5 property terms every Sydney buyer needs to know
Wed May 23, 2018
Purchasing a property can seem complex and confusing - particularly if you're new to the home buying process. Part of the problem is that the terminology itself can be hard to wrap your head around, an issue that causes plenty of headaches amongst keen home buyers. In fact, a recent Domain article revealed that many buyers don't know what many of the most commonly used real estate terms mean.
Not only does this make the entire process more stressful than it needs to be, it also introduces the possibility of misunderstanding a key piece of information, and making the wrong decision as a result.
To help, we've put together a list of five commonly misunderstood real estate terms, and what they really mean.
If you've paid off the entirety of your mortgage, then you'll have 100 per cent equity in your home.
Put simply, your equity is the percentage of your property that you own outright. If you've paid off the entirety of your mortgage, then you'll have 100 per cent equity in your home, and own the entirety of its value. Things get a little bit more complex if you still have money left to pay, but there's a simple formula that you can use to work out how much equity you have, and the value of that amount.
This formula is the property's total market value, minus whatever amount you have left to pay off.
2. Stamp duty
One of the most common property mistakes that we see among first-time property buyers is failing to understand the additional costs that come with purchasing a home. These can include everything from legal fees to the cost of conducting a thorough pre-purchase inspection, but one of the most important elements to consider is stamp duty.
This is a form of tax that is levied on the transfer or sale of land in Australia, and differs from state to state. In New South Wales, stamp duty is calculated in brackets. For example, if a home is worth between $300,000 and $1,000,000, you'll need to pay a flat fee of $8,990, plus an additional $4.50 for every $100 over $300,000.
3. Cooling-off period
Auctions are a high-stress environment, and it's important for first-home buyers to understand the ways they differ from other types of property sale. Perhaps the biggest difference is that there is no cooling-off period.
This is a set period of time where the buyer can withdraw their offer, meaning that if you bid and win at auction, you're obliged to carry through with the purchase.
4. Vendor bid
Another element of auctions that some buyers find confusing is the notion of a vendor bid. This isn't a 'real' bid from the homeowner on their own property, instead it's a tool that can be used to kick off the bidding process and provide an indication of what sort of price the vendor is looking for.
In New South Wales, a vendor bid can be placed once per auction, and it needs to be clearly identified by the auctioneer, who typically places the bid on behalf of the owner.
A Torrens Title property includes both the home and the land it sits on, while a Strata Title property includes just the home.
5. Torrens Title and Strata Title
A final set of real estate terms that it's important to understand are Torrens Titles and Strata Titles. A Torrens Title property includes both the home and the land it sits on, while a Strata Title property includes just the home, as well as access to shared areas. Strata Titles are more common in apartment complexes or other types of units, and it's vital to understand the various fees and rules that you'll need to pay and adhere to when buying a Strata property.
If you have any further questions about these real estate terms - or any others - get in touch with the Laing+Simmons team today.