Property Terms Explained

A report on the building's condition and any termites or other pests.

Get it before you buy (or before the auction). It can show problems that change what you'd pay, or whether you'd buy at all.

An agent who works for the buyer, not the seller.

They find properties, judge the price and negotiate or bid for you, for a fee. A selling agent works for the seller, even when they're helpful to you.

The legal agreement between buyer and seller.

It sets the price, deposit, settlement date and any conditions. Have a conveyancer or solicitor check it before you sign, and before bidding at auction, because an auction contract is unconditional.

The person who handles the legal side of buying or selling.

They check the contract, run the searches, arrange settlement and make sure the title moves to you. A solicitor can do the same work.

A few days after signing when a buyer can pull out of a private sale.

The length depends on the state: for example 5 business days in NSW and Queensland, and 3 in Victoria. Some states, such as Western Australia, have none. Pulling out usually costs a small part of the price (0.25% in NSW and Queensland). There's no cooling-off at auction.

The part of the price paid at exchange, usually 10%.

It's held in trust until settlement. Separately, your home loan deposit is the share of the price you pay with your own money instead of borrowing it.

A guarantee that stands in for the cash deposit until settlement.

You pay a fee to a provider, who promises the seller the deposit. It's useful when your money is tied up, for example in a property you haven't sold yet.

When buyer and seller both sign and the contract becomes binding.

The buyer usually pays the deposit at exchange. Any cooling-off period starts from here.

A sale where buyers submit their best offer, in writing, by a closing date.

Offers can include conditions and the settlement date you want. You don't see other buyers' offers, so put in what the property is worth to you.

When a seller accepts your offer, then sells to someone who offers more before contracts are exchanged.

Until contracts are exchanged an agreed price isn't binding, so it can happen in a private sale. Exchanging quickly is the best protection.

Buying a property before it's built, from the plans.

You pay a deposit now and the rest when it's finished, which can be years away. Check the sunset clause and how the finished value compares with the price.

A property sold without being publicly advertised.

Agents offer it to buyers on their list first. It can mean less competition, but also fewer sales to compare the price with.

Said at auction once bidding passes the reserve price.

From that point the property will sell to the highest bidder when the hammer falls.

An auction that ends without reaching the reserve, so the property isn't sold under the hammer.

The highest bidder usually gets the first chance to negotiate with the seller straight after the auction. If they can't agree, the property is listed for sale afterwards.

The agent's published idea of what the property will sell for.

It's a guide, not a promise. NSW and Victoria have laws against underquoting, and in Victoria agents must publish a Statement of Information with an indicative selling price. In Queensland, agents can't advertise a price for a property going to auction.

A sale by negotiation instead of auction.

The property is listed with an asking price (or a range), buyers make offers, and the seller can accept, reject or counter. A cooling-off period usually applies.

The lowest price the seller will accept at auction.

The seller sets it with their agent before the auction and it's kept private. If bidding goes past it, the property is "on the market" and the highest bidder buys it. If bidding stops below it, the property is passed in.

Victoria's vendor statement: what the seller must disclose before you buy.

It covers the title, zoning, rates, easements, owners corporation details and more. Other states have their own disclosure rules and documents.

The day the sale completes: the balance is paid and you get the keys.

It's usually 30 to 90 days after exchange, as the contract says. Your lender, the seller's lender and both conveyancers settle it together, now usually online.

A look into an apartment or townhouse complex's records.

It shows the levies, the sinking fund, planned works, special levies and any disputes or defects. A low sinking fund with big works coming can mean a large bill soon after you buy.

A condition that lets you pull out if your loan isn't approved.

It has a deadline in the contract. Auctions don't allow it, so get pre-approval before bidding.

The date by which an off-the-plan property must be finished, or the contract can end.

Some states limit when a developer can use it to cancel, because prices may have risen since you signed.

A contract with no conditions left: the sale must go ahead.

Auction contracts are unconditional when the hammer falls. A private sale becomes unconditional once finance, inspections and cooling-off have passed.

Advertising a price below what the agent really expects the property to sell for.

It draws buyers in with a price they can't buy at. It's illegal in NSW and Victoria, where agents can be fined. If a price guide looks too low next to recent sales nearby, it may be.

A bid the auctioneer makes on the seller's behalf.

It's allowed below the reserve to get bidding moving, but it must be announced as a vendor bid. How many are allowed and how they're announced varies by state.

An agent's estimate of what your property would sell for.

It's free and meant to win your listing, so the highest appraisal isn't always the most accurate. Ask each agent for the recent nearby sales behind their number.

The fee a selling agent charges, usually a percentage of the sale price.

It's commonly somewhere around 1.5% to 3% plus GST, depending on the area and the agent, and it's negotiable. It's normally paid at settlement, out of the sale money.

How long a property is listed before it sells.

A suburb average that's rising suggests demand is cooling. A property that has sat for a long time may have a seller open to offers.

An agreement that one agent sells your property for a set period.

You usually owe that agent commission if it sells during the period, even to a buyer you found yourself. Check how long it lasts and how you can end it.

What the seller pays for photos, listings, signs and ads.

It's usually paid on top of commission, and often whether or not the property sells. Ask for the full list in writing before you sign with an agent.

Listing with several agents at once; only the one who sells it is paid.

It can bring in more buyers, but agents may put less effort into a property another agent could sell.

A formal estimate of a property's value by a qualified valuer.

Lenders order one before approving a loan, and it's often more cautious than an agent's appraisal. If it comes in below the price, the lender will lend against the lower figure.

The seller.

Contracts and auctions use "vendor" for the seller and "purchaser" for the buyer.

How far the final sale price ends up below the first asking price.

A bigger average discount in a suburb usually means buyers have more room to negotiate.

What a lender can charge if you end a fixed rate loan early.

It depends on how much rates have moved since you fixed, so it can be small or several thousand dollars. Ask the lender for an estimate before you switch.

The interest rate with most fees and charges added in.

It's worked out on a $150,000 loan over 25 years so loans can be compared. A big gap between the rate and the comparison rate usually means high fees.

What your property is worth minus what you owe on it.

Lenders will often let you borrow against some of it (usually up to 80% of the value, less the loan) for a deposit on another property.

A rate locked for a set term, often 1 to 5 years.

Your repayments stay the same for the term. Paying it off or switching early can cost a break fee, and extra repayments are often limited.

Someone, often a parent, who backs part of your loan with their own property.

It can let you buy with a small deposit and avoid LMI, but the guarantor's property is at risk if you can't repay.

Repayments that cover only the interest, so the loan doesn't go down.

Common for investors because repayments are lower, usually for up to 5 years. After that the loan switches to principal and interest and repayments jump.

A one-off cost when you borrow more than about 80% of the value.

It protects the lender, not you, if you can't repay. It's often added to the loan. Some buyers avoid it through government schemes or a guarantor.

Your loan as a share of the property's value.

Borrowing $600,000 on a $750,000 property is an 80% LVR. Lenders usually charge less below 80%, and above 80% you'll usually pay lenders mortgage insurance.

Someone who compares lenders and arranges a loan for you.

They're usually paid commission by the lender, and must act in your best interests. Ask which lenders they work with.

A transaction account linked to your loan that cuts the interest you pay.

$20,000 in an offset against a $500,000 loan means you pay interest on $480,000, and the money stays yours to use.

A lender's early yes to how much they'd lend you.

It usually lasts about three months and still depends on a valuation of the property and final checks. Get it before you bid at auction.

Repayments that pay off the loan as well as the interest.

The loan shrinks with every repayment, and the rate is usually lower than interest only.

Taking back extra repayments you've made on your loan.

Unlike an offset, the money is part of the loan until you redraw it, and some lenders limit or charge for redraws.

Moving your loan to a new lender, or a new loan with the same lender.

Usually done to get a lower rate or release equity. Check any break fee and the costs of switching first.

The extra rate lenders test your repayments at.

APRA expects banks to check you could still repay at least 3 percentage points above the actual rate, which is why borrowing power is lower than people expect.

One loan split into a fixed part and a variable part.

You get some certainty from the fixed part and some flexibility, such as an offset, on the variable part.

A rate that can go up or down, usually when the RBA changes the cash rate.

Variable loans usually allow extra repayments, redraw and an offset account.

Tax on the profit when you sell a property that isn't your home.

The gain is added to your income for the year. Hold it more than 12 months and usually only half the gain is taxed. Your main residence is generally exempt.

A yearly charge by your local council, based on your property's value.

They pay for local services such as roads and bins. Water rates are usually billed separately.

A tax deduction for the wear on an investment property's building and fittings.

Division 43 covers the building itself, Division 40 the fittings like ovens and carpet. A quantity surveyor's depreciation schedule works out the amounts.

A state grant for some first home buyers, usually for a new home.

Each state sets its own amount, price caps and rules. It's separate from first home buyer stamp duty concessions.

Extra stamp duty, and often land tax, for buyers who aren't Australian citizens or permanent residents.

Each state sets its own rate, on top of normal duty.

A yearly state tax on land you own, above a threshold.

Your own home is usually exempt; investment properties usually aren't. Each state has its own threshold and rates.

When an investment property's costs are more than its rent, and the loss cuts your tax.

The loss is taken off your other income, so you get some back at tax time. You're still out of pocket each week; it pays off only if the property grows in value.

A way to get your property tax deductions in each pay instead of at tax time.

You apply to the ATO, and your employer then takes less tax from each pay.

Government fees to record the new owner and the mortgage on the title.

They're small next to stamp duty, and set by each state.

A state tax paid by the buyer when a property changes hands.

It's often the biggest upfront cost after the deposit and depends on the price and the state. First home buyers can pay less or none.

Regular payments by apartment or townhouse owners to run the complex.

They cover insurance, cleaning, repairs and a sinking fund for big future works. A special levy is a one-off extra charge when the funds fall short.

The share of auctions in a week where the property sold.

It's a quick read of buyer demand: higher rates mean a stronger market for sellers.

How much a property's value rises over time.

Usually quoted as a yearly percentage. Past growth in a suburb is no promise of future growth.

A year's rent as a share of the property's price.

$600 a week on a $650,000 property is $31,200 a year, a 4.8% gross yield. It ignores costs, so it flatters the return.

A year's rent, less the property's running costs, as a share of the price.

Running costs include rates, strata, insurance, management and repairs. It's a truer picture than gross yield, but leaves out loan interest.

When the rent covers all the property's costs, including interest, with money left over.

The extra is taxable income. The opposite, where you top up each week, is negative cash flow.

An agent who runs a rental for the owner, for a fee.

They find tenants, collect rent, arrange repairs and do inspections. Fees are usually a percentage of the rent plus some one-off charges.

Money a tenant pays at the start of a lease to cover damage or unpaid rent.

It's usually 4 weeks' rent, held by the state's bond authority, not the landlord, and returned at the end of the lease if there are no claims.

The share of rental homes in an area that are empty and for rent.

Around 2% to 3% is often seen as balanced. Lower means renters compete for homes and rents tend to rise.

A property's net income as a share of its value.

Valuers use it to price commercial property: a $100,000 net income at a 5% cap rate means a $2 million value.

Rent that includes the outgoings.

Simpler for the tenant, but the landlord prices the outgoings into the rent.

A sweetener to sign a lease, such as rent-free months or a fitout contribution.

It lowers the effective rent below the advertised (face) rent.

The tenant's duty to return the premises to their original condition when the lease ends.

It can mean removing the fitout, which can be costly. Check the clause before you sign.

Rent plus the tenant's share of the outgoings.

Common for commercial property. The headline rent looks lower, so add the outgoings before comparing.

A building's running costs, such as rates, insurance and maintenance.

Under a net lease the tenant pays their share on top of rent; under a gross lease they're included in the rent.

When the rent is adjusted during a lease, as the lease sets out.

It can be a fixed percentage each year, in line with inflation (CPI), or reset to market rent.