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BLOG: Understanding the Settlement Process

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ensure you reach settlement day without any hiccups with this handy guide

So you finally bought it. You moved heaven and earth, (as well as your life’s savings), negotiated with real estate agents, convinced your bank you were a reliable loan applicant and begged your loved ones to get on board and embrace the idea of moving into a new home.

It is quite an involved process to reach the point where a ‘sold’ sticker is finally stuck to the front of the ‘for sale’ sign outside what is to become your property. Once your loan is approved and the purchase contract is signed, in theory the deal is done, but there are still a number of steps that need to take place in order for the sale to go ahead and reach settlement. So despite feeling like the hard work is over, it’s not officially yours until the settlement process is completed, which on average settlement can take anything from 2-12 weeks, but can take longer in some cases.

What is Settlement? 

Settlement is essentially the legal process of property ownership passing from the vendor (seller) to you once the balance of the sale price is paid, a series of steps facilitated by your solicitor and lending representatives. Your conveyancer or conveyancing solicitor will assist you with the settlement process and ensure the title transfer process goes smoothly, checking you meet all legal obligations and that your rights are protected during the transaction. Conveyancer fees could be anything from $1000-$3000 including all property checks and lodgement fees, so be prepared to have this set aside. The settlement date is usually set in the contact of sale, but this can often be negotiated to a mutually agreeable date before the contract is signed.

The settlement process includes final paperwork being exchanged between solicitors, loans documents being finalised, all property checks and cross checks completed, as well as the last fees, charges and costs compiled and paid. Fees payable before settlement date include stamp duty if applicable, loan establishment and other bank fees, lawyer costs and any ‘adjustment costs’ owed to the vendor for water rates, council rates and strata levies which may have been paid in advance by the vendor.

On settlement day your solicitor or conveyancer meets at an agreed time and place to exchange documents (or electronically exchange via an online portal). The balance of the purchase is provided by the lender to the vendor on this day. As buyer you will also receive the title of the property and your legal representative will arrange to register the transfer of land and mortgage with the relevant title office in your state or territory. By settlement day your solicitor will have already checked any existing mortgage on the title to the vendor has been discharged, as well as any caveats being removed (any third party who has rights over the property). All clauses on the sales contract have been fulfilled by now.

Once both parties have advised in writing to the agent that settlement has occured, you get to hold the shiny keys to your new home in your (possibly slightly clammy with excitement) hand.

How to Prepare for Settlement Day

There are a few things you can do to ensure Settlement Day goes smoothly. 

  • You have engaged a solicitor or conveyancer to represent you in the settlement process as sales agent. The sales contract has been signed and dated and all parties are aware of and agree with the settlement date. It's a good idea to call or email your solicitor a week before settlement ensuring there is nothing else you need to do on your end to finalise the process.
  • You have ensured the balance of the loan (your deposit and other additional costs such as stamp duty and solicitor’s fees) have been transferred into the relevant accounts well before settlement day.  Be mindful that some banks take up to 3 days for a transfer to clear, so make sure you’re ahead of the game and transfer over a week before settlement if possible. Some trust accounts (such those used by a solicitor if doing an electronic settlement) need funds to clear up to 2 days before settlement in order for everything to go ahead. Also the kids of figures often needed at settlement exceed most bank’s online transfer limits, so going into a branch and arranging a transfer over the counter is the best way to ensure a smooth, single transaction. In some cases an international money transfer will be required if the balance of the loan is over $150,000.
  • You’ve arranged for a new comprehensive home insurance policy (as required by most lenders) to commence on the day of settlement.
  • A final inspection of the property has been completed and you’ve checked the property is in the same condition it was in when it was sold. It’s also your chance to check things like the hot water system, appliances and air conditioning units function and that all keys and remote controls for things like garage doors and air conditioning units are supplied.

Now What?

Congratulations! You officially own your property (with some help from the bank). You get the keys and can move in. Your lender will discuss with you mortgage repayments and you can decide what frequency you’d prefer (usually fortnightly or monthly). Some lenders will give a few weeks grace period after settlement before repayments begin, and if you’re lucky there might even be a bottle of bubbles left for you by the sales agent on your new kitchen bench for you to sip, enjoy and celebrate your new purchase. 

Buying a property can be overwhelming especially if its your first time but Endeavour Mutual Bank can be there every step of the way when the time is right. If you are ready to buy, a fast approval can assist you to act quickly when the right property presents itself. The lending specialists at Endeavour can assist you in obtaining a full approval quickly and easily. Whether you’re saving for a deposit or getting ready to bid at an auction, Endeavour Mutual Bank can provide continued support and up to date information along your journey to make the process as simple as possible. 

To find out more about preparing yourself for purchasing property contact us or explore our easy to follow Home Buyers Guide for some more handy hints and tips.   

Alison Gallagher is a freelance writer, resourcefulness expert and entrepreneur. She has been featured in various publications including Stellar Magazine, Australian Health and Fitness Magazine, and Cleo Magazine. Alison is particularly passionate about sharing practical tips on how to live simply, sustainably and seasonally.