Real Estate Jargon ExplainedAPPRAISAL: An appraisal is the process of estimating the market value of a property and is conducted by sales consultants. A property appraisal involves inspecting the property and presenting a report to the client stating the approximate price that it will sell for.
AUCTION: The process by which real estate is sold to the highest bidder.
BRIDGING FINANCE: A short term loan used to bridge the gap between buying a new property and selling an existing one.
BUILDING INSPECTION: A thorough inspection by a licensed builder that evaluates the structural condition of a property undertaken at the buyer’s expense.
BUYERS MARKET: When the demand for property is less than supply; the advantages shift to the buyers.
CAVEAT: Caveats (meaning ‘beware’ in Latin) are documents lodged with the Land Titles Office and recorded in the certificate of title, warning anyone interested in acquiring rights to a parcel of land that another person has an equitable interest (e.g., an unregistered mortgage).
CERTIFICATE OF TITLE: A certificate of title is a legal document showing the lot dimensions, location and ownership of land with encumbrances (such as a mortgage, caveat or easement relating to the property) if any.
CODE OF CONDUCT: The code of conduct requires that a representative must not; make misleading statements, advertise a property without written authority, advertise a property at a price or terms different from that authorised by the principal, claim advertising costs from a seller unless the seller has initialled the amount on the listing agreement form.
COMMISSION: A proportion of the sale price (generally a percentage) of a property paid to real estate agent for negotiating the sale.
COMMON PROPERTY (STRATA): Land and buildings within the strata parcel, which are not part of a strata title lot, is known as common property. Each proprietor owns an interest (share) in the common property (i.e. possibly the exterior of the building and possibly garden areas and driveways) together with the proprietors of the other strata titled lots as tenants in common in proportion to their unit entitlement as reflected within the strata plan or survey strata plan.
CONTRACT FOR SALE: An agreement in writing that details the terms and conditions in regards to the sale/purchase of a property.
CONVEYANCING: The legal process for transferring property ownership from one entity to another.
COVENANTS: Covenants are requirements for an owner of a property to do something (positive covenant, e.g. have a brick and tile roof), or refrain from doing something (negative covenant, e.g. changing the brick and tile roof to zincalume). Covenants are frequently used by town planner, developers or strata companies to maintain the character of an area and enhance property values.
DEED: Legal title documents proving ownership. The deeds will be held by the mortgage lender.
EASEMENT: Easements are rights to make specific use of another person’s land (positive easement), or to prevent or restrict the use of another person’s land in any specific way (negative easement). Easements can be created in writing or, under common law, by usage (implied), e.g. by allowing your neighbour to use your land as a shortcut for a long period of time you may be creating an implied easement.
ENCUMBRANCE: An interest or right in real property which diminishes the value of the fee but does not prevent conveyance of the fee by the owner. Any impediment to the use or transfer of land, including such things as easements, mortgages, caveats, notices of intention to resume, leases etc, which are usually registered on the title.
FITTINGS: Objects that can be removed from a property without causing damage.
FIXED TERM TENANCY: A fixed term tenancy is for a specific period of time. There is a commencement and terminating date eg. 1/1/13 – 30/6/13. The Tenancy Agreement normally contains provisions that, at the termination of the lease or agreement, the tenancy may continue but under conditions to be determined. At the conclusion of a fixed term the owner may offer the tenant another fixed term. However, should another fixed term not be offered or taken and the tenant remains in the property, the tenancy rolls over into a periodic tenancy. Neither party can terminate a fixed term tenancy contract before it expires, unless both parties agree.
FIXTURES: Fixtures are real property and are permanent in nature and intention, and if removed would leave a scar on removal. For example, a brick building is a fixture on the land together with fencing. Inside the house, items such as glued floor coverings and built-in furniture are fixtures.
JOINT TENANCY (form of ownership): In a joint tenancy each tenant owns an equal and undivided share of the estate and there is a right of survivorship. Thus, on the death of one joint tenant, the survivor retains an undivided right to the entire estate, which is not subject to the rights of the deceased co-tenant.
LEASE: A grant of the possession of real property to last for a fixed or ascertainable period at will or in perpetuity and usualy with the reservation of a rent. The person who grants the lease is called the lessor, the person to whom it is granted being the lessee. A lease must be for a less estate or term than the lessor has in the property, for if it comprises his whole interest it is a conveyance or assignment and not a lease. Where a person who is himself a lessee grants a lease of the same property to another person for a shorter term, it is called an underlease or sub-lease.
LISTING AGREEMENT: Before a property can be offered for sale, there must first be a valid written authority for the listing, signed by the seller in favour of the agent (stating the price of the property, the date of execution and the length of the listing). This is a requirement under the Real Estate and Business Agents Act 1978. Without a written authority an agent is not entitled to a commission for the sale.
MARKET VALUE: The price at which a seller is happy to sell and a buyer is willing to buy. This assumes that there is sufficient activity in the marketplace to generate enough buyers and sellers so that neither party controls the price.
NEGLIGENCE: An agent must carry out his / her duties with skill, care and diligence. Failure to do so could constitute negligence.
OFF THE PLAN: When you buy off the plan, you are buying a property before it is built, having only seen the plans. This is commonly used for apartments or units under construction or soon to be built.
PASSED IN: When the highest bid at an auction doesn’t meet the reserve price set on the property. In effect the property doesn’t sell at auction.
PERIODIC TENANCY: A Periodic Tenancy is a tenancy from week to week, fortnight to fortnight or month to month for a non specified period of time. It ‘rolls over’ at the expiration of each period. This continues until such time as either the Tenant or the Owner gives notice of termination of the tenancy.
PRIVATE TREATY: Private treaty is the term used for all non-auction and tender transactions. The agent accepts an appointment to present the property for sale to interested parties attracted as a result of advertising. The property is offered at a price and should a prospective buyer express interest, negotiations commence.
PROPERTY MANAGEMENT: Property Management is the care and maintenance of rented property as authorised by the Owner. The term ‘Property Management’ describes the whole of the professional aspect of the management by an Agent of all forms of real property as authorised by the Owner.
R-CODES: The common name for the residential housing density codes, which describe the average land area required for the construction of a dwelling on a block of land. The R-Codes are often referred by property developers who are considering the redevelopment potential of a property. To calculate the land areas applying to each R-Code simply divide the number 10,000 by the R-Code. For instance, an R-20 zoning, which is common in Perth, would require 500 sqm of land area for each dwelling. RENTAL YIELDS : The return on an investment as a percentage of the amount invested. Gross rental yield can be calculated by multiplying the weekly rent by 52 (weeks in a year), then dividing by the value of the property and multiplying this figure by 100 to get the percentage.
SECURITY BOND: A security bond is paid by the tenant and acts as a monetary pledge of his/her intention to comply with the provisions of a Lease or Tenancy Agreement. The cost of the security bond is typically the total of four weeks rent.
SELLERS MARKET: When demand for property is greater than supply. The result is greater opportunities for owners who may find purchasers willing to offer the asking price or even a figure greater than the asking price.
STAMP DUTY: A state tax on conveyance or transfer of property calculated on the total value of the property.
STRATA COMPANY: A strata company is not a company in the usual sense. The strata company has many responsibilities, but one of the most important responsibilities is to ensure maintenance, repair and replacement of common property. A budget is set annually for the cost of insurance, management and maintenance of the common property. Each proprietor is then levied according to each proprietor’s unit entitlement.
STRATA PLAN (Buildings): The strata plan has a number of pages including a location plan and a floor plan. The location plan indicates the position of all buildings (if applicable) in relation to the boundaries. There is a different floor plan for each floor or level of a building. The floor plan indicates the position, floor shape and floor area of each lot and is noted with the lot number or part lot number.
STRATA TITLE: Another popular form of property title. A strata title is different from a green title because it covers land that is shared by owners of adjoining strata titles. This shared land is known as common property. Strata titles are often used in developments of home units and townhouses, which require a facility to incorporate a common driveway in the development.
SURVEY STRATA PLAN (creating vacant lots): Survey strata schemes differ significantly from a strata plan (which relates to buildings) . Survey strata plans reflect a subdivision of land and require a formal survey by a licensed surveyor showing all dimensions, angles and areas.
TENANTS IN COMMON (form of ownership): In a tenancy in common, each tenant has an undivided interest in the entire property. Each tenant has the right to possession of the whole property. There is no right of survivorship. Each tenant has a distinct proportionate interest in the property.
VALUATION: A property valuation is the process of estimating the value of a property and is conducted by a licensed valuer.
ZONING: Local Government or Planning Authority control of the use of land, such as business, residential, light, offensive or heavy industrial etc, as well as regulating the type and density of the improvements upon it.