Unfamiliar with property speak? Learn the property lingo.

Whether you are exploring property for sale, property for rent, property to let in the commercial or residential space, you may very well have come across some unfamiliar terminology. For the uninitiated, the world of property could appear to have its own language. At Property.CoZa, we are firmly committed to simplifying property buying and selling.

Property For Sale: Buying and Selling

Absorption Rate: A ratio reflecting the number of sold properties in an area versus the number for sale.

Abstraction Method: By comparing two properties in the same property market, this method is used to estimate the value of a property.

Acceleration Clause: A term of a bond agreement allowing the bank or funding party to demand payment of the balance of the loan with immediate effect.

Additional Principal Payment: An amount paid over and above the mandated monthly loan amount by the borrower. This payment reduces the loan amount and can shorten the period of the loan.

Adjustable Rate Mortgage (ARM): A bond where the bank or money lender can adjust the interest rate according to a specific index (usually the Reserve Bank Repo Rate).

Administration Fee: A bank fee covering the initial costs of a home loan application.

Affordability Score: The bank’s assessment of whether a buyer can afford a property based on income (top tip: use the Property.CoZa affordability calculator and bond calculator as a starting point in assessing affordability

Agent’s Commission: A percentage of the selling price paid by the seller to the agent for services performed in selling a property.

Amortisation: The process of applying monies from monthly loan repayments to interest and payment of the capital loan amount.

Appraisal: The current value of the property according to a real estate agent’s assessment.

Balloon Mortgage: A bond where the balance of the loan needs to be paid at an agreed point in the future.

Beetle Certificate: An entomology certificate confirming that a property is free from wood borer or termites.

Bill of Sale: A document confirming transfer of title from one party to another.

Blended Interest Rate: Where a loan is refinanced at a different interest rate to the original loan, resulting in a debt payable at an interest rate between the old and the new.

Bond Costs: An amount payable by the buyer to the attorney registering the bond for the registration of the bond at the Deeds Office.

Cap: Under an ARM, the limitation on interest rate fluctuations that may take place at different stages during the lifespan of the loan.

Capital Gains Tax: A tax charged on profit earned from appreciation of a property from the time of purchase.

Carrying Charges: The amount of money it takes to maintain a property over time

Certificate of Occupancy: Documents issued by the municipality confirming that a new building complies with relevant regulations.

Clearance Certificate: A document issued by the municipality confirming that all rates and taxes are paid at the time of transfer.

Comparative Market Analysis: A market assessment of a property by comparing data on similar property sales.

Conditions of Title: Conditions on a property that limit the rights of free ownership (e.g. servitudes).

Cooling-Off Period: The five days following the signing of the Offer to Purchase, during which time the buyer is entitled to cancel.

Debt Coverage Ratio: Assessing income versus loan payments on a property to ascertain if it can pay for its own debt.

Debt-to-Income Ratio: An affordability calculation reflecting a buyer’s monthly repayment amount and monthly income as a ratio.

Distressed Property: A steal! A property listed for sale far below its current value or value following improvements.

Due on Sale Clause: A provision of a bond requiring full repayment of the balance of the loan to the lender on occasion of sale.

Earnest Money Deposit: A deposit put down as an indicator of seriousness by the buyer.

Encroachment: A development that unlawfully extends on to another person’s property.

Equity: The value of a property to its owner after subtracting loans on the property from its value.

Escape Clause: A clause of the sale agreement that allows the seller the right to cancel the agreement where he receives a higher offer while the buyer waits to sell his or her property, also known as the ‘72 hour clause’.

Exchange: The point at which sale agreements are exchanged between buyer and seller – a landmark event in the binding nature of the agreement.

Fixed Interest Rate: An agreement that interest rates on a loan will not fluctuate with interest rates over an agreed period.

Fixed-Period Adjustable-Rate Mortgage: An ARM with a fixed rate for an initial period, with periodic adjustments thereafter.

Floating Rate: An interest rate on a loan that varies according to a specified rate or index by a set amount.

Fluctuating Payments: Where repayment amounts are changed ( according to interest rate changes on loans with variable interest rates.

Forced Sale: When a property is sold as security upon default on a loan repayment.

Foreclosure: When a bank repossesses a property for failure to repay the loan amount.

Fractional Ownership: Shared ownership of a single property.

Freehold: Undisturbed ownership of a property.

Good Faith Estimate: The anticipated costs of transfer for the purchaser, sent by the transferring attorney.

Growing Equity Mortgage: A fixed-rate bond under which repayments increase based on a pre-agreed schedule, with additional monies being applied to the capital loan and interest amount.

Home Inspection: An inspection by a property professional that informs the property valuation process.

Home Loan Pledge: A document detailing the amount of credit a bank is willing to advance for the purpose of property purchase.

Huur Gaat Voor Koop: ‘Lease Goes Before Sale’ principle, which dictates that tenants may remain in occupation of a property after sale until such time as the lease expires.

Income Approach: A valuation consideration that assesses the anticipated income-generating potential of a property.

Initiation Fee: An amount charged by the bank for services associated with the initial home loan application.

Instant Equity: The difference between a property’s value and the purchase price.

Interest Rate Ceiling: The maximum amount of interest that can be charged on an ARM.

Interest Rate Floor: The minimum amount of interest that can be charged on an ARM.

Lien: The retention of property until a debt has been repaid where a tenant has incurred expenses from or made improvements to a property.

Liquidation Value: The estimated value of a property in the event of forced sale or foreclosure.

Lis Pendens: Notice of impending legal action at court around property title.

Loan Plus Costs: A provision that’s especially useful for first-time homeowners, which allows the buyer to borrow more than the value of the property to cover associated purchase costs.

Loan to Value Ratio (LTV): The percentage the bank is willing to loan for property purchase, calculated from the estimated property value and the required loan amount.

Metes and Bounds: The exact boundary points of a property.

Modification: Changes made to a loan agreement without a new refinancing agreement taking effect.

Mortgage Broker: An intermediary between the buyer and the bank for purposes of securing a home loan, also known as a bond consultant.

Municipal Land Value: The municipality’s valuation of a property.

Negative Amortisation: Through a process of deferred interest, where the loan amount grows instead of decreases.

Nuisance: Where one party’s use of land interferes with a neighbour’s use and enjoyment of his or her land.

Offer to Purchase: Often prepared by the real estate agent, a written offer made from the buyer to the seller. Upon signing, the agreement becomes binding on the parties.

Open Listing: A listing where the commission is only payable if the agent produces a buyer before the seller or another agent.

Option: An offer that remains valid for a pre-determined time period until a pre-determined expiry date.

Original Principal Balance: The initial loan amount before any repayments are made.

Partial Payment: Reduced loan repayment amount in times of hardship.

Participation Quota: The calculation used to allocate levies in sectional title property.

Prime Rate: A preferential interest rate charged by banks.

Property Transfer: When title in the property legally changes from the seller to the buyer, upon registration at the Deeds Office.

Qualified Buyer: A buyer who has qualified for a home loan and has passed the bank’s affordability requirements.

Reducing or Step Down Rate: The provision that the interest rate will decrease by a set percentage every three to six months over an agreed period.

Repo Rate: The rate at which the Reserve Bank lends money to private banks which, in turn, affects the rate of interest charged to consumers on credit agreements.

Restrictive Conditions of Title: Conditions in the Title Deed that restrict improvements or use of the property.

Right of First Refusal: An agreement binding the property owner to offer sale or lease of the property to a particular party before making this available to others.

Servitude: A right a party has over an owner’s immovable property.

Standard Payment Calculation: The repayment rate at the same monthly amount required to repay the principal debt at the current interest rate.

Two-Step Mortgage: A bond with one interest rate for the first five to seven years and another for the balance of the loan term.

Unencumbered Property: A property with no title deed restrictions, claims, or liens that act as an impediment to full ownership rights of the property.

Usus: The right to use a property.

Variable Rate Loan: The rise and fall of interest rates payable on a home loan, linked to fluctuations in the prime interest rate.

Variation Agreement: An agreement that the bank may change the interest rate charged without notice.

Voetstoots: A property is sold “as is”, rendering a seller not liable for any of the property’s patent defects.

Property.CoZa: Helping You Navigate the Buying and Selling of Property

Property.CoZa is a hub of property-related resources and services aimed at simplifying your property experience. From online tools and listings to our curated real estate agent directory, we give you everything you need for your property pursuits. Visit Property.CoZa or get in touch with us for more information.