Our Take on Real Estate Definitions

When you buy or sell property, it’s like entering a whole new world that speaks a foreign language. That’s why we’ve compiled this list of both common and not-so-commonly used terms and what they mean.

Here is an A–Z of real estate terms every home buyer, tenant, landlord, or seller should know.

1. Administration Fee: Banks and other professionals, like attorneys, charge or levy fees to cover the expenses involved in processing a home loan.
2. Affordability Score: This is the score that the bank uses to evaluate a buyer's financial capacity to meet monthly bond instalments, and which is based on their income and expenses.
3. Agent’s Commission: Commission is the fee that the seller pays to a real estate agent for selling their property. This revenue covers, among other things, the cost of marketing, advertising and showing the property. Commission is calculated as a percentage of the final selling price. Importantly, VAT is charged on top of this amount, so remember to factor that in. 
4. Agreement of sale: An agreement of sale is the legally binding contract between the buyer and seller that sets out all the terms and conditions of the property’s sale. Once both parties sign the Offer to Purchase (OTP), it becomes the agreement of sale.
5. Appraisal: A property appraisal, also known as a comparative market analysis, may be initiated by the buyer, seller, or mortgage broker. It establishes the actual property value, often considering the specific factors that could influence the property's sale, e.g. condition of the property, suburb, proximity to schools, etc.
6. Amenities: In real estate terms, this refers to the specific attributes of a property and/or the characteristics of the surrounding area that enhance the property's value.
7. Appreciation: Also known as “capital appreciation” or “house price appreciation”, this refers to the increase in a property's value because of changes in market dynamics, inflation or other contributory factors.
8. Asking Price: The price, usually suggested by a real estate professional, based on a competitive market analysis and agreed to by the seller, becomes the asking price. Depending on demand, buyers can choose to make offers above or below the asking price.
9. Assessed value: When you have your property appraised, assessed, or evaluated to determine its value, this is known as the assessed value. This assessment can be conducted by a designated financial institution, a mortgage broker or a real estate professional. The municipality’s assessed value of your property directly correlates with the total amount of rates, taxes or levies payable on the property.
10. Beetle Certificate: A certificate issued following a property’s inspection by an entomologist or compliance company to ensure that a building is clear of wood borer or termite infestations, and which is a prerequisite for the successful conclusion of a property transaction.
11. Bond: When you need to borrow money to buy a house, you’ll probably apply for a home loan from the bank. When they grant the loan, the property you’re purchasing is bonded, i.e. the property becomes the collateral or surety for the loan, which you repay in monthly instalments, usually with interest.
12. Bond registration: This is the process of officially activating your home loan (bond), which is also noted on the title deed. The bond registration is typically handled by both your transferring attorney and the bank’s appointed attorney.
13. Bond Originator: A bond originator works with both buyers and banks to help buyers find the best deal on their home loan. Bond originators have several services that help buyers to smoothly navigate the bond application process.
14. Buyer’s Market: A phase in the real estate market that benefits the buyer, usually characterized by a surplus of available properties resulting in an apparent drop in purchase prices.
15. Capped Rate: When you take out a home loan, you can opt for a capped interest rate. The cap is an upper limit, and a protective measure, that restricts the extent to which the interest rate can fluctuate on your bond or mortgage. The capped rate can apply either for an adjustment period or for the loan's duration.
16. Capital Gains Tax: Capital gains tax is a tax on the profit you make on selling a property that has appreciated in value. There are rules that apply to what is taxed and what is not, so it's advisable to seek guidance from a tax professional to ensure that you fulfil your tax obligations.
17. Conditions of title: When you make a property purchase, all the details about the property, its history, as well as any rules and restrictions that govern its use, are recorded on the property's Title Deed.
18. Comparative Market Analysis: Also known as a property appraisal, a comparative market analysis may be initiated by the buyer, seller, or mortgage broker. It establishes the actual property value, often considering the specific factors that could influence the property's sale, e.g. condition of the property, suburb, proximity to schools, etc.
19. Conveyancer (also known as a transferring attorney): The lawyer who handles the paperwork associated with the transfer of a property into a new owner’s name, is the conveyancer. They will handle all the legalities including lodging the transaction with the Deeds Office.
20. Cooling Off Period: According to the Consumer Protection Act, the cooling off period is the five-day window period following a purchase (or the signing of an agreement, like the Offer to Purchase) during which the buyer can still legally back out of (nullify) the agreement.
21. Credit Report/Profile: A credit report provides an account of the credit background of a potential borrower. It will include their credit score and assists in assessing the borrower's creditworthiness. In South Africa, lenders primarily rely on two major credit agencies, ITC and Experian. These agencies compile credit histories for both individuals and businesses, gathering data from your bank and various sources within the retail market and the legal system.
22. Credit Score: Your credit score is a number that indicates how good you are at paying back money that you have borrowed. To calculate it, credit bureaus consider whether you always pay your bills on time, how much money you owe and your credit history. This is all factored into scoring models that establish a score to determine how much you can borrow and the interest rate you will be charged.
23. Debt-to-Income Ratio: In simple terms, the debt-to-income ratio compares how much you bring in versus how much you owe. It is the percentage of your total monthly income that goes to pay your debts, e.g. home loan. You can work your debt-to-income-ratio out by dividing your monthly payments by your income to get a percentage.
24. Deed: Usually known as the title deed, this is a legal document which records the transfer ownership of property one party to another. The deed includes a property description and is executed, witnessed and handed over to the purchaser after the property has been registered in their name. Changes to title deeds, e.g. ownership, are all lodged at the national Deeds Office.
25. Deposit: When a buyer proposes, and pays, an upfront sum of cash to the seller when making an offer to purchase, this is the deposit. As a rule of thumb, a deposit is roughly 10% of the asking price and becomes a condition of the purchase. A deposit is not a legal requirement but can make a buyer’s offer more appealing and can support your home loan application.
26. Depreciation: Depreciation is the gradual reduction. over time, in the value of an asset. Examples of depreciating assets are motor vehicles.
27. Distressed Property Sales:When the owner of a bonded property is under financial pressure – distressed – and needs to sell the property urgently, this is known as a distressed property sale. Reasons for this distress can include foreclosure, repossession, insolvency or avoiding legal action by creditors. Sales of distressed properties can offer opportunities for buyers and investors looking for good prices, but can also come with risks or additional costs.
28. Equity: Equity is the proportion of the property that you actually own. When you make a 10% deposit, but raise a home loan for the balance, you will own 10%, while the bank owns the other 90%. As you pay off your bond, reducing the outstanding balance, so your equity – ownership – grows.
29. Erf: An erf is a plot or surveyed piece of land which is allocated a unique number to identify it in various records, e.g. municipal zoning maps, valuation rolls and the deeds office. It is this stand or lot on which a house or building can be constructed. When buying property in South Africa, understanding your erf’s size and zoning restrictions is crucial, because this informs how the land can be used — whether for residential, commercial, or industrial purposes.
30. FICA: This stands for the Financial Intelligence Centre Act of 2001 which oversees and combats money laundering activities. FICA has become a word which people and financial institutions use for the “know your customer” (KYC) process. It involves customers submitting up to date information about themselves. Consequently, during the course of a property transaction, clients will need to submit certain documentation for FICA.
31. Freehold: Full title or freehold is the highest form of landownership. In other words, if you own a land in freehold, you own both the property and the land upon which it stands and that the owner enjoys complete rights and assumes all responsibilities associated with the property.
32. Fractional Ownership: This is when legal ownership and utilisation of an asset, like a property, is shared. Fractional ownership is different from sectional title ownership or co-ownership because owners have limited – fractional – use of the property, as is the case for timeshare vacation property.
33. General Valuation Roll: The general valuation roll is a public record of the value of all properties in a municipality and is the basis on which municipal property rates are calculated. The valuation roll is updated every three to four years, so it is important to check to make sure you are not paying more for municipal rates than what the home is worth.
34. Grace Period: The grace period is a specific time – usually a number of days – that may lapse after the scheduled payment date, and before penalties apply. This grace period is usually included in the terms of the contract.
35. Home Inspection: A home inspection is a professional evaluation of a property's condition. There are various types of home inspections, but most commonly, buyers might arrange a home inspection by an independent contractor, a qualified building inspector or another accredited individual or firm, depending on the specific requirements. These providers assess whether the property has any defects or what areas of a home might need maintenance before a buyer finalises an offer to purchase.
36. Homeowners Insurance: This is a type of insurance that protects your property (home) and personal belongings against unexpected events like fire, floods, theft and storms, and can also protect you from liability for injuries or property damage to others. Details of exactly what is covered will depend on your specific policy.
37. House Price Appreciation: Also known as “capital appreciation”, this refers to the increase in a property's worth arising from changes in market dynamics, inflation or other contributory factors. It is usually expressed as a percentage and is based on average house prices in an area (usually calculated at a national level). These average percentages can provide an indication of how much more a property will cost in a year’s time. For landlords and tenants, these averages can provide a useful guide for fairly determining annual rental escalations.
38. Initiation fee: When you are granted a home loan or bond, your financial institution is legally required to levy – charge – an initiation fee. This fee offsets the expenses associated with the administrative responsibilities linked to this process and activating your loan agreement.
39. Interest Rates: Interest is the fee that a lender charges when someone takes a loan. The rates at which interest is calculated on debts, including home loans, vary. The default, or prime interest rate forms the baseline for the rates they charge borrowers. The interest rate on your home loan will either be above or below prime and will depend on your credit score.
40. Inspection: An inspection of a property is a thorough assessment that can be performed by the buyer, seller, a real estate agent, or a certified expert. When buying a property, it's advisable not only to conduct a comprehensive inspection but also to engage professionals to ensure all aspects are covered. This entails enlisting the services of a qualified building inspector or another accredited individual or firm, depending on the specific requirements.
41. Levy: Levies are monthly contributions that property owners in sectional title complexes pay to cover the cost of general maintenance, management and other shared services such as security. Levy funds are managed by a body corporate who are volunteers elected by and from among the owners at the Annual General Meeting (AGM). Well managed properties where amenities or aesthetics are regularly upgraded can potentially boost the value of your property.
42. Mortgage Broker: This is similar to a bond originator: a mortgage broker is a go-between, facilitating the arrangement of a home loan between the buyer and a financial institution.
43. Municipal Land Value: The value of a piece of land or property determined by the local municipal authority and recorded in the general valuation roll.
44. Municipal Rates: Taxes that property owners pay to the local municipality to cover the cost of a host of services, such as refuse removal, local libraries, etc.
45. Occupational Rent: If, for some reason, the seller cannot move out of the property after it is registered in the buyer’s name, they will have to pay occupational rent to the new owner. Similarly, if the buyer moves into the property before it is transferred into their name, they will also have to pay occupational rent to the original owner (seller). The amount is agreed to in the OTP.
46. Offer to purchase: An offer to purchase (OTP) is a written statement that records the price that a prospective buyer is prepared to offer for your property, as well as any other terms and conditions that may be associated with the sale. An OTP is a legally enforceable contract executed by both the buyer and the seller.
47. Off-market sale: When a property is sold before it has been publicly advertised or listed on any property portals.
48. Power of Attorney: A power of attorney is a legal document that authorises one person to act on behalf of another in specific matters, e.g. the registration of a property.
49. Pre-approval: When a prospective buyer applies for a home loan ahead of making an offer, and meets the requirements, the bank will issue a pre-approval certificate indicating the loan amount for which they qualify. This is calculated based on what a buyer can afford. The actual loan amount can only be finalised after the bank has received a signed Offer to Purchase on a property and it has been formally evaluated.
50. Property Transfer: A property transfer is when the ownership officially transitions from the seller to the buyer and the property is registered in the new owner’s name at the Deeds Office. This information is recorded on the title deed to the property.
51. Purchase Agreement / Deed of Sale: An agreement entered into by both the buyer and seller, outlining the terms and conditions governing the sale of a property. The Offer to Purchase (OTP) typically becomes the purchase agreement / deed of sale after it is signed by both parties.
52. Qualified Buyer: A person who satisfies the affordability criteria set by a bank and has been pre-approved for a home loan.
53. Registering Attorney: The lawyer responsible for handling the registration of the new bond into the buyer's name is known as the registering attorney.
54. Repayment Term: This is the time period over which a home loan is paid off. In South Africa, the longest allowable repayment period is 30 years.
55. Repossessed: A property is described as repossessed when the bank has taken possession of it because the owner failed to make their mortgage payments.
56. Reserve Price: The term for the minimum price set for a home or property when it is sold at auction, is the reserve price.
57. Sectional Title: When a property is divided into a number of sections and units that are separately owned (or sold) by different individuals, this is known as sectional title ownership. Sectional title estates and complexes are managed by a body corporate.
58. Seller’s market: A seller's market occurs when demand for property exceeds supply and is usually the result of economic factors and related conditions which align to sustain higher property prices
59. Sole Mandate: A written agreement that gives a single estate agent exclusive rights to selling your property for an agreed period. This can often be more effective because it gives that agent the space to secure the best sale. A sole mandate is also a more convenient option because sellers only have one agent to deal with rather than several.
60. Suspensive Condition: Where the validity of a contract is contingent on some event happening or not of a future event, these are known as suspensive conditions. In other words, the agreement will fall away if the condition is or is not met.
61. Title Deed: This is the legal document that proves that you own your home, and unless it’s a sectional title, the land, too. The title deed records the personal details of the legal owner(s), i.e., the name and identity number of the person or people in whose name the property is registered.
62. Transfer Fee: A fee paid to the conveyancing attorney for handling the transfer of property ownership from the seller to the buyer.
63. Transfer Duty: When you buy immovable property in South Africa, you pay a government tax known as transfer duty. The tax amount is calculated on the purchase price of the property and is payable to the South African Revenue Service (SARS) before the property can be registered in the buyer’s name. The amount of transfer duty varies, with properties below a certain price threshold being exempt from the tax. It’s important for buyers to budget for transfer duty costs when planning a property purchase, because they must pay this amount upfront and before the transfer. To get an idea, play around on an online calculator.
64. Turn-key property: A property that is move-in-ready, with no need to do any further renovations or updates is known as a turn-key property.
65. Unconditional offer: An offer to purchase that is not subject to any other conditions such as securing a home loan or private home inspection, etc.
66. Utilities: Services, usually provided by the municipality, such as running water, electricity, waste and sewerage removal, are known as utilities.
67. Valuation: A formal property valuation is a documented assessment of the current market value of a property, and which can only be performed by a registered member of the South African Institute of Valuers or South African Council for the Property Valuers Profession. A real estate agent will provide a valuation of your property by drawing up a comparative market analysis.
68. Variable Rate Loan: This is the default interest rate option for most home loans. Typically this is the best option when rates increase or decrease in line with the prime lending rate, which is governed by the repurchase (repo) rate charged by the South African Reserve Bank.
69. Voetstoots: "Voetstoots" essentially translates to "as is," so if you buy a property with a damaged ceiling (for example), it becomes your problem: the seller is not obliged to repair it. To avoid surprises, it is advisable to conduct a comprehensive, professional property inspection on the property you wish to purchase before making and signing an offer.
70. Waiver of Suspensive Conditions: A party has the option to forgo – waive – a suspensive condition is to their advantage to do so.
71. Zoning: Land use zones – also known as zoning – refer to the municipal town planning regulations that govern how parcels of land and properties can be used, e.g. for retail, residential or agricultural.

“There are a lot of moving parts to any property transaction. That is why the real estate profession exists. Property professionals are there to help guide clients through these transactions. Never feel afraid to ask questions if you are ever unsure of anything during the process,” says Regional Director and CEO of RE/MAX Southern Africa, Adrian Goslett.

Whether you're buying your first home or preparing to sell your property, understanding real estate terminology can give you more confidence to make informed decisions.

Still have questions or need guidance? Get in touch with your local real estate agent who can walk you through every step of the process.