Definitions of House Buying Terms

Welcome to the Propertytoolbox definitions! Confused about all the terms used by the house crowd? This list of house buying terms with their definitions will help you out. Anything Missing? Let us know!

Term Definition
Auction An auction is a method of selling a property. When you buy at auction you are buying unconditionally. This means that if you are the highest bidder, and the reserve is met, you have effectively made a cash offer that has been accepted, and this is legally binding. Check out our auction guide.
BBO Buyer budget over [price]. Is an abbreviation of a phrased often used to give a price indication for a property.
BEO Buyer enquiry over [price]. Is an abbreviation of a phrased often used to give a price indication for a property.
Body Corporate This is a term related to unit titles. The body corporate is a group made up of all the owners of the units in a 'unit titled' development (most commonly units in an apartment block). The body corporate maintains the exterior or the building and keeps common areas such as stairwells and gardens maintained along with keeping the insurances of the building(s) up to date. For larger body corporates, a few members are elected to form a committee who handle these issues and any other issues in common with all the unit owners. The body corporate may have rules for example restrictions regarding hanging washing on balconies, animals living in the building or noise.
Body Corporate Fees These are fees paid by each member of a body corporate and are intended to cover the costs of repairs and maintenance. Part of the fee is for annual maintenance and the rest is a 'sinking fund' for planned major long term maintenance or capital works. Body corporate fees seldom cover every eventuality so additional fees can be incurred. The fee does not include maintenance to the areas of the unit that are not common i.e your internal walls, kitchens and bathrooms.
Building Inspection This is a inspection of a house that attempts to identify significant defects, overdue maintenance, future maintenance issues, gradual deterioration, inferior building work, and/or other areas of concern. Check out our guide to building inspections.
Builders Report Refer to Building Inspection.
Capital Value or CV Is the term used on a rates notice in regards to the worth the council has assigned the land and buildings. It is more commonly known as the Rateable Value.
Cash Offer An offer to buy a house using a sale and purchase agreement that has no conditions attached. If a cash offer is accepted by a vendor, the sale and purchase agreement becomes a binding contract for purchase of the house.
Cash Out Clause Is a clause that allows the vendor to keep marketing their property. A cash out clause is usually put in a sale and purchase agreement when one of the conditions of the agreement is sale of the potential purchasers house. If the vendor then receives an offer from a second buyer, the vendor is required to give the first buyer a specified number of days to go unconditional or the contract will be cancelled leaving the vendor free to accept the second buyers offer.
Certificate of Title This is the document that records the legal description of a property. The document includes details of the owners, any rights and/or restrictions regarding the property including whether there is a mortgage registered and if there are any covenants and/or easements associated with the property. The type of title is part of the title information i.e. freehold, crosslease, unit title or leasehold. It also includes a drawing that will give you the size and general shape of the property.
Chattels These are the items that remain in the property when it is sold, and usually include the light fittings, fixed floor coverings, drapes, and stove. These chattels are detailed in a standard sale and purchase agreement and any additional items beyond this need to be specified in the contract.
Conditional Offer Is an agreement for sale and purchase of a house that has conditions attached. Conditions can be added by both the buyer and the vendor to the contract. The conditions generally have a time which they need to be satisfied by. The most common conditions are added by the buyer and are satisfactory finance, a satisfactory building inspection, a satisfactory registered valuation report, and a satisfactory LIM.
Conditions Conditions are detailed in the sale and purchase agreement and specify items that the buyer and the purchaser would like to satisfy before the sale is confirmed (i.e. before the agreement becomes a binding agreement to buy the house). Conditions can be anything from sale of another house, to a satisfactory building inspection.
Conveyancing This is the legal process by which ownership of a property is transferred from one owner to another and includes the discharge and registering of mortgages against the property.
Commission This is the proportion of the sale price of a house that is paid to the real estate agent by the vendor when the house sells (on settlement day). The commission is typically around 4% of the sale price but is rarely the only house selling cost, with listing fees, and marketing fees often being charged on top.
Company Title or Company Share Is a type of title commonly used for apartments. When you buy the apartment you are buying shares in the company which owns all the apartments. This give you the right to live there. The company manages the property.
Council Records Check This is a check of the records available at the council with regard to a particular property. These records can contain building consents, drainage plans and planning permission. The council records for a property are available for the public to access. You can contact the council relevant to a property and request to do a records check. At some councils you can go into the council offices and the records are available immediately, for other council notice needs to be given. A council records check is sometimes a condition in a sale and purchase agreement. Council records check can give insight into whether alterations and renovations have had the necessary permits.
Countersign When a sale and purchase agreement is amended in anyway. The amended item is crossed out and the new item is written in. This process rejects the offer and creates a new offer. Until an amendment free copy of the agreement is signed by both the vendor and purchaser, the contract is not binding.
Covenant This is a condition with regard to a property that is detailed on the title of the property. A typical covenant is a restriction with regard to height of a dwelling that property - preventing addition of another storey, or a covenant binding titles together so they cannot be sold separately.
Crosslease This is another form of title used when there is more then one unit on one piece of land. With a crosslease the land is owned by all the owners of the units and each individual unit owner leases the house from the owners of the land. The owner of a unit has the right to occupy the unit exclusively along with any area of the land that is allocated to that unit. With common areas of the property, all the owners have joint responsibility for upkeep, maintenance and repairs.
Deposit (In a sale and purchase agreement) The deposit is the initial payment made by the purchaser in part payment of the purchase price. This is usually paid when the contract goes unconditional. The deposit ranges between 5% and 10% of the purchase price and the purchaser sets the amount. If a real estate agent is involved, they like for the deposit to cover their commission and the deposit will be paid into the real estate agents trust account. If it is a private sale the deposit is paid into the trust account of the vendor's lawyer. Find out more about the deposit.
Deposit (For a mortgage) This is the amount you are personally paying towards the house purchase price. It is the difference between what the bank is lending you and the purchase price of the house and in most cases is around 20%. In the case of 100% mortgages, no deposit is required.
Disbursements These are costs incurred by your lawyer and paid for by you. Your lawyer will itemise disbursements on the invoice which sent to you after all is done and dusted with your house purchase. Disbursements are costs like couriers, phone calls, photocopying, fees with regard to checking titles, registering mortgages, and updating titles.
Easements A rights for someone other then the property owner to use the land. For example, rights for someone else to use your driveway.
Equity Is the money you have invested in your home. Equity can be calculated by taking the market value of your home and subtracting the current balance of your mortgage.
Fee Simple or Freehold Is a type of title where the owner also owns all of the land associated with the property. Other types of title or ownership have less of an interest in then land and can range from not owning the land at all to owning part of the land.can mean you do not own the land, or only have interest in a share of the land.
Finance This is a term used to refer to the way you are funding your house purchase. Finance is most often a mortgage from a financial institution.
Fixed Rate or Fixed Interest Rate A interest rate for a mortgage that is set (or fixed) for a period of time - usually somewhere between 6 months and 7 years. This rate will not increase of decrease as market interest rates change giving predictability to mortgage repayments. Trying to work out how to structure your mortgage - this info may help you.
Floating Rate or Floating Interest Rate Is an interest rate that rises and falls with the market. The OCR is the biggest factor in the movement of this interest rate. Find out more in our structuring your mortgage section.
Freehold or fee simple Is a type of ownership of a property and relates to the owners interest in the land associated with the property. With a Fee Simple title the owner has the entire interest in the land. Other types of ownership can mean you do not own the land, or only have interest in a share of the land. The term 'Freehold' is also sometimes used to refer to owning a property without a mortgage. This is the incorrect use of this term, instead the terms 'unencumbered' or 'free and clear' should be used.
Guarantee An agreement where person, group or entity agrees to fulfill the debt obligations of the primary borrower if that person defaults.
Government Valuation - or GV The old name for what is currently called the rateable value or RV.
Guarantor A person, group, or entity that will become obligated to repay a debt for the primarily borrower if they fail to fulfil their obligations with regard to a debt.
Home Loan Or mortgage - where mortgage is the official term for the security placed on your home to borrow money - home loan is a term used to describe the actual borrowing. Often the terms are use to mean the same thing - the money you have borrowed to buy a house.
House Inspection Refer to Building Inspection.
Interest This is the charge for borrowing money. Interest is commonly represented as a percentage, being the percentage of the amount that you have borrowed that is the cost of borrowing. Interest rates are normally advertised as a yearly rate.
Interest Only Loan This is a type of loan where the repayments are only interest repayments. At the end of the term of an interest only loan you would still have the same principal amount.
Joint Tenancy This is a type of property ownership used when the property is owned by more then one person. Under a joint tenancy, each owner holds undivided shares in the property - When one party dies, the ownership of the land transfers to the surviving owners automatically. This is the way that most couples own land.
Leasehold When a title is leasehold you do not own the land the property is associated with but are leasing it. With the lease agreement, the owner of the land is giving you a right to occupy the land. Leases are most often just for the land and give the lessee the right to build. Leases are for long lengths of time (many years) with rights to renew at predetermined rates usually associated with the market value of the land at the date of renewal.
LIM or Land Information Memorandum Is a report produced by the council relevant to a property and provides information about that property with regard to zoning, drainage, planning, resource consents, building consents, hazards, flooding, erosion and much more that the council has on file. A LIM is a common condition of a sale and purchase agreement. Refer to our LIM guide for more.
Mortgage This term is commonly used to refer to a loan to buy a house but is actually the security registered against a property's title. Anyone checking a properties title can see if there is lending secured against a property by checking to see if there is are mortgages currently registered. A mortgage gives your lender rights including allowing them to sell your house if you default on your repayments. All you need to know about mortgages is in our mortgage guide.
Mortgage Broker A mortgage broker is a person, or company that acts independently of banks or other financial institutions. They liaise between people seeking mortgages (you) and potential lenders (banks, finance companies etc) in an aim to obtain mortgage finance that is acceptable to you. Find out more about mortgage brokers here.
Mortgagee The lender of money for which a house or property is security. This lender is usually a bank or financial institute.
Mortgagor The borrower of money for which a house or property is security.
Negotiation The process by which the purchase price of a house is agreed involving the signing and countersigning of a sale and purchase agreement. Check out our section on negotiation.
OCR Official cash rate - This is an interest rate set by the Reserve Bank of New Zealand (check out the RBNZ). The OCR is a tool used to keep inflation within a target range. The OCR influences the price of borrowing money in NZ as the OCR is basically the current cost the reserve bank is charging other banks to borrowing its money.
PBN Price by negotiation.
Penalty Interest A vendor can charge penalty interest if, for any reason, you do not settle your house purchase by 4pm on the agreed settlement date. The rate at which penalty interest is charged is detailed in the sale and purchase agreement.
POA Price on application. The price guide for the property is only disclosed to you when you ring the real estate agent and enquire.
Possession Date This is the date which, as agreed in the sale and purchase agreement, you have the right to move into the house. Settlement and possession can often be confused as they commonly occur on the same day.
Pre-Purchase Building Inspection Is a building inspection that takes into account that you are doing the inspection with the intention of buying the house, and the inspection focuses on details relevant to this decision.
Pre-Settlement Inspection To make sure the property is in the same condition as when you last saw it (usually the date that the sale and purchase agreement was signed) you are entitled to complete a pre-purchase inspection of the property. This inspection should be done before settlement day to make sure that if any issues arise they can be dealt with before settlement.
Principal This is the amount you have borrowed or the amount that you owe.
Principal and Interest Payments - or P & I These are mortgage repayments that include a repayment of the interest earnt and paying back some of the principal amount that was borrowed. Table mortgages have P&I repayments. In order to pay off your mortgage you will need to make P&I repayments.
Professional Indemnity Insurance or indemnity insurance - Is an insurance that businesses or professionals have that protects them from legal liability arising from the way the conduct themselves or their business.
Property Valuation or registered property valuation - Is an assessment of the market value of a property by a registered valuer.
Public Liability Insurance Is insurance that contractors have to protect them if they case damage to someones property or cause personal injury to someone, due to the contractors negligence.
Rating Valuation Is the same as the Rateable Value.
Rateable Value or RV Is the 'value' of a house set by the local authority for the purpose of determining and allocating rates. It is calculated every few years based on the general value of houses in the area and some key house statistics.
Registered Valuation or Registered Property Valuation Is an assessment of the market value of a property by a registered valuer. For all you need to know about registered property valuation check out our guide.
Reserve Is the minimum price acceptable to the vendor for sale of a house at auction. The reserve is set by the vendor just prior to the auction. If bidding does not reach the reserve, the property is not sold (passed in).
Revolving Credit Facility Is an overdraft facility with your house as security. The interest rate on these facilities is a floating interest rate.
Sale and Purchase Agreement Is a contract between you and the vendor that agrees the sale of a house. A document called the 'Agreement for Sale and Purchase of Real Estate' is the general accepted document to use. This document was created in a joint effort by the Real Estate Institute and Auckland District Law Society and is now in its 8th edition. Find out more about sale and purchase agreements here.
Security This is the collateral that your bank takes as part of its agreement to lend you money. This security is usually a 'mortgage' when money is being lent to buy a house.
Settlement The date specified in the contract for the buyer to pay for the property and take ownership and (normally) possession of it.
Settlement Statement A report prepared by the lawyer of the vendor as part of the lead up to settlement. The statement details the amount outstanding with regard to the purchase of the house as at the proposed settlement day. It takes into account rates, and the deposit paid by the purchaser, along with any other monies - such as amounts to be held back for agreed repairs.
Table Mortgage A table mortgage is one by which the repayments remain the same throughout the time the mortgage is held. With this type of mortgage the proportion of the repayment that is interest decreases with each repayment and the proportion that is principal increases.
Tender Houses are often sold by tender. This process allows for multiple parties to make an offer on a house by a set date and time. All offers are confidential and can include conditions. The offer that is most attractive to the vendor may be accepted. Check out our section on tenders.
Title the defining legal document describing a house and land. This is document is stored and maintained by Land Information New Zealand.
Unit Entitlement This is the rating (based on value) given to a unit in a block and is used to determine the share of common areas attributed to that apartment. This in turn determines the share of the body corporate fees attributed to that unit. The unit entitlement takes into account size of the unit, the location of the unit within the block (with relation to views etc), and general appeal of the unit.
Unit Title This is a form of title or ownership used most commonly for apartment buildings. With a unit title you own the unit and have undivided shares in the common areas such as gardens, stairwells and lifts. The share an owner has in the common areas is dictated by the 'unit entitlement'. As an owner of a unit title you are part of a body corporate, and will have to pay body corporate fees. The Unit Titles Act 2010 sets out the laws with regard to unit titles. It is supported by Unit Titles Regulations 2011, Unit Titles (Unit Title Disputes - Fees) Regulations 2011, and, Residential Tenancies (Unit Title Disputes) Rules 2011.
Vendor Owner of the house that is for sale.