Don’t know a fitting from a fixture, or the difference between STCA and LMI?

You’re not alone. The real estate world is full of jargon and not knowing the full meaning of certain words can be costly.

Here’s some of the more common industry jargon you should probably be across.

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Appraisal: A real estate agent’s assessment of a home’s value, usually based on recent comparable sales.

Authority: This sets out key details such as whether the home will be auctioned and the agents commission, as well as a term for how long the agency has to sell the home exclusively before another can be appointed

Body corporate: Also known as an owners corporation, it reflects the management of a connected group of homes such as an apartment building or townhouse complex. It usually includes fees to cover insurance and maintenance of common property.

Bond: A lump sum paid by tenants at the start of a lease and held aside to remedy any damage they cause or missed rental payments.

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Caveat: A notice buyers often put on a property to secure their interests before settlement.

Capital gains: The increase in value of a property over time. Capital gains tax (CGT) only applies when selling investment or secondary properties. If owned it for less than a year, 100 per cent of the gain is taxed as income. Only 50 per cent of the gain is taxed if owned for longer.

Commission: The percentage of a sale that is collected by a real estate agent for their work. This can vary by location and agent experience levels.

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Common property: Parts of a unit complex that are jointly controlled by all owners, including driveways, paths and gardens.

Cooling off: A period of time buyers have to change their mind for private sales. This varies from state to state, with some not offering a cooling-off period at all. Unconditional sales do not have a cooling-off period.

Deceased estate: The owner of the property has passed away, meaning their estate is selling the home.

Depreciation: The loss in value of a home’s fixtures and fittings through wear and tear. This can be used to minimise tax for investment properties, but not your family home.

Equity: The difference in what a home is worth and the balance of any loans against it. A fall in home values can lead to negative equity. As the value rises, or as owners pay more of their mortgage, homes gain equity.

Easement: A right of someone else over a part of a property, such as water authorities right to access sewerage infrastructure.

Fittings: Also known as chattels, these are easily removed parts of a home that might not be included in the sale — for example a fridge or washing machine.

Fixtures: Built-in features that will be included in the purchase, such as an oven.

Guarantor: A person who provides a financial commitment to back a loan and helps a buyer, usually for their first home, avoid lenders mortgage insurance.

High ceilings: Building codes require most rooms in Australian homes have a minimum 2.4m height, and anything above that will generally be referred to as ‘high’. But kitchen, bathroom and hallway ceilings can be as low as 2.1m. If you have tall furnishings, measure before you buy.

LMI: Lenders mortgage insurance, a fee banks charge to insure loans that are (usually) below 20 per cent equity. This can add thousands of dollars in upfront purchase costs.

Median: The middle figure in a list. In real estate this denotes the middle sale for a suburb, with half the homes sold for more than it and half below it.

Mortgagee in possession: The property is being sold by the lender, usually because the borrower has been unable to meet mortgage repayments.

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Negative gearing: When an investment property costs a landlord more to keep than it makes them in rent. Can be used to reduce the amount of tax an investor pays.

Overlay: From heritage to bushfire and flood, overlays set controls for property and can impact plans for extensions or development. They can also lead to additional insurance costs.

Positively geared: An investment property that produces more income than it costs the landlord to hold it.

Pre-approval: A lender’s indication of what they are willing to lend a buyer before they purchase. This is not approval for the loan, which is only set once an offer is made for a home and subject to an independent valuation by the bank.

Private treaty: The most common form of selling a home in Australia, this is a deal struck between a purchaser and a vendor or their agents.

ROW: A right of way to access a property, usually from the side or rear.

Squares: an archaic measurement used to denote the size of a house, representing 100 square feet. In more modern figures a square translates to about 9.3sq m — a smidgen smaller than the real estate agent’s Mercedes parked out the front of the house.

Settlement: The date at which the balance of a home’s purchase price comes due, and when the title or deed changes names. Buyers can offer to match a vendor’s preferred settlement date to make their offer more attractive without spending more.

Settlement risk: Typically connected to off-the-plan purchases or house-and-land packages, this indicates the risk of a lender valuing a home at less than a buyer has agreed to purchase it for. Buyers then have a short period to fund the gap, or forfeit their deposit and lose the home.

Stamp duty: Also known as land transfer duty, this is a government tax charged on the purchase of a property. It typically costs tens of thousands of dollars, but varies from state to state, by the price of the home and in some scenarios can be waived or reduced for first-home buyers.

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STCA: Subject to council approval, commonly used when agents speculate on development potential at a property.

Subject to: A clause buyers add to purchase contracts making a sale subject to finance, or a pest or building inspection. These do not apply to unconditional offers.

Under offer: The home is sold, but it is not unconditional – ask the agent to let you know if it starts looking shaky.

Zoning: The council or state government zoning for the property which can have impacts to plans for improvements and development — and indicate if its possible for a neighbouring home to be developed into an apartment complex down the track.

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