Real Estate Glossary

Real estate and finance terms

Adjustments – Amount of property taxes, council and water rates prepaid by the vendor and adjusted at settlement for amounts for which the purchaser will be liable.

Agent’s commission – This fee (usually a percentage of the sale price) is payable to a real estate agent for selling a property.

Amortisation period – Time taken to reduce the value of the debt through payment of regular instalments until the loan has been paid off in full.

Appraised value – An estimate of the value of property offered as security for a home loan. The appraisal is undertaken for financial lending purposes and may not reflect the actual market value.

Architrave – A decorative moulding around doors or windows.

Assets – Everything that a person or company owns or has a right to, from which a benefit can be derived. Net assets are assets in excess of liabilities. Liquid assets are assets either in the form of cash or those readily convertible into cash.

Awning window – A window with sashes that open out horizontally.

Body corporate – A strata corporation incorporated in relation to land subdivided wholly or mainly for residential purposes under a law providing for strata, cluster, precent or other subdivision of land or whose issued shares give a right to occupy land for residential purposes. The body corporate usually has the responsibility for the management and upkeep of common areas of the property.

Brick veneer – A type of building in which a structural timber frame is tied to a single brick external wall.

Bridging finance – Short term finance used when buying and selling houses to cover the gap between receipt of funds from sale of existing house and the payment of funds to purchase another house.

Building regulations – Designed to uphold the standards of public safety, health, and construction. These regulations are in place and have been formulated by responsible authorities to control the quality of buildings.

Capital gain – Profit from sale of a particular asset at a higher market price than it cost. Investors often buy for the sale of an expected increase in value of an asset rather than of the income it may generate during the time they own it.

Casement window – A window with sashes that open out vertically.

Caveat emptor – Latin for “Let the Buyer Beware”. This means that the buyers of goods (in this case, landed property) are responsible to examine the goods (the property being purchased) closely or read the fine print (to the contract) carefully before completing the purchase. Under common law this means that if someone is sold faulty goods he or she has no right to obtain compensation.

Ceiling joists – Parallel lengths of timber/steel which support the ceiling.

Certificate of title – The document of title to the estate or interest in land. It sets out the Crown description of the land, proprietorship and shows any registered interests such as mortgagees, charges and caveators. It also shows any restrictive covenants and easements which affect the estate or interest.

Chattels – Chattels are personal property. There are two types – the first type are real chattels (buildings and fixtures) and the second type are personal chattels (clothes, furniture etc.)

Cluster title – Each cluster title holder has a certificate of title which specifies ownership in terms of a particular area for which the owner is responsible and defines the common property. Unlike strata title, it does not subdivide “airspace”.

Commission – See agent’s commission.

Common area – An area which is for use by many and not an individual. For example, home units have common areas such as stairs and driveways.

Company title – This title applies when a company owns the whole of the property. By purchasing shares in the company, the purchaser obtains an entitlement to occupy a particular part of the property. See your solicitor before buying.

Comparison rate – The comparison rate provides an indicative interest rate that takes into account certain costs associated with setting up a loan. This rate includes the nominal interest rate/s, loan approval fee, any other upfront fees and known ongoing fees. The comparison rate does not include government and statutory fees, since these are standard across all loans regardless of the lender. It also doesn’t include other fees and charges that are ‘event based’ and which may or may not apply throughout the term of your loan (for example, redraw fees and early repayment costs).

Contract note – The first document signed on buying a house is sometimes a contract note, instead of a contract of sale. This document, when signed by both parties, is as legally binding as a contract of sale and the buyer and seller should treat it with the same importance.

Contract of sale – A written agreement which details the terms and conditions regarding the purchase or sale of a property. It is usually prepared by the vendor’s agent, solicitor or conveyancer.

Conveyancing – The legal process where ownership of real estate is transferred from one party to another.

Cornice – A horizontal decorative moulding usually positioned where the wall meets the ceiling.

Cover note – This is a document giving temporary insurance cover over a property until a formal policy is issued by the insurance company.

Deposit – An amount of money placed in trust or paid to the vendor directly as evidence of intention to buy. In most cases, it is 10% of the purchase price.

Door jambs – The vertical sides of a door frame.

Drawdown – The disbursement of loan funds provided by the bank.

Easement – A right that an individual enjoys over land belonging to another. eg rights of way, rights of light, rights of support.

Encumbrance – A legal claim on a particular property. eg easement or mortgage.

Equity – The part of an asset (house) which you own over and above the amount borrowed from the bank which has a mortgage over the house property.

Fibro cement – Building material made of compressed fibres cemented into rigid sheets.

Fitments – Built-in equipment such as the bath and stove.

Fittings – Things that can be removed from a property without causing damage to it, such as drapes.

Fixed rate loan – A loan priced at a fixed rate of interest for a set term. Interest rate and payments remain the same during the fixed term of the loan regardless of interest rate changes in the market.

Fixtures – Things that are affixed to and form part of the property. eg built – in air conditioning.

Footing – The footing supports the building on its foundation.

Foundation – The compact sand, gravel, hard clay or rock upon which the footings rest.

Freehold – Common term used for an “estate in fee simple”. This means that the proprietor of the land has absolute ownership of the property.

Gable – The triangular part of a building’s end wall which extends up to meet the two slopes of a roof.

Home units – A grouping of residential dwellings. They share common areas (e.g. gardens, storerooms) and are commonly registered under strata title.

Interest – A charge on borrowed money or the return earned on funds invested.

Inventory – A listing of items that could be included with a property, eg furniture, furnishings, dishwasher and other moveable items.

Joint tenants – The holding of land by two or more persons where there is a right of survivorship i.e. on the death of one joint owner, the land as a whole vests in the survivors and can only be disposed of by will by the last surviving owner.

Laminated timber – Layers of timber glued and pressed together to increase rigidity or to use as bench tops or cupboard doors.

Land tax – Based on the property value, it is a state government tax which is payable by the owners of the property.

Lease – An agreement between two parties under which one is granted the right to use the property of the other for a specified period of time in return for a series of payment by the user to the owner.

Leasehold – The right to use and have exclusive possession (but not ownership) of real estate for a specified period and subject to the fulfilment of certain conditions as recorded in a lease agreement.

Liabilities – Debts owed by a company or individual.

Loan repayment capacity – Your monthly fixed debt commitments divided by your monthly gross income expressed as a percentage.

Loan to valuation ratio – The amount of the loan financed as a proportion of the property value, expressed as a percentage.

Manhole – An opening which permits access to the space between the roof and the ceiling, or below the floor.

Mortgage – A document drawn up between a borrower and lender, giving the lender a conditional right to property as security for the money lent.

Mortgagee – The one who lends the money to purchase the goods or property.

Mortgagor – The one who borrows the money to purchase the goods or property.

Multiple listing – This happens when a person selling a property gives it to more than one agent. The first agent who has a buyer ready, willing and able to meet the price and terms acceptable to the vendor, receives the commission for the sale.

Offer to purchase – A written offer of a specified price for a specified property. The offer may be firm (no conditions attached) or conditional (certain conditions apply).

Plan – This shows the ground plan design, elevation of house, number and size of rooms, kitchen, bathrooms, laundry layout and position of the house on the land.

Principal – The face value amount of a loan on which interest is calculated.

Private treaty sale – Sale of property via an agent through private negotiation and contract.

Rafter – Part of the framework of the roof, the rafters slope down from the ridge to the eaves.

Render – A coat of cement or plaster to brickwork or stone.

Reserve price – The minimum price a seller has specified he/she will accept at auction.

Ridge – Usually horizontal, this is the peak of the roof where the top end of each rafter is attached.

Right of way – A person may have the right to cross your property to gain access to their own property, or there may be a general pathway across the land. This is an example of an easement.

Rise and fall clause – This clause may be contained in a building contract. It provides for an upward or downward contract price which correlates to the movement of prices, wages or other factors specified in the clause.

Roof pitch – The slope of the roof.

Sash – The frame in which a pane of glass is set to form a window.

Security – Something given or deposited as surety for the payment of debt. In the case of home loans, the property which is to be bought with the loan money usually acts as the security.

Semi–detached – Two houses joined together with a common wall or walls; they are usually registered under Torrens Title.

Settlement date – The date on which the sale of the property is finalised; money and security changes hands and the new owner takes possession.

Shingles – Thin pieces of wood or other material set in overlapping rows to form a roof or wall cladding.

Sill – The horizontal section of material at the base of a window opening.

Sole agency – One agent or agency has the exclusive rights to sell a property.

Stamp duty – Revenue raised by governments on written instruments such as agreements, conveyances, and transfers of land. When buying a home, the most common types of stamp duty payable are stamp duty on transfer of land and stamp duty on mortgage.

Strata title – Most commonly used for flats and units. This title gives you the ownership of a small piece of a larger property. You have sole right to a particular unit and can lease, sell or legally dispose of your unit as you desire. You also have an undivided share of the common land. You also become a member of the body corporate which controls maintenance.

Stratum title – This title gives you legal ownership over a piece of property and also gives you a share in the company set up to look after the common areas of the flats or units you live in. It does not include “air space”.

Studs – The uprights in the wall of a building.

Survey – Shows boundaries of the land and location of the building.

Tenants in common – Each tenant (or owner) owns a specified share of the land. Shares can be equal or unequal. Unlike joint tenants, there is no right of survivorship. Each share may be dealt with by sale, bequest, gift etc, as for sole ownership.

Term – The time length of a loan.

Title search – A search undertaken of records registered at the land titles office to confirm interests in land of a particular land property. A title search show interests such as proprietor, mortgagees, charges, and caveators. The search also reveals any restrictive covenants and easements which affect the estate or interest.

Torrens title system – Title is under a system given the name of its South Australian author in 1858. The principles of this system are expressed in state land title and Real Property Acts and any act or acts amending or re-enacting them. This system gives a registered proprietor of an interest in land a perfect and unchallenged title, subject only to the encumbrances and conditions mentioned on the title certificate.

Townhouse – Detached or attached housing forming part of a cluster of homes sharing some common grounds. Normally has its own private entrance and private areas. Can be single or multi storey.

Transfer of land – A document registered in the Land Titles Office which recognises and acknowledges change of property ownership. This is also noted on the certificate of title.

Uncommitted monthly income – Your available net income once all monthly expenses including loan repayments have been taken into consideration.

Underpinning – Supports placed under an existing wall to provide added strength.

Unencumbered – A property free of encumbrances, covenants, restrictions.

Valuation – A report written by a registered valuer, detailing their opinion of the property value.

Variable rate loan – A loan for which the interest rate changes as conditions in the money market change.

Vendor – One who offers a property for sale.

Wall cavity – The space between the inner and outer sections of a wall.

Zoning – Zonings fall into many categories. The two most common being commercial and residential. Local councils and/or planning authorities control the use of land and designate it as such.

Investment terms

Annuity – A payment at regular intervals of a certain sum of money for a term of years or during the life of an individual.

Assets – Everything that a person or company owns or has a right to, from which a benefit can be derived. Net assets are assets in excess of liabilities. Liquid assets are assets either in the form of cash or readily convertible into cash.

At call – Funds which can be withdrawn on demand or without notice.

Balanced trust – Balanced trusts invest in the broadest spectrum of investment markets, including shares, listed property trusts and government securities. The main advantage in making this type of investment lies in the flexibility afforded to their fund managers in being able to alter the investment composition of the trust in the light of changing economic and investment conditions to pursue the best results.

Blue chip stock – Shares in a well-established company highly regarded in financial circles.

Capital growth – The increase in value of an asset or investment i.e. the difference between the current values and the original purchase price. (Provided the result is positive, not negative)

Capital guaranteed – An investment where your money (principal) is guaranteed safe; usually by a bank, government body or life insurance company.

Cash management trust– A unit trust where investors (unit holders) pool their money into money market instruments which are normally only available to professional investors with hundreds of thousands of dollars to invest in the money market. Cash trusts operate with a trust deed, a trustee overseeing activities and a management company responsible for the investment strategy.

Compound interest– Interest which is paid on accumulated interest as well as the original principal invested.

Consumer price index (C.P.I) – Measures the national inflation rate. The index is measured quarterly (December, March, June and September quarters) and reflects changes in prices (up or down) of a fixed “basket” or list of goods and services.

Debenture – A type of fixed interest security, issued by companies (as borrowers) in return for medium and long term investment of funds. Debentures are issued to the general public through a prospectus and are secured by a trust deed which spells out the terms and conditions of fund-raising and the rights of debenture holders. Typical issuers of debentures are finance companies and large industrial companies.

Deferred annuity – An annuity where income payments do not commence ie are deferred until a specified date in the future.

Dividend – The share of profits distributed to shareholders of a publicly listed company.

Dividend imputation – A tax system, where dividends paid by a taxpaying Australian company to its shareholders, carry a credit for the tax the company has already paid on its profits. This means that shareholders receive a reduction to the tax normally payable.

Eligible termination payment (ETP) – This is the term used to describe lump sum funds received when retiring or changing employment that can be rolled over into an approved deposit fund or deferred annuity. ETPs can include payments from a superannuation fund, approved deposit fund, deferred annuity, commutation of an annuity/pension, unused sick leave and “golden handshakes”.

Franked dividend – A dividend distributed by an Australian company out of profits on which company tax has been paid.

Investment bonds – A lump sum investment product. Technically, an investment or insurance bond is a single premium lump sum investment, life insurance contract.

Maturity – The date on which a debt or other borrowing is due to be repaid.

Negative gearing – A way of obtaining tax advantages through an investment where the deductible expenses (typically including interest) exceed the income derived from the investment.

Pension – A regular payment made to a person from a superannuation fund or from the Department of Social Security or Department of Veterans Affairs.

Rollover – The renewal of a loan facility or continuation of a deposit at each maturity date, usually including a revision of the interest rates. (The term is also used to describe the transfer of eligible termination payments to an acceptable superannuation or rollover fund.)

Shareholder – A person who buys a portion of a public or private company’s capital. By doing so that person becomes a shareholder in that company’s assets and receives a share of the company’s profit in the form of dividends.

Superannuation – An investment vehicle which operates primarily to provide benefits for retirement. Superannuation savings are usually made through trust funds and if these funds meet prescribed government standards they are eligible for tax concessions.

Term deposit – Money invested for a fixed term at a fixed rate of interest which applies for the duration of the deposit.

Unit trust – A unit trust is an investment which operates under the unit principle enabling investors to share in a pool of professionally managed investments. The success of a unit trust depends on the expertise and experience of the management company which is responsible for the trust’s investment strategy. Common types of investment undertaken by unit trusts are property, shares, mortgages, and the short term money market.

Real estate and finance abbreviations