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Demystifying Real Estate Jargon: A Guide for Home Buyers and Sellers



Are you feeling overwhelmed by the myriad of unfamiliar terms thrown around in the world of estate agency? Fear not! Whether you're a first-time buyer, a seasoned investor, or simply curious about the housing market, understanding key terminology is essential for navigating the complexities of property transactions with confidence. In this comprehensive guide, I'll shed light on some of the most commonly used terms in the UK Real Estate Business.



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Acceptance

The document you need to sign when accepting a lender’s mortgage offer.


Annual Percentage Rate (APR)

The total cost of a loan, taking into account interest charges, arrangement fees and other costs, shown as a percentage.


Arrangement fees

These are fees charged by a mortgage lender or broker to arrange a loan.


Base rate

The rate of interest which the Bank of England charges for lending to other banks. These banks then use it as a benchmark for the interest rates they charge when lending money to consumers, often stipulating an interest rate “X% above the base rate”.


Break clause

A clause sometimes agreed between the landlord and tenant to be inserted in a fixed term agreement, typically if the initial fixed term is for a year or more. A break clause will usually allow either landlord or tenant to give written notice after a particular date or period of the tenancy in order to end the tenancy earlier than the original fixed term.


Bridging loan

A temporary short-term loan enabling someone to purchase a property before selling his or her existing property.


Building inspection/Structural survey

A report on the physical condition of a property. The surveyor will look at all accessible parts of the property and give a written report on defects or issues affecting it.


Capital

Capital, also known as equity, is an asset that is less liquid than cash. It represents the amount of money you have put into a property, investment or deposit.


Chain

A chain is formed when several property sales and purchases are inter-dependent. A chain can be complicated but a good estate agent will be able to help keep it moving.


Completion

The point at which the sale of the property is concluded and the buyer receives the keys.


Completion statement

A document which your solicitor or conveyancer will provide as a record of all the financial transactions and costs.


Conditions of sale

The specific items in a sale contract that govern the rights of the buyer and the duties of the seller.


Contract

The legal document detailing the agreement of terms between the seller and buyer. When a sale is agreed, a draft contract is sent to the buyer by the seller’s legal representative and at exchange of contracts both parties are bound to a date on which to complete the sale.


Conveyancer

A representative, solicitor or licensed conveyancer, who deals with the legal aspects of buying or selling a property. The buyer and seller will each appoint their own conveyancer.


Conveyancing

The legal process of transferring the ownership of a property.


Covenants

Rules governing the property in its title deeds or lease.


Credit search references

References requested for a tenant applying to take up rented accommodation. Many agents and individual landlords use external companies who will contact the applicant’s employer, landlord and check the tenant’s credit history, providing a report on their financial suitability to rent.


Deeds

The legal documents that prove the ownership of the property.


Deposit

When buying: The amount of money paid by the buyer on exchange of contracts.


Disbursements

The items in addition to legal fees in conveyancing. These may include Stamp Duty Land Tax, Land Registry fees, search fees, mortgage redemption costs and any other expenses. All conveyancers should be able to estimate the likely level of disbursements before the transaction commences.


Draft contract

The initial version of the contract. This may be amended during the course of the sale but becomes final at the point of exchange of contracts.


Easement

A right that affects a property – such as the right of neighbours to pass over an access path or the right of the water company to have their pipes and drains running under the property.


Enquiries

Questions which are raised by the buyer’s conveyancer, often about survey or property information forms.


EPC

The Energy Performance Certificate (EPC) shows the energy efficiency and carbon emissions of a property and gives an indication of the fuel bills. It is displayed as two graphs – the energy efficiency and environmental impact of the property. Each is graded from A (the best) to G (the worst).


Equity

Your equity in your property is how much of it you own. It is the difference between the value of your home and the mortgage you still owe. Negative equity occurs when you owe more to your lender than the sale price of the property.


Exchange of contracts

The buyer and seller both sign the contract for sale and at a certain time and date the conveyancers action the exchange. At this point, the sale is binding and no terms may be altered.


Fixtures and fittings

When buying: Fixtures are items that have become part of a building or land and are therefore included in the sale. Fittings are not attached to the building or land and so are not included in the sale unless otherwise agreed. The seller will complete a fixtures and fittings form that will confirm what is included in the sale, what isn’t included, and what is for sale separately.


Freehold

The broadest form of property tenure guaranteeing that occupation continues for an indeterminate period of time. This contrasts with leasehold, which is always subject to a specified period of occupation.


Gas safety record


A certificate that states all gas appliances, pipework and flues are safe. It is a legal requirement for all landlords and must be provided every year by a CORGI registered engineer after a safety check.


Gazumping


Where a sale is agreed to a buyer at a certain price and then the seller accepts a higher offer from another buyer. Note that until contracts are exchanged estate agents are bound by law to tell a seller about any offer they receive for a property.


Gazundering

Where a buyer reduces their offer just on the point of exchanging contracts.


Ground rent

The annual charge levied by the freeholder on the leaseholder of a property.


HomeBuyer Survey/Report

A report designed in a standard and easily read format that tells a buyer about the physical condition of a property. Lists defects and grades their seriousness and need for attention. Not as detailed as a structural survey. Not to be confused with a mortgage valuation (see below).


Inventory

A list of the contents of a rental property. The inventory will note the condition of items and will form the basis of a dilapidation report at the end of the tenancy. It often includes photographs of specific items and existing damage/defects.


Land Registry

A government office which is responsible for holding records of land ownership and any charges, including mortgages, against the property.


Land Registry fee

A fee charged by the Land Registry to record the change of ownership of a property.


Lease

The legal document governing the occupation by the tenant of a premises for a specific length of time. At the end of the period the property reverts to the owner.


Leasehold

The use and occupation of a property by way of a lease agreement for a certain period of time. A lease is frequently applicable to flats but can also apply to houses. The term of a lease varies but is commonly 99, 125 or 999 years.


Listed building

Buildings of special architectural or historic interest. A listed building may carry certain obligations and restrictions governing its use, repair, and maintenance.


Local authority search

A buyer’s conveyancer makes a formal enquiry to the local authority to find out if there are any matters affecting the property that is being purchased.


Maintenance charge/Service charge

Many leasehold properties (especially flats) are subject to such a charge which pays for items such as the insurance and maintenance of the building.


Maisonette

A flat with its own private entrance.


Mortgage valuation

Very commonly and incorrectly referred to as a “mortgage survey”, the mortgage valuation is carried out by a surveyor acting on behalf of a lender to provide them with a professional report stating the value of the property. The purchaser usually pays the fee for this valuation.


Multiple agent instructions

Where more than one estate or letting agency firm is instructed by a seller or landlord to offer a property for sale or to rent.


NAEA Propertymark

The NAEA Propertymark (formally the National Association of Estate Agents), the UK’s leading professional body for estate agency.


Negative equity

Where the sale value of a property is less than the amount outstanding on the mortgage.


Open house

A process, normally managed by an estate agent, where several house hunters are given a time of a few hours when they can all go and view a property for sale instead of separate, private viewings.


Market Value

The likely sale price of a property assuming a willing seller and a willing buyer, with a reasonable period of publicity and marketing and no special factors affecting the property.


Preliminary enquiries

When a sale is agreed, the buyer’s conveyancer will send the seller’s conveyancer a standard list of questions about the property.


Property auctions

A sale conducted at a certain time by an auctioneer, either online or at a physical location, where competing buyers bid openly for a property and the highest bid wins. The purchase is binding on the fall of the hammer.


The Property Ombudsman

The Property Ombudsman offers a free and independent service for resolving disputes between sales and letting agents, which are members of The Property Ombudsman, and buyers/sellers of residential property in the UK.


Purchaser

The person buying a property.


Repossession

If a mortgage is not paid over a period of time, the lender may ultimately take ownership of the property by the process of repossession.


Searches

These are conducted by your lawyer to check if there is anything that might affect the current or future value of the property. It is compulsory to have a local authority search before exchanging contracts.


Share of freehold

This is when the freehold of the property is owned by a limited company and the shareholders are the owners of the property, usually the owners of flats within that building.


Sole agent

Where only one estate or letting agency firm is instructed by a seller or landlord to offer a property for sale or to rent.


Sole selling rights

Where an estate agency or person is granted “sole selling rights” by the seller of a property, they will be able to claim an agreed fee regardless of who actually introduces the buyer.


Stamp Duty Land Tax (SDLT)

The tax paid to the government by the purchaser of a property. Rates of SDLT can vary. Changes in December 2014 mean that the tax rates are ‘banded’ progressively in the same way as income tax. If this is not your first home purchase, nothing is payable on the first £125,000 of the purchase price but from £125,001 to £250,000, two per cent is payable and from £250,001 to £925,000 the rate is five per cent. £925,001 to £1.5 million is 10 per cent and over £1.5 million it is 12 per cent.


Subject to contract

Where contracts are still not exchanged and nothing is yet legally binding on either seller or buyer.


Survey

This is a report prepared by a qualified building surveyor to check the structure for any faults. Home owners can choose from three main types of structural survey, depending on how much information they want.


Tenancy

Possession of a property by a tenant under the terms of a lease.


Tenancy agreement

The legal agreement governing the occupation of a property by a tenant.


Tenancy Deposit Scheme (TDS)

An insurance-based scheme run by The Dispute Service Ltd. for the protection of tenancy deposits and the resolution of disputes between landlords, agents and tenants concerning the return of deposits at the end of a tenancy. It is one of three schemes approved for tenancy deposit protection. TDS has recently launched a Code of Recommended Practice. This Code of Practice sets out the recommended requirements which letting agents and landlords should meet as members of the Tenancy Deposit Scheme.


Tenant

The person who has temporary possession of a property under a lease or tenancy agreement.


Tenure

The mode of holding ownership of a property: for example, leasehold or freehold.


Title deeds

Documents detailing and confirming the legal ownership of a property.


Transfer document

The final legally binding document that transfers the property and all its rights from the seller to the buyer.


Under offer

A property becomes “under offer” when a seller accepts an offer from a buyer and the legal processes of the transaction begin.


Valuation/Market appraisal)

A term often used by estate agents to cover the process of them giving an opinion of the open market value of a property.


Vendor

The person selling a property.


From "break clauses" to "leasehold," "inventory" to "title deeds," the world of real estate is rife with terminology that can leave even the savviest of buyers and sellers scratching their heads. But armed with this guide, you'll be well-equipped to tackle the complexities of property transactions like a seasoned pro.


So whether you're embarking on your first home-buying journey or gearing up to sell your property, fear not the jargon! With a bit of knowledge and the right guidance, you'll navigate the twists and turns of the real estate market with ease. Happy house hunting!

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