Homebuying Made Simple: A Glossary of Essential Real Estate Terms

Purchasing a home is a significant milestone, and for many, it can be an overwhelming process filled with unfamiliar terms and jargon. At Modern Building Solutions, we want to empower you with the knowledge to navigate this process with confidence. Here’s a deeper dive into some key terms you’re likely to encounter.

Property Title:

A property title is like the property’s birth certificate. It officially identifies who owns the land and includes details like the land’s size and any restrictions on its use. These restrictions might include height limits for buildings or agreements with neighbours about shared access paths. Understanding your title is crucial, as it outlines your rights and obligations as a property owner.

Subject to Title:

This term often pops up when buying land in a new subdivision. If a property is “subject to title,” it means that the land doesn’t yet have its official title, often because the local council is still finalising it. You can agree to purchase the property, but the sale won’t be completed until the title is issued.

Covenants:

Covenants are rules set by the developer of a subdivision to maintain a certain standard or aesthetic across the neighbourhood. These might include restrictions on the height of your fences, the types of materials you can use for building, or even the number of houses you can have on your section. While these rules help preserve the look and feel of the area, it’s important to know them upfront, as they’ll affect how you can use your property.

Building Consent:

If buying or building brand new, you might hear this term pop up in conversation. “Building consent” is a crucial approval from your local council, confirming that your new home meets all the required legal and building standards.  

Code of Compliance Certificate (CCC):

Once a home is built and all work is completed, the council will issue a “Code of Compliance Certificate” (CCC). This certificate confirms that the building work complies with the building consent and is safe to live in. It’s an important document for your records and can be vital if you decide to sell your home in the future.

Sale and Purchase Agreement:

This is the legal contract that outlines the terms of the property sale. It covers everything from the agreed-upon price to the settlement date and any conditions that need to be met. It also lists any chattels (items like appliances or fixtures) included in the sale. Your lawyer will review this agreement to ensure everything is in order before you sign it.

Conditional Offer:

A conditional offer is an offer to buy a property that hinges on certain conditions being met. These could be anything from securing a mortgage, selling your current home, or getting a satisfactory building inspection. If the conditions are met, the sale proceeds; if not, you can walk away without penalty.

Unconditional Offer:

An unconditional offer is a straightforward commitment to purchase a property without any conditions attached. This type of offer is often more appealing to sellers because it provides certainty that the sale will go through without delays.

Deposit:

When you make an offer on a property, you’ll typically need to pay a deposit. This is an upfront payment, usually a percentage of the total purchase price, that shows the seller you’re serious. The deposit is held in a trust account until settlement day when it’s applied to the final purchase price.

LIM Report:

A LIM (Land Information Memorandum) report is a document provided by the local council that details important information about the property, such as past building consents and any known issues like flooding or unpermitted work. Reviewing the LIM report can help you avoid surprises and make an informed decision.

Building Inspection:

A building inspection is a thorough examination of the property’s condition, usually conducted by a qualified building inspector. This inspection looks for any structural issues, safety hazards, or maintenance problems that could affect the property’s value or your decision to buy. The results of a building inspection can be a crucial factor in whether you proceed with the purchase, renegotiate the price, or decide to walk away.

Pre-Settlement Inspection:

A pre-settlement inspection is your opportunity to visit the property just before settlement day to ensure that everything is in order. This final walkthrough allows you to confirm that any agreed-upon repairs have been completed, that the property is in the same condition as when you agreed to buy it, and that all chattels included in the sale are present and working. It’s a critical step in ensuring there are no last-minute surprises.

Settlement:

Settlement day is when everything becomes official. It’s the day you become the legal owner of your new home, and the final payment is made to the seller. Your lawyer plays a key role here, ensuring all the paperwork is in order and the funds are transferred smoothly.

Agent’s Fees:

These are the fees paid to the real estate agent for selling the property. They’re usually a percentage of the sale price and are deducted from the proceeds the seller receives once the sale is finalised.

Lawyer/Solicitor:

Your lawyer or solicitor is your legal guide through the property purchase process. They handle the transfer of ownership documents, review all the paperwork, manage the transfer of funds, and ensure the transaction complies with all legal requirements. They’ll also communicate with the local council and Land Information New Zealand (LINZ) to finalise the ownership transfer.

Lawyer’s Trust Account:

This is a secure account where your lawyer holds your deposit, and other funds related to the purchase until they’re needed. The agent’s fees and the final payment to the seller on settlement day are usually paid from this account.

Final Thoughts

Understanding these key terms can make the process of buying your first home much smoother and less intimidating. By familiarising yourself with the terminology and what it means, you’ll be better equipped to make informed decisions and approach the home-buying journey with confidence. Remember, the more you know, the more empowered you’ll feel as you take this important step towards homeownership.

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