Even the most seasoned property moguls agree that the real estate industry is a fast moving and diverse terrain to traverse. For people looking to buy, especially a first home buyer, often the task can feel like a slippery slope of foreign lingo, misguided beliefs and unreliable information.
An auction is designed to be a transparent transaction over a property, however with it comes a realm of laws and terminology that are both foreign and daunting to buyers. Throw in the mixed opinions of your friends and family (especially your great uncle Johno who bought his last property in 1964 and knows all about the current market) and you have yourself a cocktail of confusion.
Fear not, despite what you’ve heard you don’t need to be in the industry to successfully acquire property and you don’t need a real estate dictionary (although we wish there was such a thing) to ensure that you keep up with the conversation. You have our permission to save this article as your real estate bible (promise we won’t tell). Below you will find all the terminology you’ll need to set you on your property buying journey and ensure you’re sounding like a seasoned veteran to real estate agents far and wide.
A vendor is the person appointed to sell the property. This could be as simple as the people who currently live in or own the property or it could be a person acting as Power of Attorney, an Executor of a will, or a group of individuals if they all own the property in equal share.
In many instances, instead of listing a single figure, a real estate agent will quote a range that they anticipate the property to be valued at. This is based on comparative sales in the immediate area and within a recent time frame of approximately 6 months. Real estate agents are governed quite heavily by Consumer Affairs and there are fines for any misconduct such as underquoting. Underquoting is quite often difficult to police however, as competition between bidders on auction day can result in a much higher sale price than the original quote range.
Speaking of underquoting, what is it? Well this occurs when a property is listed at a price that is less than the agent expects it to sell for, or the sellers asking price. A property can also be considered underquoted if the advertised price is at a figure that has already been rejected by the seller.
If you’ve ever attended an auction or enquired on a property going under the hammer, we bet you’ve heard this one before. Interestingly, a lot of people don’t know what this means.
When listing the property for sale, the vendor has a single price that is the minimum price they will sell the property. This is separate to the agent’s quoted price you’ll see featured on the listing. You likely won’t know what this figure is until mid-auction when the auctioneer will announce that bidding has reached this figure and the property is now set to sell. If this figure is not reached, no sale.
On the market
During the auction, the auctioneer will aim to achieve the vendors reserve price or higher, in order to see the property sell. The auctioneer will call for bids until such time that the vendors’ reserve price has been reached; at this time, the auctioneer will call the property on the market and may announce so by saying words to the effect of “we are selling”, “playing for keeps”, “we are on the market”. Once this occurs, if you are the highest bidder at the end of the auction, you are purchasing the property and are essentially committed to the purchase.
During an auction, the auctioneer has the option to place a vendor bid, known as a bid on behalf of the vendor. As the vendor already owns the property, they are not actually bidding to purchase the property but rather this is a tactic used to ensue value in the crowd and get the ball rolling. An auctioneer may place more than one vendor bid throughout the auction until the reserve is reached.
If an auction sees no bids made, or the bidding does not reach the vendors’ reserve price, the auctioneer will have no choice but to pass the property in. In this event there are 2 things that can follow; the highest bidder at the time will be called in to negotiate, or if nobody has placed a bid, the auctioneer will pass the property in. This means that the property will now be offered for private sale to the public at a single price point. The auction is now complete.
Statement of Information
A statement of information is a document that was introduced in 2017 to strengthen laws against underquoting. As a requirement of every sale, an agent must prepare a statement of information and provide this upon request to all buyers, it must also be included online on all advertised properties. You should find the statement of information on display at every open home and be able to request a copy for any property you inspect that is an off market or private sale. The statement of information contains information regarding the quote range or single asking price, as well as three comparable property sales within a 6 month period and a 2km radius of the selling property.
Now that you’re all set with your new knowledge base, you’ll be on your way to successfully purchasing a property in no time!