What is Settlement?

What is Settlement? 15 September 2021
What is a settlement?

You’ve looked around for your perfect property. You’ve done the hard yards and sorted out finance, pest and build reports and gone through the stress of exchanging contracts. We have told you that you are settling on a date in the future, but what is settlement? 

Settlement is the day nominated under your Contract of Sale on which you will complete your sale/purchase transaction. This varies subject to the agreed terms of your contract but is commonly 35 or 42 days after exchange. 

Legally, settlement is the process whereby the property title transfers from the vendor to the purchaser. Simultaneously to this, the purchaser pays the balance of the purchase price. In real terms, it is the day the new owners receive the keys to the property.

Before Settlement 

If you are taking out finance or discharging a home loan, you will need to ensure that you promptly finalise and sign all loan documentation.  

You will start to hear us talk about PEXA, which is an online settlement forum we use in conjunction with the other side and your lender, to finalise your matter electronically. If you haven’t done so already, we will ask you to complete a verification of identity process, which is required for all conveyancing transactions.  

We will write to you and send out a settlement statement. If you are purchasing, this will outline the funds needed to settle your matter and a direction as to how this is organised – either directly with your new mortgagee or by paying funds into our trust account. If you are a vendor, we will give you an estimate of the funds you will receive on settlement, or organise any shortfall funds which could be required to pay out your mortgage if there are insufficient funds from your sale proceeds.

A time for settlement will be nominated and we will advise you of this. Sometimes the selected time is out of our control, particularly when there is a bank involved. 

You will want to think about organising a removalist and start packing. You will also want to think about contacting an electricity, phone and internet provider to arrange new services. If purchasing, we also recommend that you arrange building and contents insurance to start on the settlement date. If you are taking out a mortgage, your mortgagee will need to be noted on the policy.

If you are purchasing a property, you will need to contact the agent to organise a final inspection. We recommend you do this on the day of settlement or the day before settlement. If the vendor has left the property in an unsatisfactory condition, inclusions have been removed, or terms of the contract have not been complied with, you need to contact us immediately so that we can iron out these issues for you before settlement. 

If you are selling, you will need to ensure that the agent is holding all keys to the property, including any garage remotes. You will need to provide vacant possession which means removing all items of property (and rubbish) that is not listed as an inclusion on the contract. You will also need to leave the property in a good state of condition and repair consistent with how the property was presented at the time of exchange. 

On Settlement Day 

Behind the scenes, we will have been working to ensure everything is in order, including all documents are signed and that money payable is in order. Delays can and do happen. They are normally because of your, or the other party’s, bank. We work closely and tirelessly with all parties to ensure that settlement happens as scheduled or as close to the nominated time/date as possible. 

Once all parties are signed off (when you hear these words, you can breathe a sigh of relief), settlement will take place. The deeds to the property will change names and funds will start disbursing. This process normally takes 30 minutes, and we will ring you once it’s completed. 

If you are selling, your existing mortgage will be discharged, and you will likely see it disappear from your internet banking. We will have liaised with you as to where you want your sale proceeds paid. When you receive funds depends on your bank’s processing times, and can be same day, however clients tend to see funds in their bank accounts 24-48 hours after settlement. 

If you are purchasing, your lender will secure a new mortgage against the title to your new home and will retain control of the deeds until your home loan is paid out and discharged. If you are a cash purchaser, that information will be sent to us, and we will contact you to organise what you would like done with your deeds. We will handle payment of any stamp duty for you and all other costs associated with the transaction, including rates adjustments.  We will have finalized documents that notify the Council and Water board of the change of ownership so you don’t have to. 

We will also notify the agent that settlement has taken place and that they are authorised to release the keys. As a purchaser that means you can contact the real estate agent to collect the keys, move in and enjoy your new home! 

If you are looking at selling or buying a property, Contact Us on (02) 4943 3988 to speak to one of our property lawyers. We have years of experience helping conveyancing clients throughout the Newcastle, Lake Macquarie and Hunter region. 

This blog was written by,
 Chris Berryman
Chris practises in the areas of Conveyancing and
Business & Commercial Advice

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