For most buyers, settlement day is as eagerly anticipated as Christmas, and twice as exciting. Just like Christmas though, there are a few things you’ll need to do in the weeks preceding to make sure it all goes smoothly.
What happens at settlement?
Settlement is the legal process that transfers ownership from the seller to you. The specific date on which it occurs is outlined in your sales contract. Generally, settlement periods are between 30 and 60 days, but can be longer if both parties agree.
As settlement is governed by different laws and regulations in each state and territory, it’s important that you instruct a professional to help you effect it. A solicitor or conveyancer will undertake the settlement process on your behalf and make sure none of the steps are missed.
On the settlement day, both the seller and buyer’s representatives attend, either in person or virtually if the parties are using econveyancing. If there is to be a mortgage on the property, the lender is involved. The lender registers a mortgage against the title of the property and provides finance to be paid to the seller.
Once this is done and the land transfer duty or stamp duty paid, you will be the official owner of the property and the title registered in your name.
If one party is not ready for settlement on the specified day, the date can be pushed back by mutual agreement. There can be some penalties for doing so, however. If the delay is on your end, the seller can charge penalty interest, and in some circumstances can even cancel the contract. To avoid this happening to you, it’s important that you take the necessary steps to make sure settlement proceeds on time.
Steps to a timely settlement
Make finances a priority
The most common reason for settlements to be delayed is that finances are not in order.
If you’ve signed a contract for sale, you will hopefully have already obtained pre-approval for finance. However, there are some extra steps to take to make sure that your lender can provide the funds at settlement.
Usually, that means providing your broker or lender with all the paperwork they need to confirm your financial information and perform a credit check. This can take a while on their end, so make it a priority to get them the documents as soon as possible.
Don’t forget that as well as the purchase price, you will need to pay stamp duty and a transfer of registration fee.
Check the adjustment statement
Before settlement, your solicitor or conveyancer will send you an adjustment statement - sometimes called a settlement statement. This itemises which rates and charges you and the seller must pay. These include council rates, water rates and any relevant body corporate charges.
Unless you have agreed to different terms in your contract, you are responsible for all rates and charges from the day after settlement, and the seller for all those up to and on the day of settlement. Because most rates and charges are monthly or quarterly, they might cover a period of time in which you are the owner, and a period of time in which the seller is still the owner. Therefore, they need adjusting to make sure each party pays their share.
Once you have checked the statement, an adjustment to the purchase price is made so that the seller receives the right amount at settlement.
Other pre-settlement tasks
If you’ve given your solicitor or conveyancer all the information they need, settlement should go through without a hitch. However, there are still a few things you’ll need to do on your end to make sure there are no nasty shocks in store.
Do a pre-settlement inspection
In most states and territories, the buyer has an automatic right to a final inspection in the week before settlement. In others, you will need to make it an explicit term of the contract. While it’s not compulsory to do so, it’s a very good idea to take advantage of this right.
That way, you can satisfy yourself that the property is in the same condition as it was when you signed the contract. Check that nothing has been broken or damaged (beyond ‘fair wear and tear’), that everything named in the contract is still there, and that you can take vacant possession of the property - i.e., that the owners or tenants have vacated and that the home is not filled with rubbish or immovable objects.
Check that appliances work, not forgetting light fittings, the hot water system, locks and keys. Fixtures, which include window coverings and attached floor coverings, should remain in place. So too should any chattels (movable objects) which are specified as inclusions in the contract.
It’s always recommended to do a pre-purchase inspection at which you document the condition of the property, so that you can compare the condition at this near-settlement stage. If you see minor damage, like scuff marks or minor floor scratching from moving furniture, that’s classed as ‘fair wear and tear’ and the seller isn’t liable. Anything more serious should be brought to their attention to see if a solution can be found. Most commonly, this might look like a small adjustment in the purchase price as compensation.
Organise building and contents insurance
You should organise building and contents insurance as soon as is practicable after signing the contract of sale. While it’s not a legal obligation, it is a powerful safeguard.
Under common law, from the moment that you agree to buy the property, you become the beneficial owner. That means that any damage that occurs to the property after the contract is finalised is yours to wear unless it happens as a result of the seller’s negligence.
Most insurance providers will issue you a certificate of currency that takes immediate effect from the date of the contract and can be cancelled if for some reason settlement doesn’t proceed.
Arrange to collect the key
It sounds simple, but you’d be surprised how many people forget this last detail! When the settlement day finally arrives, and you get confirmation that you’re the new owner, you can finally take possession. Beforehand, therefore, you need to work out how to get the key from the seller.
Some parties choose to meet and hand over the key in person, whereas others use the selling agent as a go-between. Whichever you choose, make sure that everyone is aware of the arrangement so that you’re not left sitting on the porch surrounded by boxes.
While your solicitor or conveyancer will handle the legal aspects of your settlement, there are several things you can do to help. Being prompt with paperwork and information will help you get your finances in shape so you’re ready and willing to settle on the day. Do your due diligence around inspecting and insuring your new property to avoid surprises, and don’t be afraid to chase up your representative and ask for progress reports if you’re worried.
Once all that is done, there’s nothing left to do but crack open the champagne!
To find out how we can help you, contact us at Peter Blackshaw Real Estate.