Real Estate Terms

Glossary of Real Estate Terms

AGENCY – Used to describe a real estate business.

AGENCY AGREEMENT – A legally binding document which forms a contract between the agent and the principal to perform a service such as selling or managing land or property.

AGENT – A licensed person or company who is engaged by, and acts on behalf of, a principal (client), to provide a service. A salesperson, property manager or employee who works for the licensed agent, is acting for the agent, when they provide any service, advice or sign any documents.

APPRAISAL – An agent’s opinion of the expected price a property for sale or rent could achieve in the marketplace.

AUCTION – The sale of a property where parties are invited to bid for the property on a set date and where the highest bidder can purchase the property, if or when the reserve price has been reached. The vendor sets the reserve price. An Auctioneer conducts auctions.

BOND – Security held by the Rental Bond Board (in the case of residential tenancies) and lodged by an owner or agent against a tenant not meeting their obligations under a tenancy agreement. For non-residential property a bond may take the form of bank guarantee or director’s guarantee.

BREACH – Failure to honour terms or conditions of a contract, or legal or agreed obligations.

BUILDING CERTIFICATE – Issued by local councils or approved inspectors after inspecting a building. Once issued, it prevents council from making any orders in relation to the structural soundness or otherwise of the building.

CAVEAT – A warning placed on the title to land to warn that another party may have a claim or interest in that land. This is also known as an encumbrance on title.

CAVEAT EMPTOR – “Let the buyer beware” – This principle still applies, but consumer protection legislation has limited the extent of this notion. Purchasers of property now have much greater protection from unscrupulous vendors and agents under the law.

CERTIFICATE Of TITLE – Title to land registered under the “Torrens Title” system. It lists all registered dealings in that land.

CHATTEL – Movable and tangible property that is not fixed to the land.

CLIENT – Normally applies to person or party who engages the agent and who pays the agent’s fee. Some agents consider anyone involved in a transaction to be a client or prospective client.

COMMISSION – The fee paid to an agent for services rendered, such as the sale of property.

COMPANY TITLE – A form of title where a purchaser of property acquires shares in a company which owns the building and is given exclusive rights to occupy part of the building.

CONTRACT – An agreement between the parties which is intended to be legal or enforced at law.

CONVEYANCE – The act by which ownership of an interest in land is changed.

COOLING OFF – A period in which a party can change their mind and withdraw from the contract.

CORPORATION – A business entity registered under the Corporations Act 2001.

COVENANT – A promise or agreement which is part of a contract that one party will or will not do something, e.g. A covenant to not build a garage on a block of land unless it is built with identical material to the home or a requirement to build the home above a specified value.

DEPOSIT – A “good faith”, or preliminary payment, towards securing a property. The deposit is consideration required under the contract of sale and is usually 10% of the purchase price. For residential tenancies the deposit is legally referred to as a “reservation fee”.

DEPOSIT BOND – A guarantee that the purchaser of a property will pay the full deposit by the due date. Institutions providing deposit bonds act as guarantors that payment will be made.

DEVELOPMENT APPLICATION (DA) – Approval is required to build or develop on land and predetermined controls need to be complied with. DAs also include BAs (Building Applications).

EASEMENT – A “right” granted to another person (not the owner) to use part of the land for a particular purpose. Easements do not convey ownership of the land but a “right to use” the land such as a right of way or to run power lines or drainage systems across/under the land.

ENCROACHMENTS – Something that overhangs the boundary of the land onto someone else’s land, such as fences, eaves or balconies.

ENCUMBRANCE – Something that effects or places a burden on the land.

ESTATE – An interest in land/property.

EXCHANGE OF CONTRACT – The point of time at law when the vendor and purchaser swap documentation and the contract becomes binding on both parties.

EXCLUSIVE AGENCY – An agency agreement given to an agent exclusively for a set period of time. The agent is entitled to the specified fee regardless of who sells or initiates the sale during the agency period.

FIXTURES – Things that are part of, or fixed to, the land that cannot be removed without causing damage. Fixtures are items included in a sale.

FREEHOLD – The highest form of ownership of land. A person may do what they wish on or with the land provided it is within the law.

GAZUMPING – Where a seller accepts an offer from one purchaser and another purchaser then makes a subsequent higher offer in an attempt to purchase the land or property. Agents must submit ALL offers received to their seller and a sale does not take place until contracts have been exchanged. Contracts for the sale must be endorsed in writing. Therefore, in the time between offer, acceptance and actual exchange of contracts a purchaser is “at risk” of another purchaser offering more to purchase the property. Whether a deposit is paid or not an agent should make the purchaser FULLY aware of this fact. If a deposit has been paid, this is required by law and must be written on the deposit receipt or given to the purchaser in writing with the receipt.

INJUNCTION – A court order to do or not to do something.

IMPROVEMENTS – Buildings or work on land that increases the value of the land.

JOINT TENANTS – Ownership of the land is divided equally between all registered owners. A right of survivorship exists where title to the land automatically passes to the surviving party/ies in the event of death.

LEASE – The right to exclusively occupy land or buildings upon payment of rent or consideration.

LEASEHOLD – A form of ownership of land where land is held by way of a lease for a set period of time.

LESSEE – The occupier/tenant of a property under lease.

LESSOR – The owner of the land or property being leased.

LIABILITY – An obligation at law.

LICENCE – The right or power to do something. In the use of land it may relate to using water, grazing stock, erecting a sign or crossing land.

LISTING – An agent “lists” a property or land for sale from a seller by written agreement. The “listing” then becomes the product that an agent offers for sale. Agents are always on the “lookout” for new listings.

MARKET – The pool of supply and demand that affects the ultimate price obtained for the sale or rental of a property or land.

MORTGAGE – A legal agreement where a loan is taken out using security such as land or property. The mortgage is registered on the Certificate of Title.

MORTGAGEE – The lender of the money for the purchase of a property.

MORTGAGOR – The term that refers to the person who borrows the money and who offers the security.

MULTIPLE LISTING (MULTILIST) – A group or co-operative of agents who share or “pool” their listings and the fees involved.

NEGLIGENCE – A breach of a professional duty of care owed to a party to a transaction.

OBLIGATION – A duty at law.

OLD SYSTEM – A type of title to land where a series of transactions follow back to what is called a good “root of title”.

OPEN HOUSE – An advertised invitation to view (inspect) a property also known as Open for Inspection or Exhibition.

OPEN AGENCY – Where land or property is given to more then one agent to sell and only the successful selling agent is paid a fee. The owner can also sell the property themselves, without having to pay a fee to any of the agents involved. This is the least popular agreement with agents as they spend time and money and may not receive any remuneration in return for their efforts.

OPINION OF MARKET WORTH – An agent’s opinion of what price could be achieved for land or a property under current market conditions.

OPTION – A term in a lease that allows a tenant to extend the period of the lease under predetermined conditions. Also, an exclusive right to purchase a property subject to terms agreed in advance.

PRECEDENT – A court decision that is legally binding on the court as a result of a previous court case.

PRIVATE SALE – Where the owner sells the property without the services of an agent.

PRIVATE TREATY – An invitation to the public to purchase a property at a predetermined or negotiated price that is acceptable to both the purchaser and seller.

PURCHASER – The buyer of land or property.

RENT ROLL – The portfolio (total number) of properties managed by an agent.

REQUISITION ON TITLE – A list of questions asked by a purchaser of the vendor in relation to the title of the land usually through the solicitor or conveyancer.

RESCIND – Cancel, terminate or revoke a contract.

RESERVE PRICE – The price at which a seller is prepared to sell the property. Normally relates to auctions and refers to the price below which the auctioneer cannot sell the property without the sellers expressed consent. This is the MINIMUM price the vendor is prepared to accept.

RESTRICTIVE COVENANT – A notice on the title that restricts the use in relation to that particular piece of land or property and binds the owner to the restriction.

SECTION 149 CERTIFICATE – A planning certificate that contains information relating to zoning, development restrictions and various matters issued under the Environmental Planning and Assessment Act 1979.

SETTLEMENT – Also known as completion. Settlement occurs when the money is paid and possession is transferred to the purchaser. The sale and transfer is then registered on the Certificate of Title.

SOLE AGENCY – Where an agent is given sole rights to sell the property. The owner may also retain the right to sell themselves, and not pay the agent a fee, if they do so. Not a widely used form of agreement.

STRATA TITLE – Where land and/or buildings are sub-divided into individual lots, which may be sold separately.

SURVEY – To examine and “map” land and/or buildings in relation to boundaries between lots.

TENANTS IN COMMON – Ownership of land by two or more persons. Shares do not have to be equal and can be disposed of whenever the owner wishes without the consent of the other owners.

TENDER – A method of sale where purchasers are invited to submit a written offer by a set date. Tenders usually involve tender documents that outline the terms and conditions of the sale process and to which the purchaser’s respond. Agents use a wide variety of methods/terms and conditions for this process. A deposit is usually required to be submitted with the tender, which is in the form of a sealed bid to be opened on the set date.

TITLE – Record of ownership of land together with any encumbrances.

TORRENS TITLE – A form of registration of ownership of title to land where the Certificate of Title shows all restrictions and registered dealings for that parcel of land. This form of title is guaranteed by act of registration.

TRUST ACCOUNT – An account into which an agent must bank all monies received on behalf of another person. This account is opened by the agent for the purposes of holding monies that do not belong to the agent.

VALUE – What a person is actually prepared to pay to buy or lease land or property.

VALUATION – An estimated price established by a qualified, registered valuer that is sworn and will be upheld in a court of law.

VENDOR – Also called the seller. The owner/s selling the land or property.

WAIVE – To abandon or disclaim a right to something.

WARRANTIES – An understanding or promise to do something, or declare that something has been done.

ZONING – Restriction by law (statute) on how land can be used, or what uses are prohibited.

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