As you may already know, there are many steps to purchasing a home. The very last step is something called ‘property settlement’. To complete your real estate purchase, you have to go through the property settlement process.
In this quick guide, we walk you through the basics of property settlement and what you should expect on settlement day.
What is property settlement?
Property settlement is the legal process in which the buyer takes legal and physical ownership of the property. The process is facilitated by both legal and financial representatives of the buyer and seller. Essentially, it’s the moment the property you purchase officially becomes yours.
When does property settlement start?
You may see timelines in the contract itself stating ‘30 days from the contract date for settlement’ or even a scheduled date of when the settlement is set to occur.
There are cases where property settlement is dependent on meeting certain conditions like contemporaneous settlement or a subject-to-sale case. In any case, all the conditions of the contract must be met before settlement can take place.
How long does property settlement take?
The length of the settlement period depends on what the buyer and seller have agreed upon. Before signing the contracts, the buyer and seller usually discuss the settlement period timeline outlined in the contract of sale.
Generally, the settlement period may take anywhere from 30 days to six weeks depending on the state or territory you reside, and the terms set during the negotiating period.
What happens before the settlement day?
Before the settlement, a final property inspection is in order. This gives buyers a chance to give the property another once over to ensure everything is in good condition. You need to make sure the property is ready to be passed over to them.
Sellers must provide the property in the condition it was sold. If you’re unhappy with the condition of the property after the final inspection, you can request for the property settlement to be pushed back until the issues are fixed.
Talk to your real estate agent to arrange a final inspection of the property. Take note of the following while going through the inspection report:
- There have been no new or additional damage or issues with the property since your last inspection.
- The appliances are in working order including the hot water system, heating and cooling, stove, oven, and the like.
- The fixtures and fittings are in the same condition as when the property was bought.
- The walls, light fittings, windows, and the like are in the same condition as when they were bought.
- Locks, keys, garage remotes, and other security features have been supplied and are in working order.
- All chattels such as furniture have been removed from the property unless otherwise agreed upon in the contract.
If you’re buying a newly built home, make sure the construction is finished in its entirety. Also, ensure any inclusions you paid for have been installed and are in working order. It’s a good idea to organise a building inspection to double-check the property before a settlement is finalised.
What happens on settlement day?
The last part of the settlement process comes on settlement day. During this day, your legal and financial representatives will meet with the seller’s representative at an agreed time and place. Your representatives will organise a balance deposit on your behalf.
At this time, your lender will:
- Register a mortgage against the title of your new property.
- Provide the funds to purchase the property.
Your solicitor or conveyancer will:
- Check and see if any existing mortgage on the title to the vendor is discharged.
- Ensure that any caveats are removed.
- Double-check to make sure all relevant clauses on the contract are fulfilled.
- Check that the transfer of land and mortgage has been registered with the title office in your state or territory.
You can let your conveyancer or solicitor take care of the settlement day documents. This includes working with your lender and the seller’s representatives.
How can you prepare for settlement day?
If you want the property settlement process to go off without a hitch, you need to be prepared for anything. Having backup plans in place can help ease the process in case something goes wrong.
Here are a few tips that can help your settlement come and go as smoothly and efficiently as possible:
- Discuss the property settlement process with your solicitor or conveyancer.
- Make sure the sales contract is duly signed and dated with the correct settlement date.
- Account for stamp duty, lenders mortgage insurance (if applicable), buying fees and charges, and so on.
- Ensure that insurance is effective from the date you move into the property.
- Be ready to move in before settlement day rolls around.
What happens after settlement?
After settlement, you are officially the owner of your new property! You’ll receive confirmation from your conveyancer or solicitor letting you know the property settlement has occurred. Your lender will also send you a confirmation letter detailing your loan amount and repayment details.
Once you’ve received confirmation of settlement, you can pick up the keys from your real estate agent and start moving into your new home.
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