Real Estate Terminology
Agency Agreement: Every time a member of the public appoints a real estate agent to list their property for sale or rent, the two parties record their agreement and responsibilities in writing, which offers protection to them both. This agreement fixes the marketing price and gives the agency the authority to claim a commission should the agency introduce a buyer.
This is also referred to as a:
- Appointment to act
- Listing Agreement
- Sales Agreement
Agency Appointment Types: Essentially there are three different types of listing appointment:
- Exclusive Agency
- Sole Agency
- Open Listing (or General Listing)
Each appointment type imposes varying degrees of responsibility and conditions on both the agent and the seller. It also indicates to the other party in the agreement the level of commitment, in this case to sell a property.
Auction: Similar to an Exclusive Agency, except that the property seller and the agent agree to:
- Promote a specific day in the future when the property will be offered for sale.
- Remove the price; let the market indicate the value.
Of course, the expectation is that the property will be sold to the highest bidder on that day which will be the market price at that moment.
Actually, the Auction process consists of 3 parts:
- Auction Day
The auction system gives the vendor total control at all times and may choose to enter into a contract for sale at any stage of the process on terms agreeable to the buyer and him/herself.
The vendor also knows that those that make offers under the auction terms are in a position to buy as the contract is cash unconditional.
An Auction is a method of marketing and should not be mistaken for a sign of desperation. On the contrary, when the agent, in collaboration with the seller, ensures that as many people as possible are made aware of the Auction and it is sold under the hammer then statistics prove that the best possible price will have been achieved. Moreover, the successful bidder would have his finances in place and there would be no conditions attached to the contract.
Agent: The entirety that holds the authority to act on behalf of the Vendor to sell the listed property or entity.
Bid: An offer to buy a property at a specific price during an auction made by a registered bidder either in person or through a registered agent.
Buyer: Person(s)/entity that is interested to purchase a property, which is advertised by the agent on behalf of the seller.
Buyers Agent: An entirety that has been employed by a Buyer to source suitable properties within a criterion to buy, for a reward.
Chattels: Any property other than the leasehold of the land.
Commission: The proportion of the final selling price, which was agreed in the Sales Agreement, that is due to be paid by the Vendor to the agent for thier services, once the contract is unconditional. Normally from the proceeds of the sale once settled.
Conditions: When negotiating a purchase either party has, at the outset, the option to include conditions. These if both parties agree, are binding.
Conditional Offer: An offer to purchase a property, which is subject to the occurrence of another event which could be one or more of the following or as agreed by all parties:
- Approval of finance
- Building inspection
- Pest inspection
- Sales of another property
- Change of use
- New lease
Conjunctional-Listing: A Conjunctional Listing agreement arises when a seller has listed the property exclusively with an agent, but is not opposed to that agent working in conjunction with another agent in order to secure a sale. In such cases, the agreed commission is shared between the listing agent and the agent that has introduced the successful buyer. The seller is not expected to pay 2 lots of commission unless expressly indicated in writing by the vendor.
Contract of Sale: A formal and binding written agreement, which states the terms and conditions of sale including the agreed price. This has to be signed by both parties and their chosen representatives.
Conveyance agent: A person /company who act on behalf of another to assist the transfer of property from vendor to the buyer.
Custom Owner: The legal owner of the freehold land in Vanuatu.
Deed: A document whereby an agreement is made, obligation entered into or property conveyed and is signed by all parties to the agreement.
Deposit: This is something of value, normally money that has no minimum limit but cannot be more that 10% of the buyers perceived value, which is held by the stack holder. Until the property goes under contract it remains the property of the buyer and is 100% refundable.
Disbursements: Money paid out by an agent from a trust account supported by invoices, generally on behalf of a property owner and which can include advertising, rates, taxes, insurance, service fees etc.
Endorsement: Signing of a document.
Exclusive Listing: This written agreement places the property in the hands of one agent for an agreed period. As your exclusive agent there is commitment to actively marketing the property for sale. What you should expect from you exclusive agent:
- A Competitive Market Analysis to ascertain where the property sits in the present market.
- A professionally adapted and agreed marketing plan.
- Regular reports on the activities pertaining to the property.
- Meetings to make adjustments to the advertising and price based on market feed back.
A professional agent will always opt for an Exclusive Listing particularly if there is a belief that the property will sell however, the work involved restricts the number of listings of this type. An agent can handle 10-15 Exclusive Listings at any one time.
A Vendor that enters in to this type of agreement sends a clear message to the market “I’m a serious vendor” but at a price.
Expiry Date: The date, usually agreed by two or more parties, when a contract or agreement that has been entered into comes to the end of its life.
Fallen sale: This is when a Vendor and a Buyer have agreed the terms of the transfer of a property but one of the parties has had a change of heart and withdrawn. This is normally before the contract goes “Unconditional”
Fixtures and Fittings: Those items that are fix to the property in the following manner:
- Screw or Nail
These are considered part of the property on signing the "Contract of Sale" and should be in place on settlement unless otherwise specified in the contract.
Foreclosure: When, despite every effort, the lender has no option but to invoke its contractual authority to take possession of the asset that has been lodge as collateral, normally the property.
Gazumping: When a seller (especially of property) accepts a verbal offer of the asking price from one potential buyer, but then accepts a higher offer from someone else. There is a common misconception that you are 'Gazumped' if you agree to buy a property for less than the asking price and then another buyer agrees to pay more than your knocked down offer. Always make your offers in writing, using a qualified entity.
Holding Deposit: An amount of money paid by a buyer and placed in trust as evidence of their intention to purchase. This is normally restricted to 10% more could be seen as entering into a stage payment scheme. This could be to withdraw the property from the market or to give the buyer time to arrange further funds.
Improvements: Anything that is built on the land, for example the house.
Instruct: Give authority to another person e.g. Solicitor, agent, friend, to act on your behalf.
Inventory: Is a list of items that are present on inspection at a given date and time.
Legal fees: Monies paid for legal work completed by Solicitor or Conveyance agent.
Lease: An agreement to allow the use of a property for a predetermined fee over fixed time period.
Lease Holder: The entity that has the rights to use the property.
Listing: The recording of properties as being for sale or rent.
Market price: The price actually paid, or agreed supported by an agreement and deposit to be paid, for a property
Market Value: The price that a willing buyer (in full knowledge of the subject property) might pay a willing seller for a specific property.
Mortgage: A legal document signed as security for the repayment of money.
Mortgage Deposit: The funds deposited, normally with a lender, to show commitment to a purchase. This amount depends on the risk the lender perceives to have in the transaction.
Mortgage Payment: The agreed amount paid to a mortgagee at a agreed time.
Mortgagee: A person or company who lends money to another for the purchase of a property and whose agreement is evidenced in a mortgage.
None Disclosure Agreement: Normally used in the case of a business sale or a property that has very special features. This agreement is entered into by a buyer prior to receiving copies of any sensitive information that could at the time or within an agreed period in the future be used in a fashion that could be detrimental to the entity supplying the information.
Off The Plan: An agreement to purchase, at a time to be yet decided, a property to be or under construction.
Offer To Purchase: A letter or contract which would include the details of the interested parties a considered amount as well as any conditions to purchase a property or business.
Open Listing: This written agreement is where the seller lists their property with a number of real estate agents. Under an open listing agreement, each agent can sell the property individually or work with another agent to sell the property. Only the agent that introduces the buyer to the property will receive the commission from the seller.
Some Facts about Open Listing
- The agents that have the listing may not spend colectivly as much time or make an effort promoting a property (outside of placing an ad on the internet) when it’s likely another agent could sell it and receive the commission. Agents aren’t going to pay as much attention to the sale of a property where there is a strong possibility that they may not end up with anything out it – and from their point of view it's not too hard to understand, since their income is results driven.
- Each agent will want to place their sign in the front yard and previous experience tells us that multiple For Sale signs can turn buyers off (makes them question why the seller needs so many agents to sell their property or that the vendor is sharp) or make it appear as if the sellers are desperate to sell (and therefore potentially attract only opportunist buyers that are after more of a bargain than the vendor is willing to agree with!)
- Unethical agents may push sellers for a faster sale if they think that potentially the buyer they have may be the best chance of negociating a sale for themselves before another agent finds a buyer that is willing to pay more.
- Communication with several agents can become time consuming and difficult to maintain.
Possession date: The day the purchaser receives possession of the property. This is usually also called the settlement date.
Promotion: Advising to the public and interested parties that a property is for sale.
Registration Fee: An amount collected for registering a change in the public records.
Rental Return: This is the amount that a property actually or could be expected to generate over a given period. This figure is very important if the property is being pitched to investors. The rent received should be equal to the mortgage repayments less any tax deductible expenses.
Requisitions: A list of questions that a buyer puts to the seller, usually through the solicitor or conveyance agent, to determine information about the property such as rates, title, rents, etc.
Sales Commission: The proportion of the final selling price, which was agreed in the Sales Agreement, that is due to be paid by the Vendor to the agent for thier services, once the contract is unconditional. Normally from the proceeds of the sale once settled.
Salesperson: The person employed by the agent to represent the Vendor.
Seller: The person or organization that has placed the property or entirety on the market for sale. (Also Vendor)
Service fees: Money paid to professionals for their work.
Settlement: The completion of the sale. Documents and money settled between parties.
Settlement day: The day of completion of the sale. Seller receives money, buyer receives possession of property.
Sole Agency Listing: This type of agency agreement is used when a person selling a property wishes to list with one agent only, but at the same time retain the right to sell the property to certain people, without having to pay commission on the sale. The seller would need to disclose to the agent, the names of the potential buyers with whom he has been negotiating up to including the date of the appointment.
Solicitor: A qualified legal person who acts on behalf of another to assist the transfer of property form one owner to another.
Stakeholder: A person or company, usually the agent or solicitor, with whom money has been deposited pending the sale of a property.
Stamp Duty: A tax collected by the government.
Tender: A means of selling that requires buyers to submit, in the strictest confidence, their offer within a strict time period.
Title: The ownership of property, or the documents constituting the evidence of such ownership.
a. Company Title: Usually on a block of units owned by a company and run by a board of directors. You purchase shares in the company rather than owning a title or deed.
b. Community Title: A cluster of homes sharing amenities such as a driveway, drainage etc.
c. Strata Title: Usually on a group of dwellings such as home units and run by a body corporate. When you purchase a property in a strata titled complex you are actually buying the right to occupy designated air space in that complex.
Unconditional sale: The point at which the contract is binding.
Under Contract: Means that the buyer and seller have signed a Contract for Sale and a deposit has been paid to the stackholder, but the sale has not yet settled.
Under Offer: A buyer has submitted in writing to the seller, usually supported by a deposit to show sincerity that should not be more that 10%, a letter or a signed contract for the sellers consideration. Other buyer may submit offers, in this case the agent would probably suggest to all interested parties to "Put your best foot forward" make your best offer. Professional agents having received multiple offers will place the process in the hands of a independent person, usually their Principal.
Vacant possession: When the vendor gives vacant possession the property has to be empty persons and of all effects unless otherwise agreed in the contract of sale, usually on the day of settlement.
Valuation: An assessment on the market value of a property at any given time based on.
- Replacement value.
- The sale of similar properties in the area within a given time, normally the last six months.
Valuation Fee: Lenders may order a valuation on the property you intend to purchase or use as security. The cost of valuations may be included in your application fee.
Valuer: A registered/qualified person who provides a written valuation of a property based on their informed opinion.
Vendor: The person or organization that has placed the property or entirety on the market for sale. (See Seller)
Wear and Tear: The depreciation of an asset due to ordinary usage.
To find out more about how Vanuatu’s leading real estate agent can help you contact us.