s agent.
CLIENT – One who engages the services of an agent or valuer and to whom the agent or valuer should look for payment of his commission or fees, in return for services rendered.
COMMISSION – The fee or payment made to an agent for services rendered, such as the sale of property, often calculated with reference to the value of the property, contract or agreement.
CONDITIONS OF SALE – The conditions applicable to a sale contract made between a vendor and purchaser.
CONTRACT OF SALE – An agreement relating to the sale of property, which expresses the terms and conditions of sale.
COOLING OFF PERIOD – A short statutory period after the contract is made, during which the purchaser may cancel the contract unconditionally. Usually does not apply in the case of auctions.
COUNTER OFFER – A new offer as to price, terms and conditions, made in reply to a prior unacceptable offer. Normally the counter offer terminates the previous offer.
DATE OF SETTLEMENT – The date on which a contract of sale is finalised and final payment is made.
DEPOSIT – Percentage of total consideration, or an agreed amount, paid on exchange of contract for purchase of an asset.
DISBURSEMENTS – Recoverable costs. 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.
DISPLAY HOME – A building which represents a completed example of a dwelling type offered for sale.
EXCHANGE OF CONTRACTS – A formal legal process that creates a binding contract for the sale of real property on agreed terms. The vendor and purchaser each sign a copy of the sale contract and then exchange these documents, after which time the contract becomes legally binding on the parties. The parties are then bound to proceed to settlement, subject to any cooling off period that may apply. A deposit is usually also paid by the purchaser to the vendor during the exchange process. Any party that unilaterally declines to proceed to settlement may forfeit deposit monies or be subject to a damages claim.
EXCLUSIVE LISTING – Where a single agent only is appointed to sell or lease a property under an Exclusive Agency Agreement. Under the terms of an Exclusive Agency Agreement, the appointed agent is usually entitled to any commission resulting from a transaction relating to the property, even if it is sold / leased by another agent or the vendor during the term of the agreement. Also known as an Exclusive Agency or a Sole Agency.
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.
FITTINGS – 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.
FIXTURES – Those parts of a property 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.
GAZUMPING – Where the vendor agrees to sell a property, but then sells it to another party on more favourable terms.
HOLDING DEPOSIT – An amount given by a buyer to the estate agent acting for the seller. It shows the buyer’s serious commitment to the property and is commonly 10% of the purchase price.
INTEREST – The payment made by a borrower to a lender in return for the loan of money, in addition to the principal repayments.
LANDLORD – The owner of leased property. The lessor.
LESSEE (TENANT) – A person / legal entity who receives the right to occupy and use a property under the terms of a lease.
LICENSED REAL ESTATE AGENT – A Licensed Real Estate Agent may perform the activities in the conduct of a real estate business. He/she is licensed to hold responsibility for an agency’s legislative compliance activities.
LISTING – (a) A term commonly used by agents for obtaining an instruction to sell or lease real estate; (b) The recording of properties as being available for sale.
MARKET PRICE – The price actually paid, or agreed in a contract to be paid, for an asset. It differs from market value in that it relates to an accomplished fact, whereas market value is and remains an estimate until proved. Market price may involve circumstances not normally included in market value.
MARKET VALUE – 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.
MULTIPLE LISTING – A method of exchanging exclusive entries for the sale of properties between real estate agents who are members of the same organisation.
OPEN LISTING – Where a vendor grants selling or leasing rights over a property to any number of agents on a non-exclusive basis. The first agent to procure a buyer ready, willing and able to purchase or lease the property on terms acceptable to the vendor receives the commission. Also known as a Common Listing, Simple Listing or Open Agency.
OWNER – In relation to land, the owner includes every person who jointly or severally whether at law or in equity: (a) is entitled to the land of an estate in freehold possession; or (b) is entitled to receive rent or pro ts thereof, whether as bene cial owner, trustee, mortgagee in possession or otherwise.
PREFERRED LISTINGS – Entrusting a property sale / lease to a predetermined preferred agent.
PRINCIPAL -(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.
PRIVATE SALE – Where an owner offers a property for sale without engaging an agent.
PROPERTY – At law, property consists of the private rights of ownership. To distinguish between real estate (realty), a physical entity, and its ownership, a legal concept, ownership of land is known as real property. Physical items other than real estate are legally termed ‘personalty’ and their ownership is known as ‘personal property’. The word ‘property’ used without further qualification or identification may relate to real estate, personalty or a combination. Colloquially, property is anything that can be owned or in which an interest can be held, over which control can be exercised, which can be traded or left in an estate or from which current or future rights to receive benefits can be held. Property can include, but is not limited to, real estate and associated interests therein, personalty, intellectual property, rights, licences and options, plant and machinery, art and jewellery, goodwill and shares.
RATES – Periodic property taxes levied by Local and State Governments (e.g. water rates).
RESCIND – To terminate a contract of sale.
REVERSE MORTGAGE – 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.
SELLER’S MARKET – The condition which exists when, under competitive conditions, the pressures of supply and demand are such that market prices are at a relatively high level, giving the seller an advantage. An under-supply causing prices to increase.
SETTLEMENT – This is the final stage of the sale when the purchaser completes the payment of the contract price to the vendor and takes legal possession of the property.
SUB-AGENT – A person employed by an agent as their sales representative to provide assistance in transacting the affairs of the principal. In some states a sub-agent is referred to as a sales representative.
VALUATION – (a) The process of estimating value; (b) The prediction of the value of an asset at a point in time, depending on the purpose for which the valuation is required.
VALUATION REPORT – A document that records the instructions for the assignment, the purpose and basis of the valuation, and the results of the analysis that led to the opinion of value. A Valuation report may also explain the analytical processes undertaken in carrying out the valuation, and present meaningful information used in the analysis. Valuation reports can be either oral or written. The type, content and length of a report vary according to the intended user, legal requirements, the property type, and the nature and complexity of the assignment. The terms, valuation certificate and valuation report, are sometimes used interchangeably.
VALUER – A person who is: (a) registered / licensed / approved to carry out property or plant and machinery valuations under any State, Territory or Commonwealth legislation; and / or (b) a member of the Australian Property Institute who is accredited as a Certified Practising Valuer.
YIELD – The derived percentage return of a property 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.
*All terms have been sourced from the Real Estate Institute of Australia Consumer Fact Sheet.