Real estate terms explained: The jargon you need to know

Like any industry, real estate has its own jargon. But for buyers about to make the single biggest purchase of their life or renters struggling to snag an ideal home, these terms can make an already overwhelming process even more complex.

As if saving for a deposit or house hunting weren’t time consuming enough, deciphering agent code and industry lingo is another layer of effort many of us don’t have the energy for. With this in mind, we’ve rounded up common real estate lingo in one place for you.

An A to Z glossary of real estate jargon:

Amortisation period – The length of time it would take to pay off a mortgage in full.

Appraisal – A property appraisal is an estimated market value of your property in the current market, undertaken by a real estate agent.

Appreciation – An increase in the value of a property over time.

Auction – The sale of a property, done in public and held by an auctioneer, where the home is sold to the highest bidder.

Bank valuation – A bank’s estimate of the property value, which is often conservative.

Body corporate – Sometimes referred to as owner’s corporation, body corporate is the group of owners who share common property on a piece of land. They’re responsible for managing said common property (like shared driveways, lifts, corridors, gardens and recreational areas) of strata-titled properties (apartments, units, townhouses, etc).

Bond – For rental properties, a bond acts as a security deposit. Usually four times your weekly rent, bonds give landlords a little financial security in an event where you leave without paying rent or damage their property.

Bridging finance – Want to buy but can’t until you sell? Bridging finance is a solution by way of a short-term loan that can help you finance the purchase of a new property while you sell your current one.

Buyer’s advocate/agent – A real estate professional who represents the buyer and helps secure them the right property at the lowest price. This includes negotiating with the vendor or their agent.

Buyer’s market – A market condition where there is increased supply and lower demand, driving down prices.

Capital gains and capital gains tax (CGT) – Capital gains are the profits made on the sale of a capital asset, such as a house. Capital Gains Tax (CGT) is the tax you pay on profits from selling assets, such as property.

Caveat – A caveat is a legal claim of interest on a property. It’s a notice on title which alerts you to the fact a party other than the owner has interest in the property.

Caveat emptor – ‘Caveat emptor’ means ‘buyer beware’ in latin and alerts the buyer that the risk in a property transaction lies with them.

Commission – A fee or payment, usually calculated as a percentage, made to an agent for their services in selling a property. Typically it is only collected after a property sells.

Conveyancer – A solicitor who specialises in the property law of conveyancing. They are a licensed professional who ensures you meet all the legal obligations involved in your property transaction, including the settlement and title transfer process.

READ MORE: All the government assistance available to first home buyers in 2022

Contract of sale – An agreement relating to the sale of property, which expresses the terms and conditions of sale. The name of this differs state-by-state.

Cooling off period – The time period given to a buyer after the exchange of contracts, where they can consider their impending property purchase and potentially withdraw their offer without legal repercussions. The period is only for properties sold by private treaty (not auction) and is usually five business days. The process varies by state, for example, in NSW if a buyer withdraws they will have to pay the vendor 0.25 percent of the purchase price.

Counter offer – During negotiation, this is the ‘new’ offer you make after your previous offer has been rejected.

Depreciation – The reduction in value of an asset over time.

EOI – Short for ‘Expressions of Interest’, this is when an agent asks buyers to register their interest on a home before a certain time.

Equity – The value accrued on an asset over and above the debt owing.

Eviction – The removal of a tenant from a rental property.

Exchange of contracts – The legally binding part of the sale process, where two contracts are drawn up and signed by each party, and then exchanged so the buyer has the contract with the vendor’s signature and vice versa. A deposit is usually paid at this time.

Fittings – Also known as chattels, these are items in a home that can be removed without damaging the property, such as washing machines and fridges.

Fixtures – Usually screwed down or ‘fixed’ to a property, fixtures are included in the property sale unless stated otherwise in the contract. They include things like built-ins, carpets and under-bench dishwashers.

Guarantor – The person liable to pay your loan if you default on the mortgage.

Gazumping – A situation where a vendor and buyer agree on a price, but then the vendor sells to another party at a higher price/more favourable terms.

Interest – The amount paid by a borrower to a lender over and above the main amount borrowed ( also known as the ‘principal’). The interest rate can be fixed, variable or a combination of the two.

Lease – A lease is a legally binding contract or rental agreement between lessor (owner) and lessee (renter) where the lessee can occupy the lessor’s property for a set time in exchange for payment under certain terms. Also known as a tenancy agreement.

LMI – Lender’s Mortgage Insurance or LMI is a non-refundable, one-off fee added to your home loan in an instance where you’re wanting to borrow more than 80 percent of your home’s value. It protects the lender against higher risk borrowers.

LVR – Loan to Value Ratio (LVR) is your loan amount relative to the value of your home. For example, a $500,000 home loan secured against a property that is worth $1,000,000 = 50 percent LVR. The higher the LVR, the higher the risk for the lender (which is why when LVR is 80 percent or more, you’ll be charged Lender’s Mortgage Insurance).

Mortgage – A type of loan where real estate is used as the collateral. It allows the borrower to buy property or land, and is a written and binding contract that provides security to the lender.

Mortgage protection insurance – Insurance paid by the borrower to protect the lender in a situation where they may not be able to meet their repayments.

Negative gearing – When the expenses (including interest repayments) associated with an investment property are higher than the earnings from the property, it is considered ‘negatively geared’ and can reduce tax liability in Australia (for now).

Off market – Property sold without public advertising.

On the market – A term used during an auction when the vendor’s reserve price has been reached and the property is now officially for sale to the highest bidder.

Pass in – When the vendor’s reserve price is not reached during auction, the property will ‘pass in’ and negotiations will continue privately. The previous highest bidder has the first opportunity to negotiate.

Pre-approval – Also known as conditional approval, this is when a lender has agreed to loan you a particular amount in principle, but nothing has proceeded to final approval. Pre-approval allows you to know how much you have to bid or offer on a home.

Private treaty – What we traditionally associate with a sale of a property, where a seller sets their price and begins negotiating with potential buyers through their agent. Cooling off periods are part of private treaty sales, unless the buyer removes this condition to secure the property.

Property manager – A person or firm who manages the upkeep of a property on behalf of its owner.

Reserve – The minimum price a vendor has agreed to accept during an auction, but this can be tweaked during the auction process.

Seller’s market – A situation in which supply is scarce and demand for property is high, leading prices to remain high.

Settlement date – The date when the property sale is finalised and the buyer become the official owner of the property.

Stamp duty – A government tax applied to transfers of property and mortgages. Calculated as a percentage of the contract value, stamp duty varies from state to state, and discounts are available for certain parties, including first-home buyers.

Strata – A strata scheme is a system for handling the legal ownership of a portion or ‘lot’ of a building or structure. Lots can mean townhouses, apartments or units.

STCA – Subject to council approval, meaning the owner will need council approval before demolishing, renovating or building.

Title – A property title holds a bundle of legal information about a piece of property, including details about the land and who owns it or has a mortgage on it.

Trust account – A separate bank account managed by a real estate agent where funds (such as deposits and rental income) are held on behalf of another party.

Unconditional offer – An offer for property not subject to any other conditions (things like building and pest inspections or organising finance). The buyer accepts the property unconditionally. All auction sales are unconditional.

Under offer – When both parties have agreed on the purchase price and applicable terms and conditions, but the contract hasn’t yet been finalised, a property is ‘under offer’. Once the conditions have been met, the property is unconditional and then sold. Normally when a property is under offer no further offers can be made or accepted.

Valuation – A property valuation differs to an appraisal in that it is a legally binding report of a property’s market value, undertaken by an accredited valuer. This is usually done in situations where a definitive value is needed, such as family or partnership settlements.

Vendor bid – A bid that is set by the auctioneer on behalf of the vendor during an auction, to establish a fair starting price.