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March 5, 2024

Key Real Estate Terms Every Buyer And Seller Should Know

Real estate agents and other property professionals can sometimes seem to be speaking a different language.

If you’re confused, don’t worry. We lift the lid on the property jargon to explain what these common terms actually mean.

Property appraisal

A property appraisal involves a real estate agent inspecting a home to ascertain its real market value. The agent will usually do this by comparing the features of the property to comparable homes that have recently sold in the area. They’ll also use their knowledge of the number of buyers in the market and the current level of demand for particular features and types of homes.

A property appraisal is different from a valuation. A valuation is an assessment banks and other lenders often carry out when assessing a loan application. It’s an independent and analytical process that doesn’t take into account factors such as buyer depth or street appeal, but only the likely minimum value of the property if it were sold on the market today. For this reason, valuations often arrive at a property value that’s below that of an appraisal.

Sales method

When a real estate agent talks about sales methods, they’re referring to the process they’ll run to sell your home. There are two main sales methods: auction and private treaty.

Here in Toowoomba, most homes are sold via private treaty. This involves listing a home on the market for sale at a certain price (often expressed as “offers over” or “offers from”). There is no deadline for the sale, and interested buyers are invited to submit an offer and negotiate with the real estate agent for the final price.

In an auction, the property is listed for sale on a particular date, time and location. Just prior to the auction, the seller sets a ‘reserve’, or the minimum price they’re willing to accept. On auction day, potential buyers have the opportunity to publicly bid and put in their best offer. Once the reserve is reached, the property is declared ‘on the market’. The potential buyer with the highest offer after that point (and before the hammer falls) wins the auction and becomes the owner.

There are other methods for sale besides these, too, including expressions of interest, where buyers are asked to submit their ‘best and final’ offer before an agreed deadline. However, these are less common in the Toowoomba market.

Database

Real estate agents will often talk about having an extensive database. What they’re referring to is a list of people who have expressed interest in buying or selling property in the past. Databases are vital to real estate agents because they can be the most effective way to market a home. After all, if they properly maintain the list, they should have people already qualified who they know are interested in buying a home just like yours.

Days on market

‘Days on market’ refers to the average time it takes to sell a property from the day it is listed to the day an offer is accepted. It’s a good measure of how competitive a property market is at any point in time, especially in a market like ours where most properties are sold by private treaty. (In major cities, they often attempt to capture the same thing through ‘auction clearance rates’).

For the past few years, Toowoomba has consistently had low days on market. In fact, we’ve repeatedly achieved the lowest days on market of any area in regional Australia.

Contract for sale

In Queensland, there is a standard contract for sale that both the buyer and seller will sign. This usually happens after the buyer has made an offer and the seller has accepted it. (An offer can be verbal or in writing).

The contract for sale sets out terms such as the seller’s price, when they’ll pay the deposit (usually once the contract becomes binding) and when settlement will occur.

Generally, there is a five-day cooling-off period on contracts for sale, during which time a buyer can change their mind and get out of the contract (this doesn’t apply in auctions).

Conditional offer

The first step in the sale process usually happens when the buyer makes an offer and the seller accepts it. However, sometimes, a buyer will make a ‘conditional offer’ or an offer that depends on certain conditions being met. Common reasons include getting finance, having a clear building and pest inspection, or selling your existing home.

If you’re making a conditional offer, you should always make sure these conditions are noted in the contract for sale.

Settlement

Settlement – or settlement day – is when the property officially changes ownership. During the settlement process, the buyer pays the remaining balance on the property, receives the title to the property, and gets the keys to it.

Whether you’re a buyer or seller, you don’t have to be physically present at settlement. It’s all arranged by the solicitors, real estate agents and lenders, and carried out electronically.

Settlement usually happens four-to-six weeks after the contract for sale becomes binding.

Buyer’s agent

In today’s competitive market, we’re increasingly seeing would-be buyers engaging the services of a buyer’s agent to secure their next property. Also known as a buyer’s advocate, a buyer’s agent can search for and inspect appropriate homes, make an offer and negotiate with the real estate agent on a buyer’s behalf, potentially saving them time and money.

Want more?

These are some of the common terms you’ll hear real estate agents and others use. If you’re looking for more advice about the Toowoomba property market, we’re here to help.

Get in touch with our experienced local team today.

Article by Gary Klein

For over 35 years, Gary has been involved in the profession of selling. He held a senior position in a large local business in town and was in fact the company trainer, inductor and troubleshooter. From his experiences, he understands people very … View profile

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