When you buy or sell a property, once an offer has been accepted the next big event to prepare for is settlement day.
Settlement day represents the end of the settlement period, and while the timing can vary depending on the contract for sale and what is customary in your state or territory, it is usually 30 to 90 days.
STEP ONE: Pre-settlement inspection
The buyer is usually entitled to undertake a final, or ‘pre-settlement’, inspection of the property to ensure that nothing has been altered substantially since the offer was accepted. This should ideally be organised for a few days prior to the actual settlement.
STEP TWO: Documents and cheques exchanged
The next step is for the paperwork and the funds to be sorted. The buyer (or more usually their lender) pays the seller. If there is a mortgage on the property, this will be discharged and the buyer’s lender will take a mortgage over it.
Occasionally, reimbursements will be organised such as council rates or taxes. The seller will pay these up to and including the date of settlement. And it is at this point that the real estate agent’s commission is paid.
STEP THREE: Ownership exchanged
Remember, you do not need to be there on the day if you do not want to be. Settlement is usually a meeting of solicitors or conveyancers and lenders, but increasingly this meeting is moving online.
The real estate agent usually hands over the keys to the buyer once they’ve been notified that settlement has been finalized. Some buyers will have the revivalists ready to move on the day, however delays can occur.
At this point, the sale is complete and the property has transferred from the seller to the buyer.
Six tips to make sure settlement goes smoothly:
- The seller should make sure the property is vacant and clean.
- The seller is responsible for any bills and accounts for the property up to and including the settlement day. This includes council rates.
- Sellers should check that everything is working as it should, including any appliances, switches, air conditioning units or anything else included in the sale. Repair any damages prior to the inspection or this may cause delays.
- Settlement day usually represents the seller’s last day of occupancy, unless they have negotiated otherwise. So don’t forget to change your address and cancel any insurance policies from the day after settlement. Until that time it is still your responsibility.
- Your solicitor or conveyancer should ensure the contract is completely correct and that everything is prepared in advance of settlement day.
- You probably don’t need to attend settlement. Most buyers and vendors have their solicitor or conveyancer represent them at the settlement meeting, and increasingly this meeting is moving towards being done electronically.