After months of preparations, negotiations, and inspections, you've finally reached settlement day - congratulations! This marks the final major stage of your property transaction. But before you crack open the champagne, note that there are a few more Is to dot and Ts to cross to ensure your home sale goes as smoothly as possible.
Just a heads up though, you'll likely require professional assistance for this one.
What is property settlement?
Property settlement is the official process that legally transfers the ownership of a property from the seller to the buyer. It is facilitated by the parties' legal and financial representatives to ensure all obligations are met.
Although you are not legally required to engage a conveyancer or solicitor, it is highly recommended. Property settlement demands an understanding of legislative requirements and legal jargon. Without professional assistance, you run the risk of making legal errors that could result in costly disputes or delays.
The process is typically conducted in person, but online transactions through electronic settlement platforms such as PEXA are also common.
Who's involved in the settlement process?
The key parties involved in property settlement are the following.
| Who | What |
|---|---|
| Buyer (or Purchaser) |
|
| Buyer's Conveyancer / Solicitor |
|
| Buyer's Lender |
|
| Seller (or Vendor) |
|
| Seller's Conveyancer / Solicitor |
|
| Seller's Discharging Lender |
|
How long does property settlement take?
The actual settlement day typically lasts for about an hour or so, but the lead-up to it - also called the settlement period - usually ranges from 30 to 90 days after the contract of sale is signed.
The date of the settlement and where it will occur are agreed upon and specified in the contract between the seller and the buyer. The exact timing can vary, and the standard settlement period depends on where the property is located.
-
QLD, SA, WA, TAS, and NT: 30 days
-
ACT: 30 to 45 days
-
VIC: 30 to 90 days
-
NSW: 42 days
These prescribed durations can be negotiated shorter or longer based on mutual agreement between the parties in a private settlement.
Flexibility in settlement allows for accommodating special circumstances, such as needing more time to finalise financing and arrange moving logistics. Health issues, travel commitments, or other personal obligations that render you unavailable are also valid reasons to request a new date.
On the other hand, if it's crucial for the buyer to move in early - due to an upcoming holiday or the need to vacate their current home - they can request the seller to shorten the period.
Property settlement at auction
Homes bought and sold via auctions are much less flexible with their contracts, are unconditional, and usually feature a fixed settlement period.
While it could vary from state to state, contracts at auctions typically demand 5-10% of the purchase price upfront, payable initially to the real estate agency within a few days of the winning auction bid.
Many auction contracts feature a fixed settlement date, usually 30 days from the auction date. However, this could be negotiated between vendor and buyer.
From there, the remainder of funds (either directly via the buyer, or via their lender) will need to be paid to the vendor's lender if they have a home loan, which then discharges the mortgage, or directly into their bank account if they don't have a mortgage.
What happens on settlement day for the seller or vendor?
If you're the vendor, the settlement day marks the completion of the process of transferring ownership of your property to the buyer. Your settlement agent will meet with the buyer's representative at the agreed-upon time and location to officially finalise the sale.
Settlement day marks the final major stage in property sale.
Your lender discharges the mortgage
If you have an outstanding mortgage on the property, your lender will confirm that it's fully paid off and discharged. This process is predicated on the lender's receipt of your signed discharge authority a few weeks before settlement.
Your discharging lender will provide the payout figure to the buyer's lender or legal representative to ensure it is paid as part of the settlement funds. The final payout is the amount required to discharge the property, which consists of the outstanding loan balance, accrued interest, and other charges (e.g. early repayment penalties, discharge fees)
The buyer's lender transfers the funds
On settlement day, the buyer's lender will facilitate the transfer of the outstanding balance of the property purchase price to your bank account. The amount is the difference between the purchase price and the deposit already paid by the buyer.
Any property-related expenses, such as council rates, utilities, and strata fees, you pre-paid covering the period after the settlement date will be calculated and included in the fund transfer.
Once the transfer of funds is completed, you will be notified and confirm receipt of the money.
Documents are exchanged
The transfer of land document, signed by the seller prior to the settlement day meeting, will be handed over to the buyer's representative. Both parties' representatives will double-check all paperwork on the day to ensure there are no errors or missing information.
Keys are handed over
Once all documents have been signed and exchanged, funds are transferred, and the mortgage is discharged, you'll hand over the keys to the new owners. The handover of keys happens immediately after the settlement is confirmed, and is usually coursed through the real estate agent who facilitated the sale.
You must also supply other items necessary for property access, such as garage remotes, security codes, and mailbox keys, if available.
Property Seller Pre-Settlement Day Checklist
To avoid delays, complete these tasks a week or two before settlement day.
1. Discharge existing mortgage
Notify your lender of the upcoming settlement and request the discharge of the mortgage. Complete a discharge authority form to authorise your lender to commence the discharge process.
2. Review and sign all documents
Double-check all legal documents with your conveyancer or solicitor, ensuring details like the property description, names of parties involved, and the terms of sale are accurate. Sign all required paperwork after review.
3. Pay all outstanding bills
Settle all property-related bills up to the settlement date (when you're still legally the owner). Payments for the period after settlement (when you're no longer the owner) will be reimbursed by the buyer, so keep all your receipts.
4. Move out
If you live in the property being sold, ensure you vacate and hand over the keys to the agent by settlement day. Note that once the settlement occurs, you no longer have the right to enter the property. So pack up all your belongings, book removalists, and arrange for utility disconnection and transfer weeks before D-Day.
5. Do a final inspection
Conduct a final walk-through to ensure the property is clean and in agreed-upon condition. Consider hiring professional move-out cleaners to prepare the property for the new owners, or enlist the help of family and friends.
Ensure all repairs and maintenance tasks agreed upon during negotiations are completed before the final inspection. Keep the receipts and warranties for any work done.
What happens on settlement day for the buyer?
Settlement day is the day you officially assume legal ownership of the property. You don't have to be present at the contract exchange, so your main focus is ensuring all legal and financial aspects of the purchase are finalised.
Your lender transfers the funds
If you're buying using a mortgage, your lender will coordinate the transfer of funds to the seller's discharging lender or representative. The payment transfer will also include adjustments for your share of the council rates, utilities, and other fees covering the period from settlement day (when you officially become the owner) onwards.
| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Additional Repayments | Split Loan Option | Tags | Features | Link | Compare |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
6.04% p.a. | 6.06% p.a. | $2,408 | Principal & Interest | Variable | $0 | $530 | 90% | Featured |
| |||||||||
5.99% p.a. | 5.90% p.a. | $2,396 | Principal & Interest | Variable | $0 | $0 | 80% | Featured |
| |||||||||
6.09% p.a. | 6.11% p.a. | $2,421 | Principal & Interest | Variable | $0 | $250 | 60% | Featured |
|
Documents are exchanged
After all financial arrangements are settled and confirmed, your settlement representative will exchange necessary legal documents - including the signed transfer of land - with the seller's representative.
Both parties' agents will check that the documents are signed and correctly prepared, then cross-verify them against each other's records to ensure no discrepancies. Your representative will confirm and notify you once the settlement is completed, and the seller's representative will do the same to their client.
Ownership is transferred
Your conveyancer or solicitor will lodge the transfer of land document with the relevant state or territory's land titles office to officially register you as the new owner of the property. Once verified, the land registry will update the official records, and a new title document will be issued in your name.
You are required to pay stamp duty for the transfer of ownership to proceed. This may be paid at a later date, for example, 30 days after settlement - it depends on your state.
However, depending on the state or territory regulations, you may be eligible for a full exemption or a large concession. This grant is typically offered to first home buyers.
You receive the keys to the property
Upon settlement completion, you will be notified when and where to collect the keys to your property. Once you have the keys, you can organise the moving-in arrangements and the reconnection of utilities (if you haven't done so yet). Matter of fact, you can move in and have dinner in your new home on the same day!
Property Buyer Pre-Settlement Day Checklist
Here's a detailed checklist of tasks you must accomplish before the settlement date.
Ensure you're ready for moving day by packing your belongings well ahead of settlement!
1. Conduct final inspection
A week before settlement, double-check the property to ensure that it is in agreed-upon condition and that any required repairs have been completed. If you're unsure what to look for, hire a professional to carry out the inspection for you. Make note of any issues and inform your agent immediately.
2. Confirm funds availability
If you're paying with a home loan, contact your lender to confirm that your mortgage is fully approved and the necessary funds for settlement, including the outstanding balance and payments for adjustments, are available and ready for transfer.
3. Review and sign all documents
Carefully review all documents, making sure all details are correct, all terms are understood, and all conditions are met before settlement. Typical paperwork to review includes the contract of sale, settlement statement, loan documents, and transfer documents. Sign once you're done.
4. Pay stamp duty
Depending on your state or territory, you may be required to pay stamp duty before settlement so the transfer of ownership will proceed; in some cases, it is payable on the day or after. In South Australia, stamp duty must be settled on or before settlement, while Queensland and Victoria require payment within 30 days after.
5. Buy home insurance
Most lenders require insurance as a condition for a home loan, so make sure you arrange for a policy well before settlement and set it to commence on the day of. You may even be required to have the home insured earlier as responsibility for the property can vary by state and territory.
-
In QLD, the buyer is responsible for the property from 5:00 pm the next business day after the contracts are signed.
-
In VIC and NSW, the buyer is responsible from the settlement day.
-
In WA and NT, the buyer is responsible when given possession or when the full purchase price is paid, whichever comes first.
-
In ACT, SA, and TAS, the buyer is responsible for the property during the settlement period.
6. Arrange transfer of utilities
Notify utility providers (electricity, gas, water, internet) of your upcoming move. Arrange for transfer or reconnection of services, ensuring they are active from the settlement date.
7. Hire removalists
While it is not a requirement, hiring removalists can take the stress out of moving. They can also provide temporary storage if there is a gap between your move-out and move-in dates. Book removalists well in advance of settlement day and make sure everything is boxed up, labelled, and ready to go.
What happens after settlement day?
If you're the buyer moving into the new property, post-settlement day is a good time to update your address with banks, the electoral roll, postal services, car registration and insurance, and so on. Your lender may also contact you within a few days to confirm your loan repayment details.
Some tasks, such as registering the transfer of ownership and the new owner's move-in, may also occur after the settlement day.
If you live in a state that only requires stamp duty payment after settlement, it's time to start thinking about that, and gearing up to pay potentially another big chunk of money.
Can a buyer move in on settlement day?
Yes, barring any delays, a buyer can move in on settlement day. Once the settlement is completed and the ownership is officially transferred, the buyer receives the keys to the property and can move in immediately. The seller in turn no longer has the rights to it.
However, it is generally recommended to move in at least a day after settlement. Scheduling your move-in days after you assume ownership of the property ensures you have enough buffer period should there be any unexpected delays on the day of.
Imagine the stress of having to deal with your removalists if the move cannot proceed as planned!
Moving is as stressful as the settlement day. Allowing the dust to settle before you take up residence at your new place reduces the pressure and gives you time to ensure everything is in order.
Header photo by Tirachard on Freepik
In-text photos by Pixabay and Ketut Subiyanto on Pexels
Need help with a home loan?