Real Estate Glossary (What Does This Word Mean?)

Confused about Real Estate terms or phrases you've heard mentioned? Here's a great section to help you through the world of Real Estate.

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.

APPRAISAL: A term commonly used in Australia, meaning an opinion of the potential saleability of a residential property based on recent, comparable property sales - based on market conditions. This should be performed by a licensed Real Estate Agent. This should not be confused with a valuation - see Valuation.

AUCTION: A sale usually in public, by an auctioneer, in which property is sold to the highest bidder.

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.

AUCTIONEER: One who is licensed to sell, or offer for sale, real estate where persons become purchasers by competition, being the highest bidders.

BASIS POINT: One percent (1%) is the equivalent of 100 basis points. BID A verbal or written offer to purchase.

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. Associated rights and obligations are fixed by scheduled by-laws.

BOND (RENTAL): Consideration held usually under a lease to ensure performance of lease terms and conditions. Normally refundable if possession of property is returned in good condition.

BUILDING CODE OF AUSTRALIA (BCA ): Sets minimum community standards for buildings in terms of health, safety and amenity in buildings for regulatory purposes.1 Produced by the Australian Building Codes Board (ABCB), refer to www.abcb.com.au

BUILDING INSPECTOR: 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.

BUSINESS BROKER: An estate agent licensed and certified to sell businesses.

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.

CAPITAL GAIN: The amount by which the net proceeds from resale of a capital item exceed the book value of the asset.2 Refer to The Australian Tax Office (ATO).

CAPITAL GAINS TAX: A Commonwealth tax payable on the Capital Gain made on the sale of an investment property. Refer to current requirements of the Australian Taxation Office (ATO).

CERTIFICATE OF TITLE: A document issued under the Torrens System of Title, showing ownership and interest in a parcel of land.

CHATTELS: Any fixed asset other than freehold land. Items such as machinery, implements, tools, furnishings, fittings, which may be associated with land use, but which are not fixed to the land or premises or, if fixed, may be removed without causing structural damage to a building. Legally known as personalty.

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.

COMMERCIAL PROPERTY: Property intended for use by all types of retail and wholesale stores, office buildings, hotels and service establishments. In many property circles, commercial property refers specifically to office property.

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.

COMMON PROPERTY: (a) Land or a tract of land considered as the property of the public in which all persons enjoy equal rights. A property not owned by individuals but by groups; (b) In a home (villa) unit or flat development that part of the property owned and used in common by all the unit or flat owners or occupiers and which is maintained by the Body Corporate.

CONDITIONS OF SALE: The conditions applicable to a sale contract made between a vendor and purchaser.

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.

DEED: A document executed under seal. For example, a conveyance.

DEPOSIT: Percentage of total consideration, or an agreed amount, paid on exchange of contract for purchase of an asset.

EASEMENT: A right to use the land of another (not involving the taking of any part of the natural produce of that land, or any part of its soil) or a right to prevent the owner of that land from using that land in a particular manner. Most commonly used where Government authorities have the right to run, for example, electrical mains or drainage through private property. Some form of compensation may be payable.

EFFECTIVE CAUSE OF SALE: Where the efforts of a particular real estate agent are considered to have been an essential element in a purchaser entering into a binding contract with a vendor for the sale of a property. An agent considered to be the effective cause of sale will usually be entitled to a commission in respect of that sale.

ENCUMBRANCE: 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).

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.

FREEHOLD: Absolute ownership subject to limitations imposed by the state; also known as a fee simple estate. An estate held for perpetuity.

GAZUMPING: Where the vendor agrees to sell a property, but then sells it to another party on more favourable terms.

GOING CONCERN: An operating business that will remain in operation for the foreseeable future. It is assumed that the entity has neither the intention nor the necessity of liquidation or of curtailing materially the scale of its operations. Properties sold as a going concern may be treated differently for taxation purposes.

GOODS AND SERVICES TAX (GST): A consumption tax imposed by the Commonwealth levied on the provision of goods and services.

GUARANTOR: A person who undertakes to fulfil a contract if the main party defaults.

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.

INTEREST ONLY LOAN: Only the interest on the principal is repaid during the term of the loan. At the end of that time the principal is repaid as a lump sum.

JOINT TENANCY: The ownership of land in common by several persons where there is a right of survivorship i.e. where on the death of one joint owner the land as a whole vests in the survivors.

LEASE: An agreement whereby the lessor conveys to the lessee in return for a payment or series of payments the right to use an asset for an agreed period of time.

LEASEHOLD: Possession and use of a property by virtue of a lease.

LESSEE (TENANT): A person / legal entity who receives the right to occupy and use a property under the terms of a lease.

LESSOR (LANDLORD): The owner of a property who transfers the right to occupy and use property to another by way of a lease agreement.

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.

MAINTENANCE: The act of keeping, or the expenditure required to keep, an asset in condition to perform efficiently the service for which it is used.

MANAGEMENT AGREEMENT: A written contract recording the agreement between the owner and manager of real estate concerning the duties, responsibilities and liabilities of the owner and the manager in the management of that real estate.

MANAGEMENT FEE (PROPERTY): The fee charged by the property manager to the landlord for the service of managing a property or properties. This service typically includes collecting rents, paying recurrent property expenses, selecting and supervising property service contractors such as cleaners, plant service providers and security. It may also include negotiating new leases, marketing of the property, rent reviews and overseeing building refurbishment. In respect of property trusts, it refers to the fee levied on unit holders by the responsible entity to cover the cost of trust administration.

MANAGING AGENT: A real estate agent authorised to manage the business affairs in connection with the property of another. See also Property Management.

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.

MEDIAN: The middle number when data is arranged from 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.

MORTGAGE: Documentation of a property loan. Security over real property to ensure payment of a debt or performance of an obligation.

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.

MORTGAGEE: Financier who lends money against property as security.

MORTGAGEE SALE: Sale of a property where, in the case of a default of payments by the mortgagee, the mortgagor can sell the property over which the mortgage has been held.

MORTGAGOR: One who owns an interest in real estate and who executes a mortgage on that interest as security for a loan or for the advance of credit.

NOTICE OF TERMINATION: The notice given by either the landlord or tenant that they want to end the rental agreement and vacate the property in compliance with the terms and conditions of the lease.

NOTICE TO QUIT: A legal notice served on tenants requiring them to vacate real estate due to a breach of lease terms.

OFFER: The consideration offered to purchase or lease an asset.

OPEN AGENCY AGREEMENT: The agreement between an agent and a vendor establishing an Open Listing.

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.

OUTGOINGS: The expenses incurred in generating income. In real estate, these expenses include, but are not necessarily limited to, property rates, insurance, repairs and maintenance and management fees.

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 profits thereof, whether as beneficial owner, trustee, mortgagee in possession or otherwise.

PASSED-IN: If a property is not sold at auction because the owner's reserve price has not been reached, it is passed in.

PERIODIC LEASE: Where a tenant continues to rent / occupy the property after the lease has formally expired.

PREMISES: A house, building or other structure together with the surrounding grounds that form part of the title. Also, the real estate forming the subject of a conveyance or licence.

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.

PRIVATE TREATY SALE: A sale negotiated directly between the parties or their agents.

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.

PROPERTY MANAGEMENT: The management of a property on behalf of the owner. For example, the leasing of space, collection of rents, selection of tenants and generally the overall maintaining and managing of real estate properties for clients.

REAL PROPERTY: All the rights, interests, and benefits related to the ownership of real estate. Real property is a legal concept distinct from real estate, which is a physical asset. There may also be potential limitations upon ownership rights to real property.

RENT: A payment made periodically by a lessee to a lessor for the use of premises.

RENT REVIEW: A periodic review of rental under a lease using a predetermined method. For example, an increase in line with Consumer Price Index (CPI) or in accordance with a market valuation.

RESCIND: To terminate a contract of sale.

RESERVE PRICE: The lowest acceptable price fixed by the vendor.

RESIDENTIAL TENANCIES TRIBUNAL: Specialist bodies exist in most Australian States and Territories to resolve disputes between landlords and residential tenants in low-cost manner, usually without the involvement of lawyers. Specifically, these bodies include the: Residential Tenancies Tribunal (ACT, SA); Residential Tenancies Authority (QLD); Residential Tenancies List (VIC); Residential Tribunal (NSW); Commissioner of Tenancies (NT); and Residential Tenancy Commissioner (TAS). Tenancy disputes may be heard by the Small Disputes Division of Local Courts in WA.

RESIDENTIAL TENANCY DATABASE: A risk management tool used by agents to identify tenants with a history of breaching tenancy rules.

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.

RIGHT OF ENTRY: Where a landlord may inspect the premises, provided reasonable notice is given to the tenant.

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.

SETTLEMENT DATE: The date on which a contract of sale is finalised and the balance of money is paid for an asset.

STAMP DUTY: The tax imposed by state governments on certain contracts (e.g. Contracts of Sale and Registered Leases). The amount of tax payable is calculated as a percentage of the contract value. See also individual state legislation.

STRATA TITLE: (a) The formal ownership of property held within a strata plan where property is defined within horizontal and vertical boundaries; (b) A scheme of property ownership where each proprietor owns parts of a building and has joint rights with other proprietors over the land and other common areas.

SUBDIVISION: Divisions by a land owner, of all or part of a parcel of land, into separate allotments (or sections), each with a separate title, in accordance with a 'plan of subdivision' approved by the planning authority.

TENANCY AGREEMENT: A form of lease, generally in an abbreviated form. It may be registered on an owner's certificate of title.

TENANCY IN COMMON: Ownership that is separate and not held directly with another person. There is no survivorship.

TENANT: A person or entity paying rent in exchange for the occupancy of a building or dwelling. See also Lessee.

TENANT'S AGENT: A Tenant's Agent should be a licensed real estate agent, who acts on behalf of a tenant in a commercial property transaction.

TENDER: The sale of an asset through the seeking of written bids.

TITLE: The form of ownership of real estate (i.e. Torrens, strata or company title).

TITLE DEEDS: Documents evidencing the ownership of property.

TORRENS TITLE: 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 has 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.

TRUST ACCOUNT: A legislatively required bank account where monies are held by an agent for or on behalf of another person e.g. deposits, rental etc.

UNIMPROVED VALUE: A statutory concept of value used mainly for rating and taxing purposes, which envisages the land as being in its virgin state but enjoying the benefits of all external factors which influence the value at a given date. The value of land as if all existing improvements thereupon, including site works, had never been built or made, but regarding all other lands as in their current circumstance, including all improvements, roads, services and amenities.

VACANT POSSESSION: In real estate this refers to a right to possession of land or built-up property in respect of which there is no current occupant.

VALUATION: To assess a property's value, a valuer will measure the property, record details on the number and type of rooms, along with fixtures, fittings and any improvements. A property's unique attributes will also be taken into account, such as: Location Building structure and its condition Building/structural faults Standard of presentation and fit-out Access, e.g., good vehicle access and a garage Planning restrictions and local council zoning The valuer combines these attributes together with recent comparable sales in the surrounding area and prevailing market conditions to produce a valuation report. Valuations should not be confused with appraisals carried out by real estate agents. A licensed valuer must base their opinion on hard evidence and take legal responsibility for any information they provide.

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.

VENDOR: One who sells anything. In real estate transactions, the person(s) or entity selling the property.

WITHOUT RESERVE: An auction term signifying that a reserve price has not been set, such that the highest bid will prevail.

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.

ZONING: A local planning tool to control the present and future development of land including residential,business and industrial uses.