Real estate agents and representatives from financial institutions can often forget that some of the terminology used is unfamiliar to those outside of their industry. Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, encourages buyers and sellers to ask as many questions as they need to make sure they understand what they are getting themselves into.
“Being uncertain about terminology could potentially lead buyers and sellers into making less than ideal decisions about things that can have some serious long-term financial implications. The main function of an estate agent is to assist buyers and sellers through the processes that are unfamiliar to them. Clients should never feel uneasy about asking as many questions as they like,” he recommends.
To address some of the questions buyers and sellers might have, RE/MAX of Southern Africa defines some of the most common abbreviations used within the real estate industry.
WIC / SQM / OSP
These abbreviations, and many more like them, are likely to be found in the description section of an online listing. Each of these describe certain features of a home. Short for walk-in closet (WIC), square meterage (SQM), and onsite parking (OSP), real estate agents often use these abbreviations to make the listing descriptions shorter and easier to read.
It is not uncommon for the letter “POA” to appear instead of the listing price. Short for Price on Application, the term exists as a way to conceal the asking price from the general public and can be used for a variety of reasons, usually as a way to ensure that only serious buyers contact them or because the seller would prefer for this to remain private and would not want their neighbours, friends or family to know how much their home is worth.
An offer to purchase (OTP) is a legally binding agreement that lays out the terms and conditions of the property transaction between the buyer and seller. The document includes issues such as the purchase amount, date of occupation, occupational rent, fixtures and fittings and the conditions of sale. Once the OTP has been concluded and signed by each party, it becomes the deed of sale on the property.
When dealing with financial institutions, you may come across this term. Loan-to-value (LTV) is a ratio used to describe the property’s market value compared to the loan amount for which you qualify. For example, if you purchase a home for R1 million but you pay a R20,000 deposit and take out a home loan for the remaining R80,000, you will have an LTV ratio of 80%.
Short for Homeowners Association, the HOA exists to protect the interests of a complex or estate. Normally made up of homeowners within the estate, although sometimes managed by an outsourced managing agency, the HOA is responsible for managing the estate’s finances, running the annual general meetings (AGM) as well as setting up and enforcing the rules and regulations of the estate.
While it might seem trivial to know what some of these abbreviations mean, others will have more important implications for the success of the transaction. “Real estate agents are there to guide you. The more you ask your agent, the better informed you will be and this will help you make smarter decisions when it comes to your real estate investments,” Goslett concludes.