Jargon demystified: What most commonly confused real estate terms really mean

Don’t know your strata from your company title, or if you can change your mind about the house you’re buying?

You’re not the only one. According to industry experts, many buyers aren’t clear on what a lot of the real estate jargon thrown around actually means.

So here’s a rundown of some of the most common property misconceptions.

1. What is the buyer’s guide at an auction?

Buyer’s agent Michelle May said many NSW house hunters didn’t understand why properties could sell above the price guide.

“When an agent is quoting a number, they can legally quote the bottom range of an agency agreement,” she said, “They’re always going to advertise the lower end of the guide.”

But buyers needed to take into consideration that the vendor would probably want more, she explained.

In Queensland, it is illegal for the real estate agent or seller to provide a price guide for a property going to auction.

In Victoria, if a property listed for sale has a price attached it must be a single figure, or a range of 10 per cent.

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2. What is a vendor bid?

Buyers may be confused why a seller is bidding on their own house, but the vendor bid is actually a tool sellers use to kick off bidding. It generally indicates a minimum figure that they would accept.

“During an auction in NSW, the vendor is entitled to have one bid,” said Mark Foy, principal of Belle Property.

Often the auctioneer would do it on their behalf, and it “must make it very clear that it’s a vendor bid”, he explained.

In Victoria and Queensland, sellers are allowed more than one vendor bid.

3. What is a cooling-off period and when does it apply?

When purchasing via private treaty in NSW and QLD, buyers get five business days after they’ve exchanged contracts in which they can change their mind and get out of the purchase with written notice.

Buyers, however, need to pay the vendor 0.25 per cent of the price if they pull out, which can equate to several thousand dollars.

Properties bought at auction, or on the same day once the property has passed in, do not get a cooling off period, As such, finance and building reports need to be arranged before auction.

“When they buy at auction, they buy unconditionally,” Mr Foy said. “When they pull out they lose their 10 per cent [deposit].”

Cooling off periods can protect buyers, according to John Carew from Mayfield Property Buyers. “The cooling off period only gives the buyers the right to walk away, not the sellers,” Mr Carew added.

For pre-auction offers in NSW, vendors will usually require buyers to sign a 66W certificate, which waives the cooling-off period.

In Victoria, properties up for private sale have a three business day cooling off period, beginning when buyers sign the contract. Pulling out will cost buyers $100 or 0.2 per cent of the price, whichever is greater.

Victorian properties bought at auction do not have cooling-off periods, and neither do pre-auction offers accepted less than three business days before the auction date.

4. How long is the settlement period and can it change?

The settlement date is when the buyer pays for the property, receives the title and takes possession.

In NSW, it’s normally six weeks after contracts are exchanged, but this period is increasingly being negotiated, especially if the vendor hasn’t found their next home yet.

“It is becoming more and more common to have a long settlement period,” Mr Carew said. “They all want to avoid moving twice, and paying bridging finance.”

He said NSW buyers should be aware when stamp duty is due. “If the settlement is longer than 90 days, you still have to pay the stamp duty on day number 90,” he said.

Settlement periods in QLD tend to be shorter, around 30 days.

5. Company title vs strata title: Which is better?

In the case of a company title property in an apartment block, a buyer is paying for a share of a company that owns the building and the right to occupy their apartment, rather than an individual title.

Strata-titled apartments differ in that each owner holds title over their apartment, as well as a share in the owner’s corporation responsible for common property and the structure of the building itself.

John Carew said that personally, he didn’t avoid company title properties, as it was common in older apartment blocks, but said financing could cause problems. “Banks don’t like company title – now they’ll say no, or want a much higher deposit,” he explained.

Company titled properties can be cheaper, but Mr Carew said these restrictions meant company titled properties may not rise in value as much as comparable strata titled properties.

“It’s much harder for first-home buyers to buy a company title – it does restrict the buyer pool.”