Real estate tax terms explained
The end of a financial year prompts swift action for tax-related matters.
This includes relevant information for property owners, renters and potential buyers in their bid to streamline real estate and financial processes.
With this in mind, our explanatory guide about tax terms and real estate phrases are designed to clarify, refresh knowledge, simplify selling-and-purchase terminology and assist with tax duties and expectations.
Glossary of market and monetary phrases
Appraisal: essentially a property evaluation, an appraisal is a free service carried out by a real estate professional to provide an understanding of the possible selling price.
Body corporate: the name given to a governing party representing a group of owners in strata (apartment building) properties.
Building Code of Australia and New Zealand: the minimum-standard requirements for a building’s health and safety, as stipulated by the code boards.
Buyers’ market: this term represents an oversupply of properties and other conditions that favour buyers.
Capital gains: these are a rise in value of a capital asset, such as property, which provides a higher value than the purchase price. Capital gains can only be determined when the property is sold.
Conditions of sale: these are conditions added by the buyer and seller to a sale contract that must be adhered to before the contract is finalised.
Cooling-off period: a period following the sale of a property in which the buyer can back out of the sale, based on certain conditions.
EOI: this stands for expressions of interest and is used to determine interest, and the potential selling price, for a property.
Guarantor: a person who agrees to take over loan payments and other contractual obligations if the borrower fails to do so.
Loan-to-value ratio: this is the ratio of a loan to the value of a property.
Negative gearing: This essentially refers to borrowing money to invest in a property where the income from that property is less than the expenses.
Reserve price: the lowest possible sale price a seller will accept at auction.
Sellers’ market: market conditions where an undersupply of property pushes up prices, favouring the seller.
Settlement: the completion of a property purchase where the buyer pays the full amount in exchange for legal ownership of the property.
Stamp duty: a state tax paid by the buyer on contracts, including property.
Under contract: the seller and buyer have agreed on a price for a property and signed a contract. But the contract is still subject to conditions such as the cooling-off period (see above).
Valuation: conducted by an accredited valuer, a valuation is used for legal or banking purposes to determine the value of a property.
For information about these and other market and tax-related terms, consult your real estate agent, bank or financial planner.