Jargon busting

Here's a no-nonsense translation of some of the words and phrases that are likely to be bandied about during your house buying journey. 

 

Agreement - The written contract for the sale and purchase of property between the vendor and the buyer.
Amortise - To repay a mortgage with regular payments that cover both principal and interest.
Appraisal - A non-binding verbal assessment of a property by a real estate sales person.
Appreciation - An increase in the value of a property over a period of time.
Asking price - The price the owner would like to get for their property, but which is normally negotiable.
Auction - A public sale of a property or real estate that is sold to the highest bidder when the owner’s reserve is reached.
Balloon payment - A large lump-sum payment to clear a debt.
Beneficiary - The person designated to receive benefits from a trust, estate, or a deed of trust.
Body corporate - An administrative body comprising all of the owners within a group of units or apartments of a strata building. Usually, a committee is elected by the owners to handle the administration and upkeep of the entire property.
Bond - Upon signing a tenancy agreement a sum of money is paid by the tenant, and held by the Tenancy Services, to ensure against defaulting on payment or damage to the property.
Boundary - The perimeter lines of a property.
BRANZ - An independent body which carries out research and testing for the building industry.
Bridging loan - A short term loan to cover the cost of purchasing a new property before an existing property has been sold.
Building code - Regulations that control design, construction and materials used in construction, as set out under the Building Act 1991.
Buyers’ market - When there is more property on the market than buyers.
Capital expenditure - The cost of making an improvement to a property to increase it’s value or extend its useful life.
Capital gain - The profit you make when an asset increases in value.
Capital improvement - Any permanent structure or addition to a property to increase it’s value or extend its useful life.
Capital valuation - A valuation of your property by your local authority, used to set your rates, and split into land value and value of improvements (ie, the house etc).
Capped interest rate - Where the interest rate can go up or down, but can’t go over a certain level for a set time.
Caveat - A warning or caution on a title that a third party might have some interest or right in the property.
Caveat emptor - A Latin phrase for “Let the buyer beware.”
Certificate of occupancy - A document issued by council to a developer permitting a structure to be occupied.
Certificate of title - A description of a property with the name of the registered owner and any mortgages or easements. It must be produced by the vendor before the sale of the property.
Chattels - Moveable and removable items in a property, eg, the stove, television aerial, carpets, curtains and light fittings. Chattels must be specified in the sales and purchase agreement to be part of the property.
Clear title - A title that is free of legal doubts as to ownership of the property.
Code of Compliance - Issued by the local council to say the building complies with the Building Act.
Collateral - An asset that guarantees the repayment of a loan.
Commission - A proportion (usually a percentage) of the sale price of a property paid to a real estate agent by the vendor for negotiating the sale.
Common property - An area which is owned by all tenants of a strata property, eg, a driveway.
Conditional agreement - A sales and purchase agreement that is subject to conditions being satisfied by a set date, eg, arranging finance, a satisfactory builder’s report, etc.
Contract of sale - Used at auctions, to set out the terms and conditions of sale.
Covenant - Terms, conditions and restrictions noted on the title.
Cover note - Temporary insurance, issued by an insurance company, until a formal policy is issued.
Credit history/report - A record of an individual’s current and repaid debts, used by a lender to assess the risk of a potential borrower.
Crosslease - A type of ownership where there is more than one home on a block of land. Everyone owns the land but each leases their home. The lease usually specifies exclusive-use area for each cross-lessee as well as common areas, and may restrict alterations.
Cul-de-sac - A dead-end street with only one entrance. Often seen as desirable in real estate terms because there’s no through-traffic.
Deed - A legal document conveying title to a property.
Default - Failure to comply with other conditions of the mortgage.
Deposit - A percentage of the purchase price paid once the price has been agreed but before settlement.
Depreciation - A decline in the value of property.
Disposable income - Money left over after all expenses have been met.
Drawdown - The disbursement of mortgage funds from the lender.
Duplex - See semi-detached and terrace house.
Easement - A right that someone has to use the land belonging to another, eg: a utility provider may have an easement across part of your property or neighbours may hold easement over a shared drive.
Encroachment - Part of a house illegally overhanging the street or a neighbour’s property.
Equity - The amount of an asset actually owned, the difference between the market value of the property and the amount still owed on its mortgage.
Estate - All assets owned by an individual at the time of death.
Exclusive listing/sole listing - When the real estate agency has the exclusive right to sell a property for a specified time.
Fee simple - The greatest possible interest a person can have in real estate.
Fidelity fund - A fund set up by a professional body, such as lawyers and real estate agents, to reimburse clients who lose money due to fraud or misconduct by one of the fund’s members.
Fiduciary - Real estate agents and salespersons are considered by law to be fiduciaries, and have a duty to act primarily for the benefit of the person who employed them. A fiduciary must act with the highest degree of care and good faith in relations with the principal and on the principal’s business.
Fixtures and fittings - The first is fixed items that cannot be removed without damaging either the property or the fixture itself. The second are objects that can be removed from a property without causing damage to it.
Fixed interest rate - Where the interest rate does not change during the term of the loan, usually taken out up to five years.
Floating interest rate - Where the interest rate goes up and down according to market forces. Also called a variable interest rate.
Foreclosure - The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually results in a mortgagee auction, the proceeds of which are used to pay back the mortgage.
Freehold - The most common type of ownership where you own the land and house with virtually no restrictions. Freehold is also used to describe a debt-free property.
Gearing - The ratio of your own money and borrowed funds for investment.
Guarantor - A person who guarantees the holder of a loan in case of they default.
Home inspection - An inspection that evaluates the condition of a property.
Interest rate - The fee charged for borrowing money.
Interest-only loan - A loan where only the interest is repaid throughout the course of the loan. The original amount is repaid at the end of the term.
Investment property - A property not occupied by the owner, but rented out.
Joint tenancy - A form of co-ownership that gives each tenant equal shares and rights in the property
Landlord - A person who rents property to another.
Leasehold - The party owns the home and leases the land for a certain time.
Liabilities - List of debts.
Lien - A legal claim against a property that must be paid off when the property is sold.
Life estate - Also called Tenancy for Life. A freehold interest that expires upon the death of the owner or some other specified person.
LIM report (Land Information Memorandum) - A LIM is a report prepared by the local council, providing a summary of property information held by the council.
Listing - A written contract between an owner and a real estate, authorizing the agent to sell the property.
Loan - A sum of borrowed money.
Loan application fee - A fee paid to a lender for processing a loan.
Lump sum payment - An extra amount paid off the mortgage.
Market value - The price a property is likely to sell for, the amount a seller is happy to sell for and a buyer is willing to buy for.
Mortgage - A legal document used as security on a property for payment of a debt.
Mortgage broker - Someone who organises loans on your behalf, typically paid a fee by the lender.
Mortgage discharge fee - A fee charged by some lending institutions for paying off a loan in full.
Mortgage repayment/protection insurance - A policy that insures the lender against the borrower on a loan. Most lenders require insurance if you borrow more than 80% of the property value.
Mortgagee sale - Usually an auction to sell a property when the mortgagor has defaulted on a loan. The proceeds are used to repay the mortgage and any left over goes to the mortgagor.
MRIENZ - A member of the Real Estate Institute of New Zealand.
MWP - Marketing without a price.
Negative gearing - Where the income on an investment is not sufficient to cover the costs.
Notice of default - A formal written notice to a borrower that has occurred and that legal action may be taken.
Notice to quit - A notice to a tenant to vacate the property.
Off the plan - Buying a property before it is completed after having only seen the plans.
Ombudsman - The banking or insurance industry ombudsman deals independently with complaints.
Passed In - In an auction, when the highest bid fails to meet the reserve price of a property.
PIM (Project Information Memorandum) - A report giving information on potential erosion, subsidence, hazardous contaminants, stormwater. It may also include historic or Department of Conservation classifications.
POA - A pricing method used on some property sales, meaning price on application.
Pre-approval - The process of determining how much money you can borrow before he or she applies for a loan.
Principal - The amount borrowed or still to be repaid on a mortgage. The part of the monthly payment that reduces the balance of the mortgage.
Private sale - The sale of property by the owner without the services of a real estate agent.
Private Treaty Sale - The sale of property, through a real estate agent, by negotiation.
Reducing loan - Where you pay off a set amount of the loan with each repayment, which means the interest portion and the loan gradually reduces.
Refinance - The process of paying off one loan with the proceeds from a new loan using the same property as security.
REA - A Real Estate Agents Authority which represents and regulates real estate agents.
Requisitions title - A process where the buyer requests additional information about the title of the property from the vendor.
Reserve price - The minimum price which a seller will accept at auction.
Resource consents - Resource consents are necessary when a group or individual wishes to carry out an activity or development that may have some effect on the environment.
Revolving credit - A type of mortgage with an upper limit, used like overdraft. Often tied to a cheque account, it allows the balance to be reduced, for example when your salary goes in, and therefore reduces the amount of interest charged. It also allows for extra funds to be drawn down for renovations etc.
Right of first refusal - A provision in an agreement that gives a party the first opportunity to purchase or lease the property before it is offered for sale or lease to others.
Right of way - A right of one property or the general public for access to or across another property, usually via a drive.
Second mortgage - A mortgage that, on the sale of a property, is paid off only when the first mortgage is paid.
Security - The property that is pledged as collateral.
Sellers’ market - When demand for property is greater than supply.
Semi-detached - Also called duplex. A type of construction where two buildings are attached together, sharing a common wall.
Settlement - When the sale of a property is finalised, the money is paid and the new owner takes possession of the property and receives the keys.
Sole agency - When a real estate agency has sole right to sell a property, usually for a set time.
Strata title - A title used with townhouses, units and blocks of flats where you own your home and associated air space. You also have an undivided share of common property and will belong to a body corporate. Also known as unit title.
Subdivision - A tract of land divided into individual lots for housing.
Survey - A drawing or map showing the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and other physical features.
Table loan - When each repayment of the loan is the same for the term of the loan (though still subject to changing interest rates).
Tenancy - The right to occupy a property under agreed terms and conditions.
Tenants in common - A type of joint tenancy in a property where two or more purchasers own a property in unequal shares. If one dies, his or her shares passes to his or her beneficiaries under the terms of the will. The shares can be sold without consultation of the other owners.
Tender - A process of selling, calling for purchasers to make their best offers in writing for that property by a given date.
Term (of a loan) - The time period over which the loan extends.
Terrace house - A series of duplex houses, sharing common walls.
Title - A legal document stating 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 that there are no other claims or outstanding issues.
Townhouse - A standalone house on a subdivided or cross-leased site, with one or more neighbouring houses of a similar type.
Unconditional - An offer made on a property that is not subject to any conditions, or “going unconditional” is when those conditions have already been satisfied. An unconditional agreement commits you legally to purchasing th