Property Expert Nicholas Statman shares real estate jargons.
As a new property investor, it can be overwhelming trying to keep up with all of the lingo and terminology used within the industry. Understanding most of the property investment jargon comes with time, but read below for a quick cheat sheet for 16 buzz words you need to know:
An asset is anything of value or a resource of value that can be converted into cash. Examples of personal assets are:
- Boats, cars, and other vehicles
- Savings accounts
- Mutual funds
In business, there are two types of assets: current and fixed. Current assets are things like inventory and certificates of deposits, that can be converted into cash within one fiscal year. Fixed assets are long term, tangible assets that a company uses for business purposes, such as machinery, land, and buildings.
Your liabilities are everything you owe, while assets are everything you own. To find your net worth, you subtract your liabilities from your assets.
A bridging loan allows sellers to access specific financing to pay off their new home while selling their existing home. There are two types of bridging loans, a closed bridge loan and an open bridge loan.
An open bridge loan works best for buyers who don’t have a solid plan for repayment. This is usually used as a way to get funds quickly during times of emergency. You are not required to provide a detailed plan of repayment, and typically have a year to pay back this debt.
A closed bridge loan, on the other hand, requires you to document exactly how and when you’ll be paying off the loan. The lender will want to know what funds you’ll be using to pay off the loan, often referred to as an exit plan. Close loans are usually paid back within a few months.
A conveyancer‘s job is to manage the legal process of moving property from one owner to another. Some of the responsibilities of a conveyancer include adjusting rates and taxes, preparing the completion statement, and searching the certificate of title. Licensed conveyancers are required to have specific qualifications, so they are current on legal responsibilities associated with the transfer of the property.
Disbursements, also known as closing costs, are the expenses involved in purchasing a property, above and beyond the purchase price. These fees include things like a land registry transfer fee (£20 for properties under £80,000, drain and water search fee (£30 – £40) and stamp duty tax.
An estate agent is a person or business that arranges the selling, renting or management of properties. Some of the responsibilities your estate agent will take care of include the valuation of the property, any marketing and promoting efforts, and managing the viewings on behalf of the seller. An estate agent will handle the offers for the seller and keep buyers informed on the process.
Fixtures and Fittings
Fixtures and fittings are terms you’ll hear a lot about when conducting a valuation of a particular property.
Fixtures are things that are secured to the wall or the floor, such as an electrical socket, plumbing installations, and built-in wardrobes.
Fittings are free-standing objects that are movable, such as carpets, refrigerators, and lamps.
It’s important to understand the definition of fixtures and fittings because there can be disagreements about them during a property transfer. During this property transaction, both the buyer and the seller need to agree on what fixtures and fittings will be included in the sale.
Gazumping is an unusual word for an unusual circumstance. This happens when an individual is making an offer on the house, and someone else comes in and makes a higher offer. The gazumping occurs when the seller accepts the higher offer. Unfortunately, this can happen at any time before you’ve exchanged contracts and could push you back significantly in your home buying process. The offer between buyer and seller is never officially legal until contracts have been exchanged.
To avoid this, industry professionals recommend buyers move as quickly as they can through the transaction process and asked for the property to be taken off the market while the details are finalized.
Home Buyer’s Report
A home buyer’s report is a detailed report on the condition of a property. It will give you valuable information about a property so you know exactly what it is you’re getting into. The cost of the report depends on how in-depth it looks into the details of the property. It is worth it to spend more money on a comprehensive report to avoid expensive surprises later. Costs start at £400 on average and will let you know if the home has any structural damage. This report doesn’t look into the walls or under the floorboards, so if you’re worried about previous water damage in the home, a RICS Building Survey can give you a more in-depth analysis of the house.
Negative equity happens when you owe more on your mortgage than the property is actually worth. Negative equity makes it difficult (but not impossible) to sell your home, and if you were thinking about refinancing your home, the negative equity might make this difficult as well.
Open market value
Open market value refers to how supply and demand impact the cost of goods and services. When it comes to property investing, the open market value is the price at which a property can be sold in a particular market under ‘normal’ marketing conditions and timescales.
Property investing requires in-depth knowledge of property law. It is essential for anyone dealing with the buying, selling, and investing of property to work with a solicitor that they trust. They handle conveyance, contracts, inheritance, and other legal matters. The difference between a barrister and a solicitor is that a barrister defends people in court, and solicitors perform most of their legal work outside of a courtroom.
A transfer deed is a document to transfer property from one owner to another. The transfer deed should not be confused with the title deed, which is another document that proves legal ownership. Whether you are transferring property from an owner to a business or an owner to a relative, a transfer deed is one of the most effective ways to do so quickly.
When a seller accepts an offer from a buyer and the legal process of the exchange has begun, the property officially becomes under offer. When the seller accepts this offer, usually your status changes from under offer to sold subject to contract. During this stage, paperwork isn’t completed yet, so there is a possibility that other buyers could sweep in and offer a higher price. During either phase, nothing is official because contracts have not been exchanged.
The open market value of a home is typically decided on during the valuation process. The value of the property is based on different factors such as location, condition of the house, and size. The details of the property are taken into consideration to give you an idea of a fair asking price.
As a beginning investor, all of the terms and regulations associated with buying and selling property can be overwhelming. All of the jargon and terminology can feel like you’re learning a new language. But over time, you will be able to incorporate these terms and many others into your property investment vocabulary.