Accredited Valuers
See Valuer (below)
Adverse Possession
This is an old doctrine that says, basically, that where an intruder onto land remains in possession of the land for a period of time (generally 15 years) then that person acquires ownership of the land.
More about Adverse Possession >>
Agent
Most people have some understanding of the terms "agent" or "agency", but few know the correct meaning of the term. Agency involves representation, and the taking of
responsibility on behalf of the client (known as the principal). In real estate the use of the term "agent", to describe an estate agent, can be quite misleading.
More about agency >>
Agent Representative (also known as "Sales Consultant")
The average "estate agent" who deals with consumers on a day to day basis is NOT a licensed estate agent at all, but merely an "agent's representative" or "agent's rep", and
neither the licensed estate agent, nor the agent's rep are agents in the true sense of the term. In fact, the High Court of Australia has said that using the term "agent" when referring to
an estate agent is "misleading". By comparison, a lawyer is an agent in the true legal sense, providing full representation for the client.
So, what exactly is an agent's rep? According to the Estate Agents Act 1980:
"agent's representative means any person who is not a licensed estate agent but who is employed by a licensed estate agent
and who performs for that estate agent any of the functions of an estate agent..."
Becoming an agent's rep is quite simple. No real estate knowledge or experience is required, and a quick part-time training course will
qualify anyone for immediate employment as an agent's rep. As the CEO of the Real Estate Institute of Victoria acknowledged:
"Entry-level requirements (for those entering the real estate industry) are far too lenient and low - at present you need a 50 hour course to call yourself an expert."
(Enzo Raimondo, quoted in the Sunday Herald Sun October 13, 2002 p.78)
More about Agency >>
Agent Taint
"Agent Taint" occurs where a Vendor cannot accept an offer from a Purchaser without having to pay a commission to the estate agent, even though the Exclusive Sale Authority has been ended. Every person who has in any way become aware that a property is for sale, during the period of the Exclusive Sale Authority, is tainted, because of the likelihood that the estate agent will claim commission if the property is sold to them.
More about Agent Taint >>
Appraisal
"Appraisal" is just another term for valuation, but is used instead of the word "valuation" because
estate agents are not permitted to provide true valuations on real estate. Only an accredited valuer can provide a genuine property "valuation".
More about "Appraisals" >>
Auction
An auctions is a form of sale where potential purchasers make competing offers or "bids", with the person offering the highest bid
being declared as the purchaser. Unfortunately, the auction concept is falling into disrepute with regard to the sale of
real estate. This is because many of those who promote real estate auctions tend to resort to tricks and deceptions in order to
make the concept work.
See our section Auctions - Tricks & Tips >>
Bait Pricing
This is a trick that involves marketing a property at a price that is lower than a price acceptable to the vendor. Estate agents
using bait pricing tell vendors that it will attract more buyer interest in the property. Any form of marketing
that involves "invented" figures is fraudulent.
See Price Ranges below.
Best Practice
The term "best practice" is used to describe a way or method of accomplishing a business function or process that is considered to be superior to all other known methods. Lawyers Real Estate has been certified as a "Quality Endorsed Legal Practice" to the rigorous standards required under LAW 9000. An example of "best practice" methodology is our policy of using experts at every stage of the sale transaction.
More about "Quality Endorsed Legal Practice" >>
Best Price
Most people wrongly believe that the highest price is the "best price". In fact, the best price is one that also combines the best terms and conditions.
For example, a contract could have a selling price of $400,000 but with a requirement that the vendor must spend $30,000 on repairs. In these circumstances an unconditional contract for $390,000 would be better. Usually, the effects of the terms and conditions of the contract are not so obvious.
This is where the negotiation skills of the lawyer are crucial to achieving the best price.
More about "Best Price" >>
"Bid to Buy" Form
The "Bid to Buy" form allows a potential purchaser to commence negotiations without being committed or legally bound.
The potential purchaser simply completes the Bid to Buy form, specifying the conditions on which they would like to purchase the property. A set of check-boxes makes the task of setting special conditions (e.g. subject to finance, subject to building inspection etc.) quick and simple.
The Bid to Buy form is sent by the potential purchaser or their legal representative to Lawyers Real Estate, and the vendor is informed of the bid immediately.
If the bid is acceptable to the vendor, Lawyers Real Estate will prepare a standard form Contract of Sale of Real Estate, based on the preferences indicated by the potential purchaser, and arrange for the vendor to sign it.
The signed Contract of Sale of Real Estate is then submitted to the potential purchaser as the vendor's formal offer to sell. The purchaser accepts the vendor's offer by signing the contract and returning it to Lawyers Real Estate, either personally or through their own legal representative.
When Lawyers Real Estate has received the signed contract from the purchaser, the property is legally sold and both parties are bound by the contract.
More about making a bid >>
Body Corporate
A body corporate comes into existence when a plan of subdivision, allowing the creation of a body corporate, is registered at the Land Titles Office. Owners of the Lots specified on the plant of subdivision become members of the body corporate.
Body Corporate Certificate
See Form 3 Body Corporate Certificate below.
Buyer's Agent
A buyer's agent or buyer's advocate is simply an estate agent who requires the purchaser
to pay a commission in return for being introduced to a property. The concept of the buyer's agent
is quite misleading, as the buyer's agent does not have the legal skills or qualifications to properly
negotiate the purchase of real estate, and must always refer the client to a lawyer for all contractual and legal matters.
More about buyer's agents >>
Caveat
A caveat is a means by which a Certificate of Title at the Land Titles Office can be "tagged" to show that someone has an interest in the property.
A caveat prevents the Registrar Of Titles from registering another interest against the title without first giving notice to the person who lodged the caveat. Generally speaking, once a caveat has been lodged against a property, nothing else can be lodged against the property without the consent of the person who lodged the caveat.
More about Caveats >>
Certificate of Occupancy
A simple explanation:
As the name implies, the Certificate of Occupancy certifies that a home can be lived in. It is a requirement of most local government or shire councils that an occupancy certificate be issued prior to the purchaser of a home taking occupation.
More about Certificates Of Occupation >>
Certificate of Title
A simple explanation:
Imagine a huge book kept at the Land Titles Office, in which every block of land in the State of Victoria has its own page. Of course, such a book would have many volumes and many pages (folios).
If you wanted to identify a particular block of land, you would find out its volume and folio number, and use these numbers to look up the relevant page.
To find out who owns the land, you would simply turn over the page, and see whose name was last added to the page. This person is the owner.
Certification
The planning authority "certifies" a plan of subdivision when it is satisfied that the plan is in compliance with the all requirements. Upon certification the plan of subdivision is lodged at the Land Titles Office.
Chattels
See Fixtures & Chattels (below)
Commission
Commission is the way in which estate agents are paid, and is probably the most unfair and unethical form of payment imaginable. Real estate commissions have been described as a form of "wealth tax" levied by estate agents.
More about Commission >>
See also "Unfair Fees In Real Estate" >>
Commission Rage
"Commission Rage" is the term we use to describe a form of commission-driven greed, that causes otherwise decent individuals to engage in improper behaviour.
More about Commission Rage >>
Common Property
This is the land on a plan of subdivision that does not form any of the lots, but is the subject of shared ownership by the Lot owners as members of the body corporate. Common property may take the form of land, air space, space below the ground or buildings.
Company Share Scheme
This was the first type of "unit" development. While it appears to be similar to a strata unit development, is really quite different.
More about Company Share Scheme Properties >>
Conditioning the Vendor
Conditioning the vendor is the term used to describe the process where an estate agent strives to convince the vendor to lower the asking price on a property so that the estate agent can secure a sale.
Estate agents are paid by commission, and the huge commissions involved in the sale of real estate give rise to a variety of improper practices. Conditioning is one such practice.
In order to convince vendors to use their services, some estate agents overquote as to the amount that can be achieved on the sale of a property. The estate agent then has to bring the vendor back to “reality”, through conditioning.
The following is an example of how the "conditioning" process is applied:
The estate agent wants to have the vendor reduce his asking price from $350,000 to $290,000 (the highest genuine offer received). The estate agent allows other interested parties to submit offers that are well below $290,000 knowing that they are totally unacceptable to the vendor, but for the sole purpose of demonstrating to the vendor that the value of his property has fallen. Because the figure of $290,000 compares favourably as against the other "offers", the vendor accepts a sale price of $290,000.
Conditioning the vendor is a form of deception, and usually involves the commission of a criminal offence!
Conditions
Conditions are the "rules" of the Contract of Sale. They tell the parties who is responsible for what, the dates by which things must be done, and what will happen if things are not done as agreed.
Conditions take the form of General Conditions (which are standard inclusions in most Contracts) and Special Conditions (which are inserted in particular Contracts by one or other of the parties.
The drafting of conditions requires legal knowledge and skill, as poorly drafted conditions may eventually have to be decided upon by a court. It is most important that an estate agent is never permitted to draft or insert special conditions into the Contract.
Conflict of Interests
A conflict of interests occurs when a person who has a duty to act in the interests of a client also has a duty to act against the interests of that same client. A conflict of interests also occurs when a person who has a duty to act in the interests of a client is in a position where he/she may be tempted by money or some other motive to act against the interests of that same client.
More about Conflict Of Interests >>
Contract of Sale
The Contract of Sale is the term used to describe the document prepared by a lawyer, and used to formalise the sale of real estate. However, the word "Contract" has more than one meaning:
| 1. |
Contract can mean an agreement; or |
| 2. |
Contract can mean the document that sets out the agreement. |
More about Contracts >>
Contract Note
This is another nasty device used by estate agents (see also the "Exclusive Sale Authority"). The name of the document is the first trick - Contract Note. To most people the term "Contract Note" suggests that the document is something less than a Contract, and that a real Contract will be drawn up later.
Playing along with this misunderstanding, many estate agents never use the word "Contract" - they simply call the document an offer, saying that it is not a Contract unless it is accepted.
Strictly speaking, this is true. A Contract does not come into being until there is an "offer" by one person and an "acceptance" of that offer by another. The problem is that the person who signs the offer only discovers that it has become a Contract when the agent rings to say "congratulations, the Vendor accepted your offer, can you come in and pay the full deposit."
Most estate agents use and prefer the Contract Note over any other form of Contract. This is because the Contract Note allows the estate agent to take control of the sale closure.
More about the Contract Note >>
Conveyancer - Licensed Conveyancer
The Conveyancers Act 2006 was introduced after the Victorian government intervened to stop untrained, unqualified and inexperienced non-lawyer conveyancers from taking advantage of consumers. Unfortunately, the Conveyancers Act 2006 did little to remedy the problems of corruption and consumer exposure to uninsured risk.
It has been recognised that the severe constraints on the legal work and advice Licensed Conveyancers can offer to consumers, and the limited coverage of their professional indemnity insurance, renders them an expensive and risky alternative to lawyer conveyancers in the provision of conveyancing and real estate related services.
Article:
Licensed Conveyancers - A Risk For Consumers >>
Conveyancing Work
We use this term to differentiate between the work associated with a conveyancing transaction and "legal work".
Work associated with a conveyancing matter can be performed by a conveyancer or a lawyer, while legal work (i.e. legal
matters that go beyond what is required to complete a conveyancing transaction) must be completed by a qualified lawyer.
Conveyancing Kits
In their promotional material, conveyancing kit-writers don't emphasise that those who use the kit will still have to pay for rate and planning certificates, title searches, postage, transport to settlement, etc.
There is also an assumption that kit-users have plenty of spare time, and that their time is of no value. Otherwise, the amount of time needed for reading and learning about conveyancing has to be taken into account.
More about Conveyancing Kits >>
Cooling Off
In certain circumstances, the Purchaser of real estate is permitted to cancel the Contract and walk away from it all together, within 3 days of having signed it.
More about Cooling Off >>
Covenant
A covenant is a way in which the use of one person's land can be controlled by another, and is commonly to protect the "amenity" or value of an area. A developer, for example, could prevent the building of front fences, the parking of heavy vehicles or the building of low-quality homes in a new estate by placing a special condition in the Contract of Sale, requiring the Purchaser to register a restrictive covenant on the Purchaser's new title.
A covenant is an encumbrance on the title.
Current Market Value
The current market value of a property is determined according the following standard:
The price at which a willing but not anxious vendor would sell, and at which a willing but now anxious purchaser would buy.
Theoretically, if someone bought the property at current market value as an investment, then decided to sell it again, they should be able to find someone else who is prepared to pay the same price in the same market, and so on.
This formula was developed by the High Court of Australia in the case of Spencer v The Commonwealth. This was a case about the compulsory acquisition of land, and the owner of the land felt that the compensation offered by the government was inadequate. The High Court had to decide as to how the value of a piece of land should be determined on the day ownership changed.
Justice Isaacs said,
"To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration. We must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to person best capable of forming an opinion, of a rise or fall for whatever reason in the amount which one would otherwise be will to fix as the value of the property."
The Vendor's aim, when selling real estate, is to negotiate the best price, and the first step in the negotiation process is to establish the current market value of the property.
The best way to determine the current market value of a property is to consult an accredited valuer.
Deception In Real Estate
Deception is a major problem in the real estate industry. Falsely telling a purchaser that "someone else
is interested" in a property, providing fictitious information to a vendor regarding the value of a property in order to
win a listing, and "dummy bidding" are just a few examples of deceptive tactics used in the real estate industry.
The types of deception used are many and varied, but they all have one thing in common - they
involve some form of trick. In any situation
where a party is led to believe in a situation that does not really exist, and they are "tricked" into acting contrary to
their interests, there is probably a form of deception involved. Click on the link below for a thorough
examination of the criminal offence of deception as it applies to some real estate practices.
More about Deception >>
Deposit
A deposit is an amount of money, usually 10%, paid by the purchaser to secure the contract of sale. Generally,
if the purchaser repudiates the contract, the deposit will be forfeited.
More about Deposit >>
Deposit Bond
Sometimes a purchaser does not have the ready cash to be able to pay a 10% deposit on the purchase of a property. This can result in both the purchaser and the vendor missing out on a sale.
The deposit bond is an alternative to a cash deposit.
More about Deposit Bonds >>
Disbursements
Disbursements are the out-of-pocket costs associated with a matter, as opposed to the legal costs charged for the service being provided.
For example, in a conveyancing matter the legal costs include checking of the contract and
preparation of documents. Disbursements include the amount
paid to the Land Titles Office for the title search, and amounts paid to rating authorities for certificates.
Dual Occupancy
Dual occupancy is the term used to describe a subdivision where a house block is subdivided so as to enable and additional dwelling the be built on it. A dual occupancy development involves at least a two lot subdivision.
e-Contract
An e-Contract is a PDF version of the sale contract prepared by Lawyers Real Estate for its vendor clients. A potential purchaser can download and examine the Section 32 Vendor's Statement and the sale Contract as a single document.
e-Contracts for properties we are selling can be found by clicking on the "E-Contracts" link at the top of each page of this website, or click here.
Easement
An easement is a right that allows one person's land to dominate another person's land by exercising some right of the dominated land.
The land that benefits from the easement is called the dominant land, while the land affected by the easement is called the servient land.
Common examples of easements are:
| • |
The right of a farmer to move cattle along a path across a neighbour's paddock; |
| • |
The right of water authorities to run sewerage pipes across suburban properties; |
| • |
The right to use a private carpark. |
| • |
An easement is an encumbrance and will usually appear as a registered easement on the title, but unregistered easements do exist, and can arise as a nasty surprise after a Contract has been signed. |
Encumbrances
This is the term used to describe a claim that one person has against another person's land. It is important to remember that an encumbrance is against the land and NOT the owner of the land. This means that if the land changes hands, the new owner takes both the land AND encumbrances attached to it.
If the encumbrance takes the form of a debt, then the owner of the land may not be able to sell it until the debt has been paid. If the encumbrance takes the form of a restriction of the owner's use, then action can be taken against the owner if the restriction is breached. Similarly, if the encumbrance takes the form of a right that another person has (e.g. a right to use a path across the land), then action can be taken against the owner of the land if that right is interrupted.
Estate Agent Escorted Inspections
The escorted inspection is where purchasers are escorted to, and shown through a property by the estate agent.
Consumers have been conditioned to believe that the escorted inspection is a service, when in fact the opposite is true.
The escorted inspection is really a device used by the estate agent
to maintain control over the vendor, the property,
and the purchaser, so that the estate agent
seems like an indispensable link between all three. It also
assists the estate agent
to "prove" that the estate agent
actually "introduced" to the purchaser to the property, and to
thereby satisfy the requirements of the Exclusive Sale Authority.
A careful examination of the escorted inspection reveals that it actually impedes the progress of the sale, it promotes
improper conduct, and it places the vendor at risk with regard to security and insurance.
More about Estate Agent Escorted Inspections >>
Estate Agent
Most consumers are shocked to discover that the average "estate agent" who deals with consumers on a day to day basis is NOT a licensed estate agent at all, but merely an "agent's representative", who may
have very little knowledge of real estate.
More about agent representatives >>
Ethics In Real Estate
Ethics in real estate has become something of an oxymoron. Estate agents regularly use the term without regard for its true meaning. To counter the decline in real estate ethics Lawyers Real Estate has developed
a set of ethical standards which, if adhered to by the real estate industry, would bring about fundamental change.
More about Ethics In Real Estate >>
Exclusive Sale Authority
This is the document by which an estate agent is able to exclusively secure the Vendor, the property being sold, and all persons who enquire about the property for a set period of time, and then indefinitely until the Vendor cancels in writing.
Devised by estate agents, and distributed through the Real Estate Institute of Victoria, it is one of the most complex and confusing documents a consumer will ever encounter.
The Exclusive Sale Authority consists of an apparently simple and straight-forward front page, and a back page of classic "fine-print" which qualifies and often contradicts the information provided on the front. For example, the front page of the
Exclusive Sale Authority states that the Authority is for a specific period of time, but this is contradicted by a condition in the "fine print" that allows the period to run indefinitely until the client cancels the Exclusive Sale
Authority in writing.
It is a major challenge for any consumer to read the entire document and make sense of it, and Extreme caution should be exercised by any consumer intending to sign an Exclusive Sale Authority.
More about the Exclusive Sale Authority >>
Experts and Expertise
The knowledge and skills necessary to properly conduct a real estate sale are many and varied. We have adopted a policy of "experts at every stage" in order to ensure that there are no weak links in the real estate transaction chain. This ensures that the entire sale transaction is conducted in accordance with industry best practice. The link below will take you to our page on "Experts At Every Stage".
More about Experts At Every Stage >>
Fidelity Insurance
Fidelity insurance protects the clients of professionals against theft or misappropriation of funds by the professional person or an employee while the client's funds are under the control of the professional person.
Simply put, if your lawyer, conveyancer, accountant or estate agent had a secret gambling problem and took the proceeds of your property sale to a casino and lost it, there may be little point in trying to sue the now bankrupt thief. However, fidelity insurance would cover the loss.
More about Fidelity Insurance >>
Fiduciary Relationship
A fiduciary relationship imposes the highest duty known to the law, and requires a person who acts
on behalf of another to always act in the utmost good faith. For example, a person acting as trustee owes a
fiduciary duty to the beneficiary of the trust.
In agency law the agent owes a fiduciary duty to the client (known as the principal), and must never allow his own interests
to conflict with those of the client.
Another aspect of the fiduciary duty is that the agent must make full disclosure to the client.
Further, the agent has a duty not to make a secret profit from the fiduciary relationship.
When considering the term "agent" it is important not to confuse the role of the estate agent with the legal definition of agent.
Finance - "Subject To Finance"
Signing "subject to finance" simply means that the Purchaser is not yet sure as to whether their home loan has been approved by the bank, and wants to be able to cancel the Contract if the bank fails to approve their loan application.
More about "Subject To Finance" >>
Fixed Fees
A fixed fee is a single all-inclusive charge for service. It is possible to quote a fixed fee
where the service being provided is of a standard and quantifiable kind.
Commission, on the other hand, is a charge determined by reference to the value of a sale. It is an unfair method
of calculating fees in relation to the sale of residential real estate.
More about our fees >>
Fixtures & Chattels
Fixtures are things that are permanently attached to the land so as to become part of the land. Chattels are things that are not part of the land. When land is sold, all fixtures (the house, and things permanently attached to the house) will pass to the Purchaser as part of the land.
If a chattel is to be included in the sale, it must be specifically listed in the Contract. If a fixture is to be removed from the property by the Vendor and therefore not included in the sale, then this must be specifically mentioned in the Contract.
Form 3 Body Corporate Certificate
This is the statement provided by a body corporate to any person who requires it. It contains specified information about the body corporate, including financial information.
Fraud
Fraud is the gaining of an advantage by improper or unfair means. At present, fraud is a major
problem in the real estate industry.
More about Fraud In Real Estate >>
Full Representation
While lawyers, conveyancers, and estate agents all
have involvement in real estate sale or purchase transactions, only the lawyer has the ability to
provide full representation.
Full representation is the term we use to describe a service where the lawyer actually
represents the client through all stages of the sale process, providing legal services and representation from the first listing of the property for sale, through the sale negotiation stages,
and all the way through the conveyancing process until final settlement.
Full representation contrasts with the simple "introduction" function of the estate agent, and
the basic clerical functions of the conveyancer, neither of whom are qualified to actually
represent a client in a true agent capacity.
General Law Land
This is land that is not under the operation of the Transfer of Land Act. Ownership of general law land is determined by examination of the "chain of title", a collection of documents showing that the land has been transferred from one person to another over many years. A chain of title must show every dealing associated with the land for the past 30 years, if good title is to be established. These days, the purchase of any general law land must be converted so that the land is brought under the operation of the Transfer of Land Act.
Impressions Parade
The "impressions parade" is a term used by estate agents to describe the use of one purchaser to impress two or more vendors. A purchaser who expresses interest in a property is driven to that property via two or three
other properties the estate agent has listed. This allows the estate agent to "prove" to the vendors of the other properties that the estate agent is generating buyer interest.
The problem for the purchasers is that they are being taken to properties they have not enquired about, while vendors suffer the inconvenience of inspections by people who may not be at all interested in their property.
The "impressions parade" often constitutes a criminal offence (see the heading "Inspections" on our page "Deception In Real Estate).
Independent Legal Advice
When a person needs legal advice it is important that the person providing that advice not only
knows the law and how to apply it, but is also in a position to provide that advice without
bias. The lawyer must always be totally "independent" of the matter. In other words, the lawyer
should never be personally involved in the matter, and should not be acting for, or advising anyone else who
is involved in the matter or who stands to gain anything from it.
See Legal Advice below.
Instructions
This is the term used by lawyers to describe what the client wants done. However, it goes beyond this. Taking instructions is not just a matter of doing as the client directs. The proper taking of instructions requires the lawyer to use his or her legal knowledge and skills to ensure that the client is in a position to make the best decision. This is part of the lawyer's fiduciary duty.
After finding out what the client wishes to do, the lawyer will advise the client as to the legalities involved, and the options available to the client as the client pursues his/her goal.
A client is entitled, not only to make the final decision, but also to be in a position to make the best possible decision, based on the best possible advice.
Only after the lawyer has listened, considered, advised, and then been told which direction the client wishes to take, can the lawyer regard him/herself as having been properly instructed.
Introduced
The term "introduced" is used by the estate agent
to determine the point at which the vendor becomes liable to pay the estate agent.
By using a carefully worded definition of "introduced", the estate agent
is able to claim the commission in the most
unlikely of circumstances.
More about "introduced" >>
Introduction Agent
An "introduction agent" is a person whose role is introduce one party to another. A typical example is a dating agency, where the introduction is made and the parties then
take control of the relationship.
Estate agents are introduction agents in this sense, however it has become common for estate agents to go further than they should.
In fact, the High Court of Australia has said that using the term "agent" when referring to
an estate agent is "misleading".
Because the estate agent is commission-driven, it is not uncommon to find an estate agent manipulating the parties in order to "save" a sale in order to win a commission.
The problem of commission rage often becomes a factor in taking the estate agent beyond his or her limited role.
(See also Commission Rage)
Knock-Out Offer
Most people like to make a low offer, see what counter offer the vendor makes,
and then bargain until a deal is struck.
However, some purchasers just want to secure a property without "pussy-footing around". They want to make a
"Knock-Out" offer that will surprise and delight the vendor, and bring about a quick and decisive sale.
More about the "Knock-Out" offer >>
Lawyer
A lawyer is a trained legal professional who provides full representation for clients in real estate sale transactions.
Lawyers represent consumers in real estate negotiations, and are therefore included under the definition of "estate agent" in the Estate Agents Act 1980. Effectively, the
Estate Agents Act declares:
A lawyer in a property transaction is also an estate agent.
However, the lawyer has a much higher responsibility than the estate agent,
because of the professional service standards and duties required under the Legal Profession Act 2004.
Also, the lawyer is a more experienced and better qualified negotiator than the estate agent, who knows little
more than the basic sales aspects of a real estate transaction.
In addition, the lawyer actually represents the client in a true agent capacity.
More about the concept of Agency >>
Legal Advice
The giving of good legal advice involves the obtaining of an understanding of what the client wants to achieve, the checking of relevant documents, having a sound understanding of relevant principles of law or researching finer points of law, and then explaining to the client what options are available.
More about Legal Advice >>
Licence Agreement
Sometimes a purchaser may wish to occupy the property before settlement; or a vendor may wish to continue to occupy the
property beyond settlement. A Licence Agreement is a simple contract whereby one party grants another party the right to occupy the
property. The difference
between a licence and a lease is that the lease is a form of "ownership" of the property for a period of time, and the lessee is entitled to remain in occupation for the
period of the lease. The licence, on the other hand, can be
revoked at any time. If the licence is revoked, the occupier must leave the property and rely on whatever remedies are
provided for in the licence.
Licensed Estate Agent
"Licensed Estate Agent" is the term used to describe a person who is responsible for the agent representatives he or she employs in a real estate agency business.
While qualifying for an Estate Agent's Licence is a simple process, access is restricted to applicants who have been employed by an existing agency for at least 12 months full time, and who have sufficient wealth to invest in a real estate business. The licensing regime effectively favours "insiders", who tend
to be closely aligned with large franchises.
Most who enter the real estate industry find it easier to operate as an agent representative.
NOTE:
The average "estate agent" who deals with consumers on a day to day basis is NOT a licensed estate agent at all, but merely an agent's representative.
Listing
This is the term used to describe the arrangement between a Vendor and an estate agent, whereby the agent is appointed to act on behalf of the Vendor to sell real estate.
Estate agents rely on a contract called the Exclusive Sale Authority to bind the vendor, the property and all enquirers, to the agent. This
document is so heavily biased in favour of the estate agent that obtaining a listing with it is almost as good as "money in the bank" for the agent. (See also Exclusive Sale Authority)
Lot
A lot is simply a separately identifiable piece of land, part of a building, or air space, that is created when a plan of subdivision is registered.
Market Range
We use this term to describe the range within which purchasers are expected to make their initial offers. The lower figure is 5% below current market value, and the higher figure is 5% above current market value. The concept is based on the fact that a formal valuation is always
an estimate on the standard basis of "willing but not anxious purchaser" and "willing but not anxious vendor" (See Current Market Value above, for a further explanation of these terms)
More about Market Range >>
MiddleMan
The term "middleman" is often used to describe someone who plays a bridging role between two parties. The role of "middleman" in real estate has been
made obsolete through new technology, as the flow of information in real estate transactions by-passes the estate agent entirely. Nowadays, a vendor of real estate needs only
a legal representative (lawyers are also estate agents as defined in the Estate Agents Act 1980) to handle all aspects of the sale transaction.
Mortgage
A mortgage is basically a scheme or an arrangement whereby one person borrows money from another, and promises to pay the money back in return for offering land as security for the loan. The offer of land as security becomes an interest in the land for the lender. The land itself becomes encumbered by the mortgage.
The lender's rights over the land are formally recognised by way of registration on the title at the Land Titles Office.
When the loan is repaid, the lender provides the borrower with a Discharge of Mortgage. This document is then registered at the Land Titles Office to discharge (cancel) the mortgage.
The person who offers the mortgage to the lender is known as the mortgagor and the lender is known as the mortgagee.
Mortgagee
See Mortgage.
Mortgagee Costs
Purchasers who are borrowing to make their purchase should take care to avoid unfair mortgagee costs. These are cost generated by the lender "behind the back" of the borrower, through direct contact with the borrower's lawyer or conveyancer and are often in breach of the Consumer Credit Code. (NOTE: Lawyers Real Estate has a policy of directing lenders to seek a client's authority before generating such costs.)
More about Mortgagee Costs >>
Negotiation
Negotiation involves conferring or discussing matters with another person, with a view to reaching some form of compromise or agreement.
To be effective as a negotiator, your representative must be well informed about the rules and laws associated with the matter under negotiation, and must have precise instructions as to their capacity to negotiate on your behalf.
A lawyer
is a professional negotiator, and has professional indemnity insurance
to cover the legal advice and legal work that are essential in real estate negotiations.
More about Negotiation >>
Offer
For the average consumer, the term offer has a simple and straight-forward meaning. However, when applied to the law of Contract, it has a very specific meaning. The confusion between these two meanings is often manipulated, and used against consumers.
More about Offers >>
Off The Plan
This term describes the sale of land that does not yet exist as a separate "Lot". The land is described as a proposed Lot only. The Vendor of an "off the plan" lot is obliged to complete the subdivision process or building of units, and to have the Lots individually created through registration of the plan of subdivision.
More about Off-The-Plan >>
Penalty Interest
Condition 4 of Table A, Schedule 7 of the Transfer of Land Act provides for the payment of penalty interest if either party delays the payment of money. The most common form of delay is the postponement of settlement.
More about Penalty Interest >>
Plan of Subdivision
Basically, the plan of subdivision is a map of a large area of land that has been divided into small blocks of land or "Lots".
The plan shows the dimensions of each Lot, and its location in relation to every other Lot in the subdivision. Each Lot is separately numbered.
When the plan of subdivision is registered, each lot is identified in terms of its Lot number and the number of the plan of subdivision. Each Lot is registered by way of a Certificate of Title bearing distinct Volume and Folio numbers to identify the title, and the title itself records the Lot and Plan Number of the Lot it represents.
Pre-Contract Legal Advice
Advice provided by a qualified lawyer prior to the signing of a Contract to buy or sell real estate. By obtaining pre-contract legal advice a consumer is able to consider what matters should be investigated before deciding to buy, what responsibilities have to be fulfilled before selling, and what special conditions may have to be inserted into a Contract to protect his/her interests.
See also Independent Legal Advice above.
Price Range
An objective price range is determined by establishing current market value through a formal valuation (see valuer below), and then setting the lower end of the range at a figure that is 5% below the valuation, with the upper end of the range being 5% higher than the valuation. This transparent formula allows all parties
to work from current market value, but with a 5% "tolerance" either side.
A perversion of the "tolerances", commonly used by estate agents, involves "inventing" the range figures: one much lower than the vendor
intends to accept, and the other much higher than the vendor expects the property to make. Purchasers are
expected to make offers somewhere in between the two false figures.
Any form of marketing that involves "invented" or non-independent, unsubstantiated figures is likely to become fraudulent. In fact, the Northern Territory government went so far as to write to all estate agents
in that State, warning them that such price ranges and "buyer enquiry ranges" amount to misleading and deceptive conduct.
See Bait Pricing above.
Professional Indemnity Insurance
Professional indemnity insurance is held by a professional person to ensure that any claims of professional negligence made against the professional person can be met. To put it another way, there is not much point in suing a professional person if they do not have enough money to pay for your loss - so professional indemnity insurance comes in to cover the cost.
Only qualified lawyers carry full professional insurance to cover the legal advice and legal work associated with real estate negotiations, and the drafting of terms and conditions reached through sale negotiations.
The professional indemnity insurance carried by real estate agents is severely limited, and does not include cover for negligence or mistakes made involving legal advice or legal work.
Qualifications To Sell Real Estate
Contrary to popular belief, an estate agent is NOT qualified to sell real estate! According to the Estate Agents Act 1980 where a non-lawyer becomes involved in the sale or purchase of real estate on behalf of a third party, that person must hold a licence. The training of
estate agent has always been inadequate, and this has been acknowledged by the CEO of the Real Estate Institute of Victoria, who stated:
"Entry-level requirements (for those entering the real estate industry) are far too lenient and low - at present you need a 50 hour course to call yourself an expert."
(Enzo Raimondo, quoted in the Sunday Herald Sun October 13, 2002 p.78)
Even the most qualified and experienced estate agents are actually prohibited by law from offering legal advice, drafting contracts or other legal documents, or providing legal representation.
Rates
This is the term used to describe amounts payable to the local council and the water authority for services provided to a property. Rates are adjusted on a pro-rata basis, together with any other outgoings that are payable as a consequence of land ownership.
Real Estate Institute Of Victoria
The Real Estate Institute of Victoria is the professional body representing real estate agents in the State of Victoria. Known as the R.E.I.V., it also acts as a lobby group to protect and further the interests of real estate agents.
Registrable Documents
These are the documents, usually collected at settlement in return for the payment of the balance of the purchaser price, that are lodged at the Land Titles Office to transfer ownership of the property to the purchaser. They must be property signed or endorsed so as to allow registration.
Representation
Representation in the context of real estate transactions refers to the professional duty of a person to "stand in the shoes" of another person and to act, not only on that person's behalf, but also in that person's best interests. The
concept of representation is closely tied to the concept of agency, as an agent is the representative of his or her "principal".
In recent times the real estate industry has incorrectly adopted the terms agent and representation to describe the relationship between the estate agent and
their clients.
In a real estate transaction the estate agent is not an agent or representative for either party. Rather, the estate
agent's role is simply to introduce the parties to each other. The true agents of the parties are their legal representatives, i.e. the
lawyer or conveyancer whose responsibility it is to protect the legal interests of the party who appoints them.
However, only a lawyer can provide full agency representation.
Requisitions On Title
These are a series of questions formally served on the Vendor of a property by the Purchaser, by which the Purchaser discovers any issues relating to "title" (i.e. the right or capacity of the Vendor to legally sell the property). Requisitions often include a variety of other questions that are not related to "title", and can run to many pages.
Many lawyer now replace the right to submit requisitions on title with warranties in the Contract of Sale.
Retirement Villages
While most people understand the term "Retirement Village" as meaning a form of unit accommodation, it often comes as a surprise to find that there are different ways of "owning" or "occupying" a retirement unit.
More about Retirement Villages >>
Section 27 Deposit Release Statement
Section 27 of the Sale of Land Act says that the deposit paid by a Purchaser on the purchase of real estate can be released prior to settlement in certain circumstances.
More about Section 27 >>
Section 32 Vendor's Statement
This is a statement given to the Purchaser by the Vendor prior to the signing of a Contract of Sale. If the statement is not provided prior to signing of the Contract, the Purchaser may have the right to cancel the Contract. For a full explanation of the Section 32 Vendor's Statement, visit
our Section 32 page at www.LawyersConveyancing.com.au.
Section 173 Agreement
Basically, a Section 173 Agreement is an agreement between a planning authority and the owner of real estate.
It usually starts as an agreement between the authority and the developer of an estate, whereby certain works are supposed to be completed, but is then registered on title. This means that the obligations and/or restrictions imposed by the council on the developer, continue to bind the new owner of the land.
Example:
A developer wanted to subdivide land adjacent to and existing house, intending to build a two storey structure to take advantage of sea views. A problem arose when the neighbour complained that someone standing on the balcony of the new building could look directly into the neighbouring property. The council and developer entered into a Section 173 Agreement, whereby the developer was required to erect a screen, designed to prevent over-looking. The Section 173 Agreement was registered on title, so that future owners of the property would be similarly obliged to maintain the screen.
Security Problems In Real Estate
When a vendor of a property shows visitors through the property, the vendor does so on the vendor's terms. If the vendor doesn't like
the look of a visitor, the vendor does not have to allow the visitor access.
The situation is different when an estate agent takes a visitor to a client's property, as both the visitor and the estate agent are third-party visitors to the home.
With no vendor present, no person has responsibility for the vendor's belongings or for the behaviour of the visitor.
Estate agents are not licensed to act as Crowd Controllers or Security Guards, and this is a major problem for those who engage estate agents and allow them
free access to residential homes.
See our blog posting:
Estate Agents As Security Goons - The "Open House" Of The Future?
>>
Settlement
Settlement is the term used to describe the moment when all of the parties involved in a sale of real estate meet together and exchange documents and cheques to complete the matter. Often there are four parties at settlement: the Vendor, the Vendor's Mortgagee, the Purchaser and the Purchaser's Mortgagee. Usually each of these is represented by a lawyer or other representative.
Settlement normally takes place at the office of the party who holds the Certificate of Title (generally a bank). Documents and cheques are examined and confirmed as being in order, exchanged, and the parties leave. That's all there is to settlement.
More about settlement >>
Solicitor
The terms "solicitor" or "legal practitioner" or "barrister" are just other terms used to
describe a lawyer.
The term "barrister" is used to describe a lawyer who appears in court on behalf of clients. Barristers
usually avoid accepting clients direct, and prefer to act on behalf of lawyers in a form
of "sub-contacting" capacity.
Many law firms described their lawyers as "Barristers & Solicitors". In the State of Victoria, all lawyers can
describe themselves as "barrister and solicitor", and all are equally entitled to represent their clients in court.
We prefer the term "lawyer" because it is readily understood by everyone as meaning a person whose
role it is to represent, advise and assist clients in matters of law.
Stamp Duty
This is a government charge incurred by the Purchaser of real estate, and payable to the State Revenue Office prior to lodging of the Transfer of Land at the Land Titles Office. It is usually paid by the Purchaser's lender after settlement, with funds retained from the loan moneys. If there is no lender involved, a cheque will be obtained from the Purchaser and paid to the State Revenue Office by the Purchaser's lawyer.
Stamping & Lodging
This is the term used to describe the process of taking the registrable documents (obtained at settlement) to the State Revenue Office, payable stamp duty and having the Transfer of Land "stamped" to show that stamp duty has been paid, and then lodging the documents at the Land Titles Office for registration.
Statement of Adjustments
This document sets out the way in which rates and other outgoings have been apportioned as at the day of settlement. It shows the purchase price, the deposit paid, the amount of rates paid for the rating period and the proportion of those rates to be paid by the Purchaser for the period beyond the settlement date.
Strata Title
This is the term used to describe a title where there is a building on land. The title covers not only depth and width, but also the height between upper and lower boundaries.
Stratum Title
In a stratum subdivision the building is subdivided into lots, with common land, i.e. driveways, stairwells, gardens being owned by a service company and appearing on the subdivision as an additional lot.
Stratum units are regarded as unattractive because of difficulties and complexities involving the operation of the company, Corporations Law obligations, and a reluctance on the part of lenders to accept them as security.
Each lot owner holds a certificate of title for their lot, together with shares in the service company. The lot owners enter into an agreement which governs matters concerning owners' responsibilities and contributions to the operating expenses associated with maintenance of the common land.
Purchaser intending to obtain finance for the purchase of a stratum unit should first check with their lender to ensure that the unit will be accepted as security. Purchasers attending auctions are often at risk because there is little opportunity to have the Section 32 Vendor's Statement checked by a lawyer, and they may be unaware that the property is a stratum unit!
Subject To Finance
Where the purchaser had not yet received formal home loan approval, and wants to be able to
end the contract in the event that the home loan is rejected, the contract can be made
"subject to finance".
This means that a condition is added to the contract that allows a
fixed period of time, by which the home loan must be approved. If the home loan is not
approved, then the purchase may elect to end the contract.
Purchasers should always ensure that the finance condition is drafted by their lawyer, or at
least with advice from their lawyer. It is often the case that estate agents draft finance conditions
such that the purchaser can't help but breach the terms, and risk losing the deposit.
Transfer of Land
This is the document by which the Vendor and the Purchaser direct the Registrar of Titles to transfer ownership of the property from the Vendor to the Purchaser. It may also direct the Registrar to include a covenant or other encumbrance on title.
Transparency in real estate dealings
Transparency in real estate dealings describes the situation where a party is able to look inside the
sale transaction to find out exactly what is happening, how it is happening, who is responsible, and what it will cost.
One of the most common complaints in real estate transactions is the lack of transparency, and
opportunities for deception, conflicting interests and other forms of improper conduct that can arise when a vendor or
purchaser are "kept in the dark" by the estate agent.
More about transparency in real estate >>
Underquoting & Overquoting
According to
Consumer Affairs Victoria in its Real Estate Fact Sheet "Price advertising for residential property sales" underquoting occurs "when an estate agent advertises or advises a prospective buyer of a price that is less than the seller's asking price or auction reserve price or continues to advertise a price that is less than a genuine offer or expression of interest by a prospective buyer and previously refused by the seller, or gives an inaccurate appraisal of the current market price of a property."
Underquoting also occurs when a real estate agent deliberately under-values a property in order to make a quick sale and a quick commission (the amount of commission lost on the difference between the quoted value and the true value is negligible as compared to the commission to be made on a quick sale).
Overquoting occurs when a real estate agent deliberately over-values a property in order to convince the vendor to list the property for sale with the real estate agent. Overquoting is usually followed by attempts to "condition" the vendor - this is where the real estate agent attempts to convince the vendor to accept a lower price for the property than that originally quoted by the real estate agent as its selling price.
Unfair Fees In Real Estate
An estate agent is paid at a rate that is equivalent to $675 per hour, according to author and journalist Terry Ryder.
More about unfair real estate fees >>
Valuation
See Valuer below.
Valuer
A valuer is a professional person whose role it is to determine the current market value of a property. Valuers are tertiary trained, and accredited by the Australian Property Institute (API).
It is most important that a vendor understands that estate agents are not valuers, and that estate agent "appraisals" are notoriously inaccurate and often used deceptively.
For confirmation by an estate agent of the fact that estate agents are not valuers, see our blog posting at "Estate Agents Are NOT Valuers!".
When choosing a valuer it is best to consult the Yellow Pages (best to use the Local Yellow Pages for the area where the property is situated) under "Valuers - Real Estate". Make sure that the valuer is not in any way associated with an estate agent, as the integrity of the valuation may be tainted by such a relationship because of a conflict of interests.
See also Valuers vs Estate Agents >>
Vendor Inspections
The owner of real estate, the vendor, is the best person to conduct inspections. This is because only the vendor can satisfy the essentials of:
- intimate knowledge of the property and the local neighbourhood;
- the legal authority to control visitors; and
- the legal right to protect valuables.
Estate agents have neither legal authority to control visitors nor the authority to protect the vendor's possessions.
More about vendor inspections >>
Vendor Paid Advertising
Vendor paid advertising has become something of a scam. Supposedly, a vendor pays for the advertising associated with their sale, but in reality the estate agent ends up with a share of the advertising funds.
The contract between the estate agent and the vendor, the Exclusive Sale Authority
allows the estate agent to charge the vendor his own fee for placing advertisements. For example, estate agents pay a monthly membership fee to real estate portals, but they charge their clients a fee for use of the portal, plus a fee for placing the advertisement, so as to make a profit just on the advertising.
Vendor paid advertising is also used to pay for the estate agent's own advertising. Newsprint advertisements are used, not to advertise clients' properties, but to advertise the estate agent by demonstrating to local readers that the estate agent is able to attract other vendor clients.
In his book "Real Estate Mistakes" consumer advocate Neil Jenman quotes notes from a course held for Melbourne real estate agents:
"The amount spent on advertising is much greater with an auction. This means extra publicity to your company."
and
"If the seller is moving interstate ask who is paying for the advertising. If it is being paid for by the company, bump up the overall advertising schedule."
and
"With a large advertising budget, the client will be loyal to you for longer. If they owe $4000, $5,000 or $6,000, taking the property away from you will mean they have to pay the advertising money owing immediately!"
