The jargon explained - real estate terms you need to know

Like any industry, real estate has its own jargon, but with property transactions being lengthier and more complex than most, it’s also peppered with a multitude of potential pitfalls which can easily result in stressful delays or even the loss of the sale or purchase, so understanding the terms and legalities is essential.

Certain terms do seem obvious and most people will be au fait with the basic concepts of many, but that’s not enough; it’s also very important to familiarise oneself with the conditions that apply to ensure a seamless transaction without any unpleasant surprises along the way.

Abatement: A reduction in a property’s sale price, usually as the result of the discovery of a defect which decreases the property’s value from the price originally agreed upon.

Agreement of sale: This is the official contract of sale between a willing seller and buyer; a legally binding contract signed by both parties in which they agree on a purchase price, sale conditions and date of sale. It supersedes all previous verbal agreements.

Appraised Value: A property's fair market value which is determined by the estate agent based on his/her knowledge, experience, and analysis of the property and the current market. Banks will also do their own valuation if the buyer is applying for finance or bonding an existing home, and this is often more conservative.

Bond Assurance: Otherwise known as home loan insurance, it’s taken out on the life of the borrower to cover the amount owing on the home loan in the event of death or disability.

Bridging financeA temporary loan for which a buyer can apply in order to purchase a new property before the existing one has sold.

Clearance Certificates: Certificates issued by certified professionals that the electrics, plumbing, gas and features like electric fencing are all in good working order and also one issued by the local municipality to confirm that all rates, taxes and levies are paid up to date when a property transfer takes place. Transfer cannot take place without it.

Conditions of title: These are the restrictive conditions limiting an owner’s rights and can include matters such as servitude and how many dwellings are permitted on the erf. They are recorded on the property’s title deed.

Conveyancer: An attorney who specialises in the property law of conveyancing. These licensed professionals ensure you meet all the legal obligations involved in your property transaction, and attend to deed office transactions such as the transfer of a property from seller to a buyer as well as the registration of mortgage bonds and servitudes.

Deed of Sale: A formal agreement of sale and a record of the transfer of ownership of property from one person to another, expressing the terms of the agreement.

Fittings: Adornments or personal affects that can be easily removed by the seller, unless otherwise agreed, without causing damage to the property, for instance light fittings.

Fixtures: Property or items that cannot be easily removed without causing damage, such as built-in hobs and ovens or curtain rails.

Freehold vs Sectional Title: The owner of a freehold property has full rights to the entire property and takes on all responsibilities whereas sectional title properties are units within a larger property like a block of flats and owners have to adhere to the regulations of the complex which is usually managed by an entity such as a body corporate.

Initiation Fee: The fee charged by a bank for the processing of the home loan application and includes services like property appraisals and credit reports.

Prior occupation: A buyer might request occupation of a property before transfer takes place, in which case an agreed rental (occupational rent) is usually payable by the buyer until registration of transfer.

Offer to purchase: The document in which the buyer proposes a purchase price and any conditions they’d like met and, if the seller accepts and signs it, the offer to purchase becomes a valid sale agreement.

Pre-Approval: Also known as conditional approval, this is when a lender has agreed to loan a buyer a particular amount in principle, which not only gives them a head start on the purchasing process it also gives buyers a better idea of what they can afford. This is done by providing debt, income, and savings documentation which an underwriter then reviews. Once a property is chosen, it must also meet the underwriting guidelines of the financial institution before the actual bond is granted.

Prime rate: the interest rate charged by a lender to their most credit-worthy customers, or those least likely to default on their loans. This is the ‘best’ or lowest rate that the lending institution would offer any of its customers.

Subject-to sale: When the sale contract between the buyer and seller will only become unconditional and binding once the buyer sells his own property and a time period of sixty days is usually allowed, although this can be extended upon agreement of both parties.

Suspensive condition: A provision in a contract which suspends the conclusion of the sale until a specific condition, such as the approval of a mortgage loan, is fulfilled.

Title deed: Filed in a deed office, this is legal proof of property ownership and it contains all the details of the property, the sale agreement and its owner and if another person or institution has rights over the property, like a bank which holds a mortgage bond, this will also be included.

Voetstoots: This clause is a common provision in the agreement which stipulates that the purchaser buys the property from the seller as it is, thereby indemnifying the seller against claims for damages in respect of any defects on the property, whether patent or latent.