In real estate, there are a lot of industry-specific terminology, abbreviations, and references used. While seasoned property professionals will no doubt be familiar with these terms, it can be confusing for those who are new to the scene.
Whether you’re new to the property market or an aspiring real estate professional, this glossary of real estate terms will help clarify key concepts and deepen your understanding of the industry.
Glossary of real estate terms
Appraisal
An appraisal is a report estimating a property’s sale price, typically prepared by real estate agents for potential clients and sellers. While similar to valuations, appraisals lack legal standing in court disputes.
Appreciation
The increase in the market value of a property over time. When a property increases in value, it is said to have “appreciated”.
A-REIT
An Australian Real Estate Investment Trust, also referred to as a Listed Property Trust. An A-REIT buys and manages property (usually commercial in nature) on behalf of its investors.
Auction
A public sale of a property where it is awarded to the highest bidder. Vendors engage an auctioneer to facilitate the auction.
Body corporate
A term used in the Strata Titles Act referring to a group of owners of units or properties within a building complex. Each owner retains ownership of their own unit while sharing joint ownership over common areas of the building’s premises.
Bond
An amount that is held as a security deposit under a lease to ensure that tenants comply with the terms and conditions of the lease. The bond is usually refunded upon return of the property in an acceptable condition.
Building inspection
An examination of the condition of the building that is typically undertaken before a purchase or lease. Building inspections are performed by licensed professionals.
Buyer’s agent (BA)
An agent that specifically works on behalf of property buyers to search for potential properties, carry out negotiations for the sale, and secure the purchase.
Capital Gains Tax (CGT)
A government tax based on the profit (capital gain) made on the sale of an investment property. This profit is calculated as the earnings between the original amount the property was bought for, and the amount it was sold for.
Certificate of title
A legal document issued under the Torrens System of Title that proves ownership and interest in a parcel of land.
Commission
A type of payment made to a real estate professional for services rendered, such as the sale of property. Commission is calculated as a percentage of the sale value of the property.
Common property
Areas of a property that are jointly owned by the public, or in the case of a Body Corporate, by the owners of the building.
Conditions of sale
The conditions that apply to the sale of a property, set out in a contract of sale made between a vendor and a buyer.
Contract of sale
A legally binding agreement that outlines the terms and conditions of the sale of a property.
Conveyancing
The legal process of transferring the ownership of a property from one party to another, usually as part of a property sale.
Cooling off period
A period after a sale in which buyers are given the opportunity to cancel the transaction without being subject to the conditions of the sale. This period will vary between Australian states and does not apply to properties sold through an auction.
Display home
A type of property that is specifically designed and built to showcase the builder’s ability and quality of work to potential buyers. Display homes are often offered for sale by builders.
Encumbrance
A legal claim on a property, such as a mortgage or easement, that affects its ownership or use.
Exchange of contracts
The stage of a property transaction where the sale of contracts are signed and swapped between the buying and selling parties, legally binding both parties to the transaction.
Fittings
Items installed in a property that can be removed without damaging the premises, such as light fixtures or blinds.
Fixtures
Permanently attached parts of a property that cannot be easily removed without causing damage, such as floor tiling or built-in wardrobes.
Gazumping
A term used to describe when a seller accepts a higher offer from another buyer despite previously having agreed to a sale.
Gearing
The use of borrowed funds to invest in a property, often expressed as a ratio. Positive gearing is achieved when the income generated from a property exceeds the costs of owning it, resulting in a profit. Negative gearing, on the other hand, occurs when the costs of owning the property exceed the income, creating a loss that can often be used as a tax deduction.
Holding deposit
An amount paid by a buyer to an agent to showcase their genuine interest in the purchase of a property. The value of a holding deposit is usually 10% of the purchase price.
Investment property
Property that is used as a way to generate additional financial gain through rental or capital appreciation (or both), instead of being used as a primary residence.
Land tax
An annual tax that is paid for the ownership of land, usually based on unimproved value of land.
Loan-to-value ratio (LVR)
The ratio of a loan amount to the value of the property, expressed as a percentage.
Market value
The estimated price of a property if it were to be sold on the market. This amount is commonly used as a point of comparison for the actual listed sale price.
Mortgage
A type of loan that is used to fund the purchase and ownership of a property.
Offer
A formal proposal by a buyer indicating their interest in purchasing a property.
Principal
The main party responsible for a transaction, often the client in contracts; also refers to the licensed estate agent in charge of a real estate agency.
Rental return
The annual rental income as a percentage of the value of the property (also called the rental yield or yield).
Reverse mortgage
A type of loan for a residential property owned by an older individual (usually over 55 years of age), where repayments are only made once the property is sold or the last homeowner passes away.
Settlement
The final stage of a property transaction where the buyer completes the full payment of the sale price to the seller and takes legal possession of the property.
Stamp duty
A statutory tax imposed by the government on certain property transactions such as contracts of sale. The amount of tax payable is calculated as a percentage of the contract value.
Tenancy agreement
A document outlining the terms of lease between an owner and a tenant, usually registered on an owner’s certificate of title.
Vacancy rate
A percentage measuring the proportion of rental properties that are unoccupied.
Zoning
A local planning tool to control the present and future development of land and its permissible use.
