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Common real estate terms and definitions explained

September 2, 2019 10:00 am by Upside

If you’re new to world of buying and selling property, real estate jargon can seem like a jumble of acronyms and confusing terminology.

That’s why we’re here to help with this real estate glossary breaking down some of the most commonly used real estate terms and what they mean in plain language.

What is negative gearing?

In terms of real estate, negative gearing refers to borrowing money to invest in a property where the income from that property is less than the expenses. In other words, a property is negatively geared when the rental return is less than your interest repayments and expenses.

According to current Australian tax law, you can claim the interest portion of your loan repayments on a negatively geared property and also some other costs as a tax deduction, as long as the property is available to be rented.

What are capital gains?

A capital gain is a rise in the value of a capital asset such as property that gives it a higher value than the purchase price. The capital gain isn’t realised until the asset is sold.

In Australia, most properties that are sold that are not the vendor’s primary residence (such as investment properties) are subject to Capital Gains Tax. For more information, see our guide to Capital Gains Tax.

What does “under contract” mean in real estate?

When you see the words “under contract” or “under offer” on a property listing, you might think that the property has already been sold – but that’s not the case.

Both terms mean that the seller and the buyer have agreed on a price for the property and signed a contract. But the contract is still subject to conditions like a cooling off period and could fall through before the sale is completed.

So, while the seller can’t accept any other offers during this time, there’s a possibility that the property could end up back on the market if the contract is terminated for any reason.

What does “as is” mean in real estate?

If a property is sold as is, it means that the vendor is selling the property in its current state, with an understanding that no repairs will be made and that the home will come with all its current faults and issues.

If your contract stipulates that you’re buying the property as is, it’s important to make sure thorough internal and external inspections have taken place before you sign the contract. It’s also a good idea to make the contract subject to professional building and pest inspections.

What does “EOI” mean in real estate?

EOI stands for “expression of interest” and it’s a way to sell a property that combines the features of a private treaty sale and an auction.

The goal of a sale by expression of interest, or sale by tender as it’s sometimes called, is to gather buyers’ best offers by a specific date and time without disclosing the final price the seller is willing to sell for. The benefit of this approach is that buyers can submit their best offers in writing from the start – there is no negotiating involved, which can help speed up the sales process.

Other common real estate terms

  • Appraisal: Appraisals are to be used as a guide to property value, and allow you to get a better understanding of a possible selling price. An appraisal can be carried out by any real estate professional with no fee for the service.
  • BIC: Built-in cupboard.
  • BIR: Built-in robe.
  • Body corporate: The name given to the party representing a group of owners, usually for strata properties.
  • Building Code of Australia (BCA): The minimum standard by which buildings must adhere to for safety and health purposes, as stipulated by the Australian Building Codes Board.
  • Buyers’ market: Property market conditions where properties may be in oversupply, resulting in reduced property prices that are favourable for buyers.
  • Conditions of sale: Conditions added to a sale contract between a seller and buyer, which must be adhered to before settlement of the sale can be finalised.
  • Contract of sale: a binding agreement that relates to the sale of a property and outlines terms and conditions relevant to that sale.
  • Conveyancer: A licensed professional who specialises in providing advice and information about the sale of a property. A conveyancer may also be a solicitor.
  • Cooling off period: A specified period after signing the contract on a property in which you can back out of the sale.
  • Date of settlement: The date on which final payment is made to complete the transaction and the title is transferred from the vendor to the buyer.
  • Exchange of contracts: The process of creating a binding contract for the sale of a property between the seller and the buyer.
  • Guarantor: A person who agrees to take over loan payments or fulfil other contractual obligations if the borrower fails to do so.
  • Lender's Mortgage Insurance (LMI): A fee paid by the borrower for the lender to insure themselves if the borrower can’t meet payment obligations. This usually applies to loans with a Loan to Value (LVR) ratio of over 80%.
  • Loan to Value Ratio (LVR): The ratio of a loan to the value of the property. For example, a loan size of $500,000 for a property worth $550,000 makes for an LVR of 91%.
  • Private treaty: The negotiation of a property sale between the buyer and seller or their real estate agents. This is a common method of property sales in Australia.
  • Reserve price: The lowest possible sale price a seller will accept during auction.
  • Sellers’ market: Market conditions where an under-supply of properties drives up property prices, giving sellers an advantage.
  • Settlement: The completion of a property purchase where the buyer pays the total amount of money owing to the seller in exchange for taking over legal ownership of the property.
  • Stamp duty: A state tax paid by a buyer on some contracts, including property. The amount of stamp duty payable is calculated based on the contract price of the property on settlement day.
  • Strata title: A type of property ownership where each owner has rights of ownership to designated parts of a building, but still retains joint rights over common areas on the property. This usually applies to unit blocks.
  • Title: A document outlining particulars and ownership of a property.
  • Valuation: A valuation is used for legal or banking purposes to determine the current value of a property. To obtain a valuation, a formal report is created by an accredited valuer who has gone through the necessary training.
  • WIR: Walk-in robe.

If you’re looking to sell, get a free online property estimate in 30 seconds, which includes your property’s estimated value, sales history, and comparable properties in your area.

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