5 steps to successful property settlement
Buyers and sellers are increasingly well educated about the property market thanks to the amount of information you can find on the internet. But there is one area that remains a mystery to most: settlement.
Arguably the most critical of all steps in buying and selling property, a settlement is the process of transferring ownership from the seller to the buyer.
It’s a technical exercise best conducted by your solicitor or a specialist conveyancer. You can get DIY kits, but it’s an unforgiving, time-consuming process that could cost you thousands of dollars down the track if you get it wrong.
You’ll see why as we strip away the mystery and step you through the five critical steps to a successful property settlement.
1. Exchange contracts
The price is agreed, so this is when things get legal. There is one contract for the sale of a property but two copies – one for the buyer and one for the seller. Each signs their own copy and they’re exchanged. This process is usually conducted by us, as your real estate agent, or your solicitor. Until the exchange happens, nothing is legal.
Money changes hands at this point, too. Unless a different amount is agreed, the buyer will hand over a deposit. This is kept in trust, either by the selling agent, or a solicitor/conveyancer.
Be aware, there can be a cooling-off period for the buyer when the deal is conducted by private treaty – that is, a straight sale. They have XX (NSW, Qld = 5, Vic = 3, SA = 2, WA = 0) days to pull out without penalty. No such luxury is afforded the buyer who bid at auction, once the contracts are exchanged.
2. Time for the fine print
The buyer’s solicitor or conveyancer will always go through the details of the property deeds to confirm the owner and check there are no mortgages against the home that the buyer might inherit – a disastrous scenario. The boundaries of the property, as stated in the deeds and sales contract, will be confirmed.
Usually, this takes between four to six weeks to complete. This gives the buyer ample time to get their finances ready for settlement day, and the owner has wiggle room to complete their next move. If the owner has promised to do any repairs, this is the time to fulfil that undertaking.
3. Final inspection
The buyer should always conduct a final inspection, even though many don’t. The purpose is to ensure those promised repairs were made. Also, you can check the fixtures listed as remaining in the house are still there. These might include an air-conditioning unit or dishwasher. It’s best to double-check: there have been cases of light fittings gone, gardens being dug up, spas removed and the like. In most cases, there’s no problem of course but its worth the peace of mind of a final check.
4. Finalising the sale
Solicitors or conveyancers for both parties will have agreed on a settlement date. The buyer’s lender will be informed so money is available to finalise the transaction. In the background, the lender will have completed their own valuation to satisfy themselves the mortgage isn’t greater than the property’s value.
This stage will finalise details such as the payment of water rates, taxes and land duty transfer. Transfer documents are then lodged with the land registration office.
So long as everything goes to plan, settlement and the transfer of ownership is completed.
5. It’s champagne time!
It’s a great day for the seller and the new owner. A property transaction is always a win-win and often marks a new chapter in your life. A day or so after the transaction, your bank or lender will contact you to let you know the status of your mortgage.
Footnote: As we said earlier, some people do their own conveyancing to save some money. For the inexperienced, it’s a high-wire act: if you get the details wrong, or miss a step, you can set back the settlement process days if not weeks. Worse still, you may discover down the track that the boundaries you’d assumed belonged to your new home were wrong and your land size is smaller, thus affecting the property’s value. We think that risk just isn’t worth taking: stick with the experts.