Real Estate Terms Made Easy

Agreement The written contract for the sale and purchase of property between the seller (vendor) and the buyer (purchaser).

Asking Price The listed price of the property buy may not always be the selling price. The owner may be willing to negotiate.

Boundary The lines that define the perimeter of a property.

Buyer’s Market When the demand for property is less than supply so the advantages shift to the buyer.

Capital Gain The gain on the sale of a capital asset (for example a property you buy then sell for more).

Capital Improvement Any structure (house) or addition to a property (pool, shed, deck, etc.) that adds value to the land.

Certificate of Title Description of a property with registered owner/s name/s, mortgages held, easements (i.e: driveway access/water/etc.)

Chattels Moveable and removable items included in the sale: (i.e: stove, dishwasher, garden shed, etc.)

Conditional Agreement This is a legally binding contract but it is subject to conditions being satisfied, usually by the purchaser. For example, arranging finance or obtaining a building report by a certain date.

Deposit An agreed percentage of the purchase price paid (usually paid on unconditional) to bind the sale and purchase of the property. Usually paid to the Real Estate Company’s Trust Account.

Easement A right that someone has to use the land belonging to another, eg: a water authority may have a sewerage easement across part of the property you are looking to purchase.

Exclusive Listing/Sole Listing A written contract that gives a licensed real estate agent the ‘exclusive’ right to sell a property for a specified time.

Fee Simple (Or Freehold) A freehold site (section). No crosslease.

Interest The fee charged for borrowing money.

Investment Property A property that is not occupied by the owner but rented to a tenant.

LIM Report (Land Information Memorandum) A LIM is a report prepared by the local Council at your request, providing a summary of property information held by the Council as at the day the LIM was produced.

Loan Application Fee Also called an Establishment Fee. A fee paid to “some” lenders for processing a loan.

Market Value The price at which a seller is happy to sell and a buyer is willing to buy. This assumes that there is sufficient activity in the marketplace to generate enough buyers and sellers so that neither party controls the price. Establishing the market value is the objective of an appraisal by a Licensed Real Estate Agent.

Mortgage A legal document that pledges a property to the lender as security for payment of a debt.

Mortgage Broker An individual or company that brings borrowers and lenders together for the purpose of loan origination. Mortgage brokers in New Zealand are typically paid by the Bank, not the Lender for their services.

Mortgage Insurance A policy that insures the lender against the borrower on a loan. Most lenders generally require insurance when loaning more than 80% of the property’s value.

Mortgagee The lender in a mortgage agreement.

Mortgagor The borrower in a mortgage agreement.

Negotiation The to and fro between a buyer and a seller to conclude an accepted contract between the parties. Usually negotiated by a Licensed Real Estate Salesperson.

Passed In The highest bid at an auction fails to meet the reserve price (sale price as set by the Vendor) of a property and consequently does not sell.

PIM (Project Information Memorandum) A report giving information on items such as potential erosion, subsidence, hazardous contaminants, stormwater. It may also include classifications under organisations such as the Dept. of Conservation or Historic Places Trust, as well as authorisations required by the Resource Management Act.

POA A pricing method used by some Real Estate companies, meaning ‘Price On Application’.

Pre-qualified / Pre-Approved The process of determining how much money a prospective buyer will be eligible to borrow ‘before’ applying for a loan.

Principal The amount borrowed or still to be repaid. The part of the monthly payment (which includes an interest portion), that reduces the balance of the mortgage.

Private Sale The sale of property by the owner without the services of a real estate agent.

Qualified Buyer A buyer who has satisfied a lender that they are financially able to qualify for a loan. Qualifying the buyer is one of the primary steps in the loan process. The lender also needs to qualify the home (security) being purchased ‘before’ a buyer can put forward an unconditional offer.

Reserve Price The minimum price which a seller will accept at auction.

Right of Way A right of one property, or the general public, for access to, or across another property.

Seller’s Market When demand for property is greater than supply (homes on the market). The result is greater opportunities for owners who may find someone willing to offer the asking price or even a figure greater than the asking price.

Settlement The sale of a property is finalized by the legal representatives (lawyers / conveyancers) of the vendor and the purchaser, mortgage documents are affected, costs are paid and the new owner takes possession of the property and receives keys.

Subdivision A tract of land divided into individual lots for a housing development.

Tender A process of selling which calls for purchasers to make their best offers in writing by a given date. Can include conditions.

Title A legal document evidencing a person’s right to or ownership of a property.

Title Search A check of title records to ensure the seller is the legal owner of the property and that there are no claims outstanding.

Unconditional Agreement The legal contract that binds both the purchaser and the seller to settle on the agreed date at the agreed price. It is either not subject to any conditions or those conditions have already been satisfied.

Valuation A written analysis of the estimated value of a property prepared by a registered valuer (not a Real Estate salesperson).

Vendor The person or entity legally authorised to sell a property (the person on the title).