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real-estate-terms-often-misused

Know and Understand Real Estate Terminology!

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Absentee Landlord
An individual or entity that rents or leases real estate to another party, but does not reside on the premises. An absentee landlord could be anyone from a local investor to an overseas conglomerate.

Absentee landlords are the norm, rather than the exception, for commercial properties. The term "landlord" may indicate that the individual or entity's real estate holdings are likely to be sizable. An absentee landlord may also have a long-term perspective with regard to real estate investments, with on-going rental income rather than capital appreciation being the primary investment objective.
Related Topic: Landlord

Absorption Rate
The rate, expressed as a percentage, at which available space in the marketplace is leased during a predetermined period of time i.e. the speed with which the market in a specific area absorbs empty space, indicating demand. Also known as ‘absorption rate’.

Access Bond Facility
An access bond facility allows bondholders to pay extra cash into a home loan account to benefit from a savings on interest on the bond, but bondholders can withdraw this cash again if needed.
Related Topic: Bond, Loan Agreement.

Acquisition Costs
All the costs of acquiring a property other than the purchase price, such as legal costs, bond registration costs, insurance, lender fees and transfer fees. Generally excludes long-term finance charges. This is normally after adjusting for discounts, incentives, closing costs and other expenses.
Related Topic: Bond Costs; Insurance; Raising Fee; Transfer Costs; Transfer Duty; Transfer Fee, Valuation Fees

Addendum
A supplementary or separately attached document to an original sale contract which contains additional text not included in the main contract document and which may elaborate, define or contain additional specifications, provisions, standard forms or other information. A contract addendum may also be called an appendix.
Related Topic Agreement of Sale.

Administration Fees
Fees charged by the bank to cover the costs of the management, control and paperwork attributable to the handling and operation of the home loan account.
Related Topic: Raising Fee.

Advocate
A lawyer with specialised skill and knowledge who takes instruction from an attorney and generally appears in court.
Related Topic: Attorney, Registering Attorney (Bond).

Aesthetic Value
The value added to a property directly attributable to the beauty of the structure, finishes, improvements or surroundings.

Affidavit
A solemn, sworn statement of fact, declared and signed by the author, in the presence of a commissioner of oaths who in turn testifies to the authenticity of such a statement.

Affordability
The ability to afford the monthly instalments on the home loan. The bank, in terms of the National Credit Act, must assess whether the borrower can afford the monthly instalment, taking into account the nature and amount of joint income. The general rule, called the affordability factor, is that monthly instalments should not exceed 30% of gross monthly income.
Related Topic: Agreement of Loan, Bond, Loan Agreement.

Affordable Housing
Also known as ‘inclusionary housing ‘which essentially is low-cost social housing aimed at the lower-income sector of the market.

Agreement of Loan
Is the contract which is entered into between the bank and the borrower which contains the conditions at which the bank grants the bond to the applicant and includes the details of the interest rate, bank charges, insurance and monthly instalments.
Related Topic: Bond, Loan Agreement

Agreement of Sale
Also known as an Offer to Purchase or Deed of Sale. A legal contract in which one party agrees to buy and another agrees to sell a property, containing terms and conditions of the transaction and signed by the parties.
Related Topic Addendum

Alienate
Means to sell, exchange or donate in terms of the Alienation Act 68 of 1981 which governs the alienation of immovable property.

Amortisation
A detailed payment schedule in which repayments of a loan is broken down into equal, periodic instalments of principal and interest over the loan period.

A sample amortisation schedule can be viewed in our Commercial Property Financial Model:
Commercial Property Financial Model
The Funding Model Tab reflects the Amortisation Schedule

Anchor Tenant
A tenant with a brand name in a shopping mall that will draw shoppers and benefit the other stores. As such, it usually receives a favourable lease.

Ante Nuptial Contract
An agreement made prior to getting married, setting forth the rights both during and after the marriage and in the event of death or divorce. The parties will be married out of community of property.

Approaches to Value
The different methods used to estimate the value of a property, for example the cost approach, the comparison approach or the income approach.
Related Topic: Assessed Value, Comparative Market Analysis (CMA), Income Capitalisation Approach, Net Operating Income (NOI).

Arbitration
The procedure whereby parties to a dispute appoint an arbitrator to settle the dispute. The arbitrator’s decision is final and the parties bound by it. It is normally an informal hearing regarding a dispute.

Arbitration Tribunal
An independent body or person appointed to settle a rental or purchase dispute by way of arbitration.

Arithmetic Mean
The most often used measure of central tendency, it is the simple average of a number of observations. Mathematically, it is equal to the sum of all values divided by the number of observations. For xample, the arithmetic mean of 6 and 7 is (6+7)/2. The arithmetic mean of 6, 7 and 8 is (6+7+8)/3; and so forth. Outlier observations may unduly affect the mean. References to the mean refer to the arithmetic mean, unless otherwise specified.
Related Topic: Geometric Mean, Median.

Asking Price
The price at which the seller is offering the property for sale.
Related Topic: Price

Assessed Value
The value placed upon a property by the municipality for property tax purposes payable by the owner.
Related Topic: Approaches to Value, Comparative Market Analysis (CMA), Income Capitalisation Approach, Net Operating Income (NOI), Valuation.

Assessment
A professional opinion as to the current market value of the property, determined by a qualified professional on the bank’s request prior to offering finance, taking into account factors such as the property’s condition, location and future marketability.
Related Topic: Approaches to Value, Assessed Value, Comparative Market Analysis (CMA), Income Capitalisation Approach, Net Operating Income (NOI).

Attorney
A lawyer providing general legal services to consumers. Attorneys do not appear in court, but will instruct an advocate to appear in court. Usually, there are three types of attorneys, or conveyancers, involved in a property transaction – the transferring attorney, the registration attorney, and the cancellation attorney.
Related Topic: Advocate, Cancellation Attorney, Conveyancer, Registering Attorney (Bond), Transferring Attorney.

Auction
A method of selling a property by public sale at an auction to the person or company who makes the highest bid.

Auditor
A professional registered in terms of the Public Accountants and Auditors Act 51 of 1951, who audits financial statements to verify the fairness and compliance with an identified financial reporting framework and any applicable statutory requirements.

Authority Form
Is a form signed by the borrower to authorise the loan grantor to make certain payments from the proceeds of a loan upon registration of the property into the borrower’s name. Guarantees are issued by the bank upon the signature of such authority forms pending transfer, and payments are effected against such guarantees upon registration.

 
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