Date: 21st Jul 2020
Confused by all the real estate jargon words and terminology? Whether you're buying, selling, or investing, understanding legal real estate terms and conditions is crucial for making informed decisions.
We've put together this exhaustive list of real estate terminology to help you navigate the property market with confidence. This glossary covers key real estate terms and meanings that you'll encounter during property transactions in New Zealand.
A written analysis of the estimated property value prepared by a qualified sales consultant, used when setting an asking price for the property you want to sell. Not to be confused with a property valuation; read more about the differences between appraisals and valuations.
Agreement:
The written contract for the sale and purchase of property. Also known as a sale and purchase agreement, this is a legally binding contract between parties involved in a property transaction.
Auction:
A public sale where buyers bid against each other. The property goes to the highest bidder once the reserve price is met. Auctions are typically unconditional sales.
Body Corporate:
An entity responsible for managing and maintaining common property in strata title property developments, such as apartment buildings. The body corporate is typically made up of all property owners within the development. Owners pay levies to cover insurance, maintenance, and other costs.
Bridging Loan:
A short-term loan, usually at a higher interest rate, taken out to cover the financial commitment between buying a new property and selling an existing one.
Building Act:
Refers to the Building Act 2004, the key legislation that regulates building work in New Zealand. It provides the legal framework for ensuring buildings are safe, healthy, and durable, and incorporates the requirements of the New Zealand Building Code.
Building Report:
More often called a building inspection or property inspection report, it is an inspection of a particular property's condition by a qualified professional, typically included as a condition in a sale and purchase agreement.
Business/Working Day:
A standard day for conducting business: typically 9 am-5 pm. Excludes weekends and public holidays.
Buyer's Agent:
A real estate agent who works exclusively for the buyer in a transaction, helping them find and negotiate the purchase of a property.
Buyer’s Market:
When the demand for property is less than supply, the advantages shift to the buyers.
Capital Gain:
The financial gain on the sale of a capital asset, often relevant for investment properties.
Capital Improvement:
Any structure or addition to a property erected as a permanent improvement.
Certificate of Title:
A description of a property with the name of the registered owner, encumbrance, i.e., mortgages and/or easements on the property.
Chattels:
Moveable and removable items of personal property owned by the seller. In real estate transactions for the sale of homes, this typically includes items such as the stove, carpets, blinds, curtains, drapes, and light fittings. Understanding the chattels’ meaning in NZ is important, as these items are distinguished from fixtures, which are permanently attached to the property.
Closing Costs:
Expenses over and above the purchase price paid for a property, including legal fees, registration fees, and other charges paid at settlement.
Conditions (Special Conditions in a Sale and Purchase Agreement):
Conveyancing:
The legal process of transferring property ownership from one person to another.
Cross Lease:
This type of ownership is common where there is more than one home on a block of land. Each owner holds a composite certificate of title that records both the land-share and the lease. The lease is usually for a period of 999 years, and the share corresponds to the number of dwelling units.
Covenant:
A restriction or promise that may be registered on a property's title, limiting how the land can be used. Covenants in real estate terms often include rules about building design, materials, landscaping, or other property-use conditions. These covenants usually remain in effect when ownership changes.
Deadline Sale:
A sales method where offers are submitted by a specified date and time, with the seller choosing the most favourable offer.
Deposit:
A percentage of the purchase price given to bind the sale of real estate. Held in a real estate Trust account for a minimum of 10 business days.
Easement:
A right that someone has to use the land belonging to another, e.g. a water sewage easement across part of your property.
Exchange and Settlement:
Exchange occurs when both parties sign the contract. Settlement occurs when money and ownership are transferred, usually several weeks later.
Exclusive Listing/Sole Agency:
Also known as a sole or exclusive agency agreement, the property owner authorises only one selling agent to list their property for a specified period.
Fee Simple:
True ownership of the property and the greatest possible interest a person can have in real estate. Often referred to as freehold property.
Fixed Rate Mortgage:
A home loan where the interest rate remains the same for a set period.
Freehold:
An estate in fee simple, which continues for an indefinite period and grants the owner indefinite rights over both the land and any structures on it.
Home Loan:
A loan provided by a bank or other financial institution to purchase a property, also known as a mortgage loan. The financial institution lends money to the buyer through a mortgage agreement that outlines the home loan process and repayment terms.
Interest Rate:
The cost of borrowing money, expressed as a percentage of the loan amount. Applied to mortgage debt. Some loans may require payment of only the interest for an initial period before requiring principal repayments.
Joint Ownership:
When two or more people own a property together, which can be structured in different ways.
Joint Tenancy:
Where two or more people own equal shares in a property with the right of survivorship.
You buy the right to own the home and lease the land for a specific period, usually with renewal options every 21 years. The person leasing the land typically pays ground rent to the landowner. Some leases vary, and each should be investigated separately.
Life Estate:
A property interest granting someone the right to live in and use a property for the duration of their life, after which ownership automatically passes to a pre-designated beneficiary. The life tenant may occupy and maintain the property, but cannot sell or encumber its future inheritance.
LIM Report (Land Information Memorandum):
A report from the council regarding a specific property including special land features or characteristics and details of building consents and any work done to improvements over the years.
Listing:
A written contract between an owner and a real estate company authorising a licensed real estate agent to market and sell the property.
Loan Payments:
Regular payments made for a mortgage, typically including both principal balance and mortgage interest.
Mortgage Broker:
A professional who acts as an intermediary between borrowers and lenders, helping borrowers find the most suitable home loan. Mortgage brokers typically require a fee or a commission to be paid for their services, which is typically paid by the lender.
Mortgage Insurance:
Insurance that protects the lender if the borrower defaults on the loan. Private mortgage insurance is often required for loans with a down payment of less than 20%.
Mortgage Sale:
The sale of a property by a lender after the borrower has defaulted on their mortgage payments. Also known as a mortgagee sale.
POA (Price On Application):
The POA real estate meaning refers to a situation where the seller chooses not to publicly list a price. This may be for strategic reasons or because the property is unique and difficult to value accurately.
Private Sale:
When a property is sold directly to a buyer, without a real estate agent’s involvement.
Private Treaty Sale:
The vendor appoints a real estate agent but sells the property through negotiation rather than via auction or tender.
Rateable Value:
The assessed value of a property by a local council for rating or taxation purposes. The rateable value’s meaning is important to understand, as it affects the rates (property taxes) you pay. However, it may differ significantly from the property’s actual market value.
Real Estate Institute of New Zealand:
The professional body for professionals involved in New Zealand’s real estate industry, providing standards, education, and advocacy.
Registered Valuation:
A written analysis of the estimated value of a property prepared by a qualified and registered valuer, resulting in a valuation report. The bank often requires a Registered Valuation as a condition of granting a loan to a buyer.
Reserve Price:
The minimum price that a seller will accept at auction.
Resource Management Act 1991 (RMA):
New Zealand’s primary environmental legislation, governing land use and property development. It manages how natural and physical resources are used, including zoning, subdivisions, and consents.
A strategy where you buy an investment property (usually in a more affordable area) while continuing to rent in your preferred suburb. The rental income helps cover the mortgage, letting you enter the property market sooner while keeping up your lifestyle and saving toward your ideal home.
Seller’s Market:
When demand for property is greater than supply. The result is greater opportunity for sellers to find multiple buyers or someone willing to offer the asking price or even a figure greater than asked.
Settlement Date:
The day the property sale is finalised by the legal representatives of the vendor and buyer, and the mortgage documents take effect, costs are paid, and the new owner takes possession of the property.
Special Condition:
A condition that must be met before the contract goes unconditional. For example, the purchaser may specify that the contract is not legally binding until they have seen a builder’s report and are satisfied with it. In this context, the cash-out clause’s meaning refers to a provision allowing the seller to accept a better offer (often unconditional), giving the original buyer a set period to go unconditional or withdraw.
Tender:
Tender’s meaning in real estate refers to a competitive sale process where buyers submit confidential offers without knowing what others have offered, often encouraging them to put forward their best possible bid from the start.
Title:
A legal document evidencing a person’s right to or ownership of a property.
Title Search:
A check of the title records to ensure that the seller is the legal owner of the property and there are no other claims or outstanding permits.
Unconditional Agreement:
The legal contract that binds both the purchaser and the seller to settle on the specified date and for the specified price. It is either not subject to any conditions or those conditions have been satisfied.
Under Contract vs Under Offer:
A property is described as under offer when the vendor has accepted a buyer’s offer, but the sale remains conditional on one or more requirements, such as finance approval, a satisfactory LIM or building inspection, or the sale of the purchaser’s existing property. Once all conditions have been met and the agreement becomes unconditional, the property is considered under contract, meaning a binding sale agreement is in place, even though settlement (the transfer of funds and title) may not have occurred yet.
Vendor:
The person selling their home.
Now that you're familiar with the most important real estate terms to know, are you ready to put your knowledge into action? Whether you're looking to buy your dream home or sell your current property, Tremains' experienced consultants are here to guide you through every step of the process. Contact us today to discuss your property needs and discover how our expertise can help you achieve the best possible outcome.