If you are preparing to sell your home or an investment property you may be wondering what settlement is and what settlement day actually involves.
Settlement is the final process in the sale of a property, when legal documents are processed and exchanged with your buyer. This culminates on settlement day when the buyer takes legal ownership of the property.
This article will help you understand exactly what settlement involves, and why it is important to negotiate a settlement date that is right for you.
Who does what during settlement?
If you are using a conveyancer or solicitor, they will handle all the relevant paperwork and legal documentation associated with settlement. They will also liaise with your real estate agent as well as the buyer’s legal team to ensure all the conditions of the contract have been met, and that all legal documents are signed, submitted and in order.
Your conveyancer or solicitor will handle all the relevant paperwork and legal documentation associated with settlement
What is a settlement period?
Settlement starts when you sign and exchange contracts of sale with a buyer. Neither party is legally bound until signed copies of the contract are exchanged. The buyer then often has a cooling off period of five working days during which they can withdraw from the transaction.
Thereafter a lot of legal documentation needs to be to be processed and exchanged between the two parties legal teams. This is the primary reason why a sale often requires a settlement period of weeks or even months.
How long does settlement take?
Depending on where you live, settlement can take anywhere from 30 days to 90 days. This allows time for the paperwork to be finalised, and for you to prepare to vacate the property, including scheduling movers, packing and having the property cleaned. Buyers use the time preparing to occupy your property.
Depending on where you live, settlement can take anywhere from 30 days to 90 days
What is the settlement date?
The settlement date is the actual day when your property passes into the ownership of the buyer. The date, referred to as settlement day, is specified by the you in the contract of sale after consultation with the buyer. This is also the day you, as the seller, receive the balance of the sale price for your property from the buyer.
Settlement day is the actual day when your property passes into the ownership of the buyer
What is the process of settlement when selling or buying a house?
Assuming the buyer does not pull out of the sale during the cooling-off period there a number of key events that will happen over the course of the settlement process.
If you have a mortgage on the property your conveyancer/solicitor will arrange for your loan provider to process and sign a discharge of mortgage authority. Transfer of Land forms also need to be processed and submitted, to show that ownership is changing and the buyer is now the legal owner of your property. Buyers will undertake a final inspection of the property, to ensure it is in an acceptable condition, as detailed in the contract of sale. They can also run a final title search to ensure the legal ownership has not changed during the settlement period.
Settlement then occurs on the specified date, when both parties legal representatives meet to exchange documents and cheques. Sellers and buyers are rarely attend, and are typically informed by their conveyancer or solicitor when it is complete.
How to negotiate the right settlement period for you
The key to a stress-free settlement is to leave enough time for everything to happen. It also makes sense to choose a settlement period and settlement date that suits you and the buyer.
Bear in mind that once you choose a day for settlement and sign the contract the date is fixed. You are able to change it, but the buyer is not obliged to agree. If you are selling at auction you detail the settlement period and date in the contract, and bidders may approach you to see if it is flexible.
The key to a stress-free settlement is to leave enough time for everything to happen, and to choose a date that suits you
Common barriers to a fast settlement
There are a number of potential roadblocks that can hold up settlement. The most common delays include:
- Banks taking time to process and return documentation
- Incomplete documentation
- Delays with one party lodging documents
Get the right team to avoid delays to your settlement
Delays are not uncommon for a settlement as there are so many variables to coordinate.
If you want your settlement period to go smoothly without any hiccups make sure you have an experienced team working for you. Combine the skills of an experienced local agent with a conveyancer or solicitor to look out for your best interests and help make sure everything runs smoothly.
Planning on selling? Then use our Smart Seller’s Guide to help you navigate the process with the least amount of stress.