Property settlement is the last stage of a property sale, when both buyer and seller exchange all relevant legal documents and the buyer completes the payment of the contract price to the vendor. In Australia the settlement period varies between states, but the average amount of time between the exchange of contracts and when the buyer can take possession of the property is 60 days, except in NSW where it’s 42 days.
The date of settlement is usually arranged by the vendor’s conveyancer or solicitor. They will prepare all of the necessary documents and ensuring they’re signed properly, they’ll also contact the banks that are involved to make sure they have their final documents prepared, and then they will make arrangements between all parties – buyer, vendor, banks – to meet and exchange the sales contracts and so forth.
What happens on settlement day?
If you’re the vendor, you won’t need to attend the settlement meeting, as you conveyancer or solicitor will typically take care of the settlement for you. That being said, you should still be aware of when the settlement meeting will take place so that you can be sure the following occurs:
- The finance lender has authorised payment of the buyer’s loan money
- The buyer’s solicitor has authorised for the vendor to collect the deposit money from their real estate agent, where it’s being held in a trust
- The vendor and buyer reconcile any adjustments that were prepaid or accrued during the settlement period – i.e., rates
- The vendor’s solicitor or conveyancer authorises for the title to be transferred to the buyer
- Both parties notify the real estate agent – in writing – that settlement has occurred and that the agent can release the keys to the buyer.
The property settlement meeting will usually occur at either the office of the vendor’s conveyancer or solicitor or, because the majority of properties have a mortgage attached, many settlements take place at the vendor’s bank. Most settlement meetings are usually concluded in fewer than five minutes, which is why it’s sometimes impractical for the vendor to also be present.
Things that can go wrong with property settlements
Most problems that occur during the settlement process only do so due to a lack of communication. It’s vital that both the vendor and the buyer are in regular contact with the real estate sales agent, their conveyancer or solicitor, and their finance lender.
There are three common mistakes people make during the settlement process, which can result in delays or unnecessary extra costs:
- Missing the settlement date: This is serious, and only usually occurs because the buyer hasn’t been in regular contact with their conveyancer or finance lender. Doing so, however, can result in the buyer having to pay interest on the amount they owe for the property – 10 percent per annum, calculated on a daily basis.
- Changing the settlement period: Once the contracts have been signed and the settlement date has been arranged, your options as the vendor narrow sharply, particularly in relation to extending the settlement period. You are sometimes able to change the settlement date if the buyer, who isn’t obligated to do so, agrees.
- Organising removalists on settlement day: This is the most common mistake that many first-time buyers make, assuming that, because the settlement meeting is brief, the settlement itself will be finalised immediately. Often settlements can be delayed for hours, or even an entire day, after the settlement meeting, while all of the paperwork is finalised with the solicitors, banks and real estate agents. If you’re a buyer, it’s wise to avoid organising your removalists for the same day.
The first step to ensuring the settlement of your property proceeds smoothly is to ensure you’ve enlisted the right real estate agent.
Throughout the duration of the settlement process, you will need to be in regular contact with your agent, so it’s important that you appoint a sales agent you trust and have a good rapport with.
Educational videos about selling your property
If you would like to learn more about buying, selling or marketing property, Derek Farmer (Cammeray Real Estate Agent – specialist) has created 20 educational videos that are available to you at no cost – learn about them here.