Residential Q & A

Buyers Agent

Represents a property buyer in negotiations with a vendor or his/her agent. The buyer’s agent is paid by the buyer. Buyer’s agents should be licensed and certified to act as a buyer’s agent.

Chattels

Any fixed asset other than freehold land. Items such as machinery, implements, tools, furnishings, fittings, which may be associated with land use, but which are not fixed to the land or premises or, if fixed, may be removed without causing structural damage to a building. Legally known as personalty.

Company Title

(A) Method of obtaining ownership of real estate by way of company shares (usually preceded Strata Title Act); (B) Under Company Title, land and buildings are owned by a private company. The company’s shareholding structure is organised so that ownership of a certain number of shares entitles the shareholder to exclusive possession of a part of the building.

Compulsory Acquisition

The instance Where an asset is acquired by a statutory authority through legislation, irrespective of whether an owner is willing to sell or not.

Intrinsic Value

A property below its intrinsic value.

A property with a twist – something unique, special, or a bit different or scarce about the property.

A property where capital growth can be manufactured through refurbishment, renovations or redevelopment.

An area that has a long history of strong capital growth and one that will continue to outperform average capital growth because of the demographics of the people living there.

An affluent area where people are prepared and can afford to pay a premium to live.

An area going through gentrification where a wealthier demographic is moving in and pushing up prices as they improve the area.

Trust Account

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

Contract – Cooling off Period

Similar to residential Contract of Sale, this condition varies from state to state, e.g. in NSW the standard is a 5-business day cooling off period unless you have bought at an auction or you have waived the right to the cooling off period. Regardless in which state you are buying the real estate, you need to obtain legal advice regarding the benefits and also your rights and obligations in waiving the cooling off period. The cooling off period follows the exchange of contracts allowing time for searches, obtaining reports and confirming finance. If you do not continue with the sale, you will forfeit 0.25% (in NSW) of the purchase price from the deposit you have paid.

Contract - Exchange

The residential contract sets out the terms and conditions of the sale including the fittings such as blinds, curtains etc. and any items excluded from the sale. The solicitor or conveyancer will examine the contract carefully. In NSW (might be different in other states) there are two copies of the Contract for Sale – one for you and one for the seller. You each sign one copy before they are swapped or “exchanged” and the deposit is handed over. Only when both the seller and the buyer have signed the contract and exchanged copies do you both become bound by the transaction. The contract will stipulate the deposit amount and who will hold it. Once all parties have signed a contract it cannot be altered or changed. However, there might be unforeseen changes of circumstances which affect either party to a contract between signing and settlement that may require a change to be made to the contract. Provided all parties agree, changes can be made.

Contract – Memorandum of Transfer

The document that verifies the change in ownership from the seller to the buyer.

Contract - Sale

The fine print in the contracts is different from state to state. The process also differs from state to state, e.g. in some states the contract is physically “exchanged” and in others a single contract is signed by both parties. The cooling off period also differs from state to state.

Loan – Average Annualised Percentage Rate

The annualised average percentage rate also known as a comparison rate is an interest rate that takes into account all the costs associated with the loan in order to create a levelled playing field when comparing loan products offered by different lenders.

Loan - Cross Securitisation

When the financial institution uses your property (whether owner-occupied or investment) as security for another property you wish to purchase.

Loan - LMI

Not to be confused with annual building or content insurance, lender mortgage insurance is a one-off insurance premium payable by the borrower to their lender when the loan’s value is greater than 80% of the purchase price. It is an insurance for the lender to recover the loan value from the underwriter in the event the borrower defaults on the loan repayment.

Loan - LVR

The Loan to Valuation Ratio refers to the ratio between the size of your loan and the value of your security property. It is calculated by dividing your loan size by the value of your security property e.g. loan size $240,000, property value $300,000, LVR = 80%.

Loan - Vendor’s Terms

The instance when a seller is prepared to offer the buyer finance or other form of assistance such as staged payments to assist the buyer to purchase the property.

Price - Lower Quartile

The price point below which 25% of sales were recorded. For example, If there were 100 sales in a suburb, it is the lowest 25 house prices.

Price - Market Price

The market price is the price actually paid, or agreed in a contract to be paid, for an asset. It differs from market value in that it relates to an accomplished fact, whereas market value is and remains an estimate until proved. Market price may involve circumstances not normally included in market value.

Price - 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.

Price - Median

The median property price is the midway point of all sold properties during a given period. For example, if there were 51 properties sold during the month, the median price would be the property price in the middle i.e., that has 25 property prices above it and 25 property prices below it.

The reason the median price is used rather than the average is mainly because it is a more accurate indicator of the market, as it excludes the price extremities during that given period. Refer PRICE-Lower Quartile and PRICE-Upper Quartile.

Price - Property Cycle

Residential property values usually follow a cycle of growth, a slowdown, a bust and an upturn. History shows this occurs every 7 to 10 years depending on the type of the property and its location.

Price - Upper Quartile

The price point below which 75% of sales were recorded. If there were 100 sales in a suburb, it is the highest 25 highest house prices.

Price - 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.

Property

At law, property consists of the private rights of ownership. To distinguish between real estate (realty), a physical entity, and its ownership, a legal concept, ownership of land is known as real property. Physical items other than real estate are legally termed ‘personalty’ and their ownership is known as ‘personal property’. The word ‘property’ used without further qualification or identification may relate to real estate, personalty or a combination. Colloquially, property is anything that can be owned or in which an interest can be held, over which control can be exercised, which can be traded or left in an estate or from which current or future rights to receive benefits can be held. Property can include, but is not limited to, real estate and associated interests therein, personalty, intellectual property, rights, licences and options, plant and machinery, art and jewellery, goodwill and shares.

Property - Building Line

The setback from the site boundary required by statutory authorities for buildings.

Property - Caveat

Warning to a purchaser that a third party has some right or interest in the property.

Property - Covenant

Terms, conditions and restrictions noted on the property’s certificate of title . The covenant may affect future development plans or re-sale.

Property - 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.

Property - Egress

The exit point from a property.

Property - Encumbered

A property with an obstruction to use or transfer in the form of a right or interest e.g. easement, mortgage or caveat.

Property - Ingress

The entry point to a property.

Property - Outbuildings

Any building other than the main structure on a particular allotment of land e.g. a garage, workshop etc.

Property - Real

All the rights, interests, and benefits related to the ownership of real estate. Real property is a legal concept distinct from real estate, which is a physical asset. There may also be potential limitations upon ownership rights to real property.

Property - Torrens Title

Torrens Title is the title to land by registration. Originating in South Australia under the stewardship of R. R. Torrens (later Sir Robert Torrens) and enacted in 1858. The Torrens titles has superseded the ‘Common Law Title’ system throughout Australia. Under the Torrens system dealings and ownership of land are managed by registration with the Titles Office.

Property - Unencumbered

A property that is free of encumbrances, covenants and restrictions.

Strata - Apartment

A room or suite of rooms used as a dwelling unit.

Strata - Body Corporate

A term used in the Strata Titles Act to describe the body representing the building owners. The control and administration of common property is vested in a statutory Body Corporate which comes into existence automatically on the registration of the plan, and to which the provisions of the Companies Act do not apply. The registered proprietors of the units are the only members of the Body Corporate. Associated rights and obligations are fixed by scheduled by-laws.

Strata - Common Property

(A) Land or a tract of land considered as the property of the public in which all persons enjoy equal rights. A property not owned by individuals but by groups; (B) In a home (villa) unit or flat development that part of the property owned and used in common by all the unit or flat owners or occupiers and which is maintained by the Body Corporate.

Strata - Flat

A self-contained dwelling in multi-unit dwellings.

Strata - Plan

The registered plan of a strata title property showing the boundaries of lots and unit entitlements. Pursuant to legislation on strata or unit titles.

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.

Strata - Unit

Each dedicated lot / unit area designated within a strata plan.

Tenants – in - Common

When more than one party is entitled to ownership of the property, each party has an undivided share, such share is distinct and separate. The interests need not be equal; thus owner ‘A’ may have one undivided 30% share, and owner ‘B’ undivided 70% of the same property. The most important feature is that the share of a tenant-in-common may be separately disposed of during a person’s lifetime, or by will. On death it passes, not to the other tenants-in-common, but by will, or by the laws of intestacy.

Tenants – Joint

When more than one party is entitled to ownership of the property, each party has equal undivided shares. The most important feature of joint tenancy is known as survivorship; on the death of one joint tenant, that person’s share passes to the survivors so that they remain joint tenants of the whole. Joint tenants are regarded collectively as a single person in respect of their dealings with others.

Contact us if the above explanations do not answer your specific query.