This glossary describes key terminology you will hear throughout the buying and/or selling process. It's a good place to get started when you come across a term that is unfamiliar to you.
An agent proposal is a document created by a real estate agent that outlines the services they’ll provide when selling your property, their experience and knowledge of the local real estate market, a breakdown of the services they will provide (such as marketing the property, conducting open for inspections and negotiating offers), as well as their commission and any additional fees.
A property appraisal involves getting a real estate agent to come out to your property to provide a more accurate assessment of how much the home is worth. Appraisals are based on property characteristics and condition, location and market trends.
Borrowing power refers to the maximum amount of money that a financial institution (e.g., a bank or credit union) is willing to lend to a borrower, based on things like income, expenses, credit history and other financial commitments.
A building inspection is an assessment of the condition of a home conducted by a licensed inspector. A buyer may choose to purchase a building inspection prior to making an offer on a property or make an offer subject to the outcome of an inspection to reduce the risk of incurring expensive repair work after purchase. After visually inspecting the property for any defects or damage, the inspector will provide a written report outlining what they found and any recommendations.
A caveat loan is the name given to a type of short-term loan, secured by lodging a caveat on the title of your home. Note that this is general information only and not financial advice. For advice relating to your individual circumstances, and to consider whether any individual product is right for you, please consult an independent financial advisor.
A commission is the fee that you (the vendor) pays to the real estate agent for their services. This is typically a percentage of the final sale price – on average between 1.5-3% – and is negotiated prior to signing the sales authority (see definition below). When negotiating commission, it’s important to consider the level of service offered by the agent, not only the percentage value.
Contract of Sale
A contract of sale is a legal document that outlines the terms and conditions of a property sale transaction between a vendor (seller) and buyer. It outlines the sale price, settlement (see definition below) details and property details. The contract is prepared by the vendor’s conveyancer (see definition below) and signed by both parties when the sale is made.
A conveyancer is a licensed professional who specialises in the legal aspects of buying and selling property. Their role is to prepare and review legal documents, including contracts of sale (see definition above), conducting property searches, liaising with the other party’s conveyancer to ensure that the transaction progresses smoothly, facilitating payments and other fees and attending settlement (see definition below).
Equity refers to the current market value of your home, minus the amount of money still owing on your home loan.
For example, if your home is valued at $800,000 and you still owe $600,000 on it, you’ll have $200,000 in equity. Note that this is general information only and not financial advice. For advice relating to your individual circumstances, please consult an independent financial advisor.
Exclusivity is a standard inclusion in an agent proposal and grants an agent the exclusive rights to market and sell a property for a set period of time. During this period of time you (the vendor) cannot engage any other agents to sell the property. The benefit to you is that it helps ensure the agent is fully committed to achieving the best possible outcome.
In Australia, "strata" typically refers to a form of property ownership known as strata title or strata scheme. This form of ownership is commonly used for multi-unit residential buildings, such as apartment complexes, as well as townhouses and some commercial properties.
A Strata title ownership is a way for multiple individuals to collectively own and manage a property, providing a balance between individual ownership and shared responsibilities for maintenance and management.
Loan Value Ratio (LVR)
The loan-to-value ratio is the ratio of the loan amount compared to the value of a property. For example, if your home is valued at $800,000 and your remaining mortgage is $600,000 your LVR is 75%. Note that this is general information only and not financial advice. For advice relating to your individual circumstances, please consult an independent financial advisor.
A marketing schedule is a plan of action that outlines the various activities and channels that an agent recommends to advertise your property. This may include professional photography, online advertising (e.g., on realestate.com.au), signage, print advertising, direct marketing or other.
A mortgage broker is the middle person between a borrower and a lender, negotiating the loan on your behalf and helping you to find the right home loan for your needs.
Open for Inspection
Open for inspections refers to an advertised time when a property is available for potential buyers to view and inspect. During this time, interested parties can tour the property, ask questions, and get a better sense of the property's features, condition, and suitability for their needs.
A pest inspection is an examination to identify the presence of any pests that can cause damage or harm to a property. It is typically carried out by a licensed inspector who will look for signs of pests such as termites, rodents, cockroaches, and other insects. The inspector will assess the extent of any infestation and provide recommendations for treatment or management to prevent further damage or potential health hazards. Pest inspections are often conducted as part of the buying or selling process of a property.
A private treaty sale is a means of selling a property where the seller sets the price and potential buyers make offers, outside of an auction environment. Interested buyers can make offers at the listed price or a price negotiated between the buyer and seller. The seller can accept, reject, or counter the offer.
The reserve price is the minimum price that the seller is willing to accept for the property. It is set by you (the vendor) in consultation with your agent before accepting bids at an auction and does not have to be shared with potential buyers. If the bidding reaches or exceeds the reserve price, the property will be sold to the highest bidder.
A sales authority is a legal document that grants a real estate agent the authority to act on behalf of you (the vendor) in the sale of your property. It outlines the terms and conditions of the agreement between the vendor and agent, including the agent’s commission (see definition above), the exclusivity period (see definition above) and specific services that the agent will provide. This is a legally binding agreement between parties and comes after you have agreed to or negotiated on the agent’s proposal.
Settlement refers to the legal process of transferring ownership of a property from one person (or entity) to another. It is a critical stage in the buying or selling of real estate and involves the payment of the agreed-upon purchase price and the transfer of the property title from the seller to the buyer. A conveyancer will generally guide you through this process.
Stamp duty is a tax that is levied by the government on certain types of transactions, including the transfer of property ownership, and is typically payable by the buyer. The amount of stamp duty varies depending on the value of the property or the transaction and the state or territory in which it occurs.
Statement of Information
Real estate agents representing properties for sale in the State of Victoria are required to prepare and make available a Statement of Information, which includes the indicative selling price for the property.