Real Estate Glossary & Terms

Agent: A person authorised to act for another (usually for the owner) in the selling, buying, renting or management of a property. Commonly used to refer to licensed real estate agents and real estate representatives.

Auction: A sale usually in public, by an Auctioneer, in which property is sold to the highest bidder.

Appraisal: The term commonly used in America to indicate what is termed in Australia as a Valuation. In Australia, the term means an opinion of the potential saleability of a residential property by a licensed Real Estate Agent.

Auction agency agreement: An agreement that the vendor must sign when a property is listed for Auction. Details the reserve price and the costs of the Auction, including advertising and the agent’s commission. Usually includes a condition that one agent will have the exclusive right to sell the property for a period during and after the Auction

Auctioneer: One who is licensed to sell, or offer for sale, real estate where persons become purchasers by competition, being the highest bidders.

Bid: A verbal or written offer to purchase.

Capital gain: The amount by which the net proceeds from resale of a capital item exceed the book value of the asset. Refer to The Australian Tax Office (ATO).

Capital gains tax: A Commonwealth tax payable on the Capital Gain made on the sale of an investment property. Refer to current requirements of the Australian Taxation Office (ATO).

Commercial property: Property intended for use by all types of retail and wholesale stores, office buildings, hotels and service establishments. In many property circles, commercial property refers specifically to office property.

Commission: The fee or payment made to an agent for services rendered, such as the sale of property, often calculated with reference to the value of the property, contract or agreement.

Contract of sale: An agreement relating to the sale of property, which expresses the terms and conditions of sale.

Cooling off period: A short statutory period after the contract is made, during which the purchaser may cancel the contract unconditionally. Usually does not apply in the case of auctions.

Deposit: Percentage of total consideration, or an agreed amount, paid on exchange of contract for purchase of an asset.

Easement: A right to use the land of another (not involving the taking of any part of the natural produce of that land, or any part of its soil) or a right to prevent the owner of that land from using that land in a particular manner. Most commonly used where Government authorities have the right to run, for example, electrical mains or drainage through private property. Some form of compensation may be payable.

Exchange of contracts: A formal legal process that creates a binding contract for the sale of real property on agreed terms. The vendor and purchaser each sign a copy of the sale contract and then exchange these documents, after which time the contract becomes legally binding on the parties. The parties are then bound to proceed to settlement, subject to any cooling off period that may apply. A deposit is usually also paid by the purchaser to the vendor during the exchange process. Any party that unilaterally declines to proceed to settlement may forfeit deposit monies or be subject to a damages claim.

Exclusive agency agreement: The agreement between an agent and a vendor establishing an Exclusive Listing.

Exclusive listing: Where a single agent only is appointed to sell or lease a property under an Exclusive Agency Agreement. Under the terms of an Exclusive Agency Agreement, the appointed agent is usually entitled to any commission resulting from a transaction relating to the property, even if it is sold / leased by another agent or the vendor during the term of the agreement. Also known as an Exclusive Agency or a Sole Agency.

Fixtures: Those parts of a property affixed to structures or land, usually in such a manner that they cannot be independently moved without damage to themselves or the property housing supporting or pertinent to them. Fixtures are usually included in a sale and commonly include items such as carpets and awnings.

Guarantor: A person who undertakes to fulfil a contract if the main party defaults.

Investment property - Property (land or a building - or part of a building - or both) held (by the owner or by the lessee under a finance lease) to earn rentals or for capital appreciation or both.

Joint tenancy: The ownership of land in common by several persons where there is a right of survivorship i.e. where on the death of one joint owner the land as whole vests in the survivors.

Land tax: A tax payable annually in respect of the beneficial ownership of land, the rate of which is determined by the assessed valuation. Usually based on unimproved value of land.

Landlord: The owner of leased property. The lessor.

Lease: An agreement whereby the lessor conveys to the lessee in return for a payment or series of payments the right to use an asset for an agreed period of time.

Licensed real estate agent: A Licensed Real Estate Agent may perform the activities in the conduct of a real estate business. He/she is licensed to hold responsibility for an agency’s legislative compliance activities.

Listing: (a) A term commonly used by agents for obtaining an instruction to sell or lease real estate; (b) The recording of properties as being available for sale.

Market value: Market value is the estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing, wherein the parties had each acted knowledgeably, prudently and without compulsion.

Management agreement: A written contract recording the agreement between the owner and manager of real estate concerning the duties, responsibilities and liabilities of the owner and the manager in the management of that real estate.

Managing agent: A real estate agent authorised to manage the business affairs in connection with the property of another. See also Property Management.

Mortgage: Documentation of a property loan. Security over real property to ensure payment of a debt or performance of an obligation.

Offer: The consideration offered to purchase or lease an asset.

Outgoings: The expenses incurred in generating income. In real estate, these expenses include, but are not necessarily limited to, property rates, insurance, repairs and maintenance and management fees.

Owner: In relation to land, the owner includes every person who jointly or severally whether at law or in equity: (a) is entitled to the land of an estate in freehold possession; or (b) is entitled to receive rent or profits thereof, whether as beneficial owner, trustee, mortgagee in possession or otherwise.

Passed-in: If a property is not sold at Auction because the owner’s reserve price has not been reached, it is passed in.

Private sale: Where an owner offers a property for sale without engaging an agent.

Property management: The management of a property on behalf of the owner. For example, the leasing of space, collection of rents, selection of tenants and generally the overall maintaining and managing of real estate properties for clients.

Rent: A payment made periodically by a lessee to a lessor for the use of premises.

Rescind: To terminate a contract of sale.

Reserve price: The lowest acceptable price fixed by the vendor.

Settlement: This is the final stage of the sale when the purchaser completes the payment of the contract price to the vendor and takes legal possession of the property.

Stamp duty: The tax imposed by state governments on certain contracts (e.g. Contracts of Sale and Registered Leases). The amount of tax payable is calculated as a percentage of the contract value. See also individual state legislation.

Strata title: (a) The formal ownership of property held within a strata plan where property is defined within horizontal and vertical boundaries; (b) A scheme of property ownership where each proprietor owns parts of a building and has joint rights with other proprietors over the land and other common areas.

Subdivision: Divisions by a land owner, of all or part of a parcel of land, into separate allotments (or sections), each with a separate title, in accordance with a ‘plan of subdivision’ approved by the planning authority.

Tenant: A person or entity paying rent in exchange for the occupancy of a building or dwelling.

Title: The form of ownership of real estate (i.e. Torrens, strata or company title).

Trust account: A legislatively required bank account where monies are held by an agent for or on behalf of another person e.g. deposits, rental etc.

Vacate: To give up occupancy; to make vacant; move out of property.

Valuation: (a) The process of estimating value. (b) The prediction of the value of an asset at a point in time, depending on the purpose for which the valuation is required.

Vendor: One who sells anything. In real estate transactions, the person(s) or entity selling the property.

Zoning: A local planning tool to control the present and future development of land including residential, business and industrial uses.