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Understanding the Property Settlement Process

Understanding property settlement

Settlement is a word that is synonymous with buying and selling property in Australia. 

The culmination of the property exchange between a vendor and buyer, settlement involves the proper handling of several important steps to enable completion. 

If you’ve ever wondered what exactly is involved and why it is so important, this guide is for you. 

We’ll take a look at who is involved in the settlement of property, how to prepare and what you can do to avoid complications for a stress-free transaction. 

Let’s get right to it. 

 

What Is Settlement? 

Settlement, also known as ‘closing’ refers to the finalisation of the home-buying process. 

It is the date at which the final transfer of funds for the sale is made to the seller and when the buyer becomes the legal owner of the property. 

Settlement typically occurs around 6 weeks after the exchanging of signed contracts and payment of a deposit. Both of which occur shortly after the acceptance of an offer on a home.  

The length of a settlement period can be negotiated between the vendor and buyer to be longer or shorter and will be reflected in the contract of sale. 

 

Who Is Involved In Settlement? 

There are several key players involved in the settlement process, each with a specific role to play. These are: 

Solicitor Or Conveyancer

First and perhaps most importantly, is a solicitor or conveyancer. These specially trained individuals are legally qualified to oversee property transactions and are required on both sides of the sale. 

They manage a huge array of important tasks for both vendors and buyers including but not limited to:

  • Preparing, thoroughly inspecting, clarifying and lodging legal paperwork related to the sale. 
  • Performing important research into the properties certificate of title. This can alert you to any easements, caveats or covenants that may pose a concern in future. It also shows the type of title the land is held under and highlights any other important details about the property.
  • Handling the placement of the deposit into a secure trust account.
  • The revision, calculation and adjustment of any taxes, rates or outstanding strata payments linked to the property at the date of settlement.
  • Liaising with your bank or nominated financial institution to ensure all final payments are made/received on time.
  • Managing communication between the vendor/buyer or agent and/or any necessary negotiations regarding the property before settlement. 

Banks And/Or Lenders

Not only providing essential financing to purchasers, banks and lenders ensure necessary funds are available for transfer on settlement day and may facilitate this process. 

They will also work with conveyancers to ensure any mortgage closures are properly handled and that necessary paperwork has been completed. 

Real Estate Agents 

Far from wrapping up their involvement once an offer is accepted, real estate agents remain part of the sale process right up until the settlement date. 

Acting as intermediaries between the buyer and seller, they help coordinate final inspections or work with solicitors on negotiating sale terms where needed. They also facilitate the handover of keys once the new owner takes possession. 

Land Registry & Titles Office 

Each state and territory of Australia has a governing body that oversees the maintenance of records regarding land ownership.

Also responsible for registering changes in property ownership, these land title offices issue new certificates of title and register mortgages and other encumbrances against properties. 

Your solicitor or conveyancer will work closely with your local land registry and title office to ensure transfer of ownership occurs at settlement and that a new title is issued. 

 

Preparing For Settlement 

While all the paperwork is typically managed by your solicitor and you are required to have minimal hands-on involvement in the settlement, there is one aspect you need to address beforehand. 

This is your pre-settlement or final inspection. Usually occurring in the week before settlement, this is your last opportunity to check that the property is in the same condition it was when contracts were exchanged. 

During an inspection, you should be looking to see that:

  • No significant damage has occurred to the property since the contracts were signed
  • Appliances and fittings are in place and functional
  • All personal property has been removed or will be by settlement
  • No rubbish or building materials have been left at the property
  • The home is reasonably clean (it is not required to be spotless)
  • The garden is as expected and no plants have been removed unless previously agreed upon in the contract of sale. 

Where issues are apparent, they must be raised immediately with your solicitor as this may mean an adjustment to the settlement date or other negotiations need to occur.  

Final details will be arranged with the real estate agent

Settlement Day

Across Australia, modern advancements mean that settlement is generally handled electronically with no one needing to be physically present at a set time or location. 

Instead, all required parties will instigate various online procedures to ensure that all legal and financial aspects of the sale are finalised. This involves:

Exchange Of Documents & Funds Transfer

The buyer’s solicitor will transfer the balance of the purchase price to the seller’s representative in exchange for the title deeds and other legal paperwork necessary to transfer ownership. 

As a seller, these funds will be deposited to your nominated account by your solicitor once all fees and charges have been deducted. 

Payment Of Stamp Duty

A mandatory tax levied on property purchases, a buyer’s solicitor must pay the required stamp duty to the required state or territory revenue office on the day of settlement. 

Registration Of Ownership Transfer 

As a last step, the buyer’s solicitor or conveyancer will lodge a registration request for the transfer of ownership with the relevant land titles office. 

 

Post-Settlement 

Following settlement, there are some additional administrative tasks that must be completed. 

Notify Authorities 

A job for the vendor and buyer, each party needs to update their address details with relevant government agencies and utility providers. 

This ensures all future correspondence and billing can be directed to the correct party. 

Distribution Of Funds

Solicitors on both sides ensure all transaction fees, outstanding costs, mortgage balances or similar are paid and any residual funds returned to the relevant parties. 

A buyer’s solicitor will also check that the prior mortgage on the property held by the former owner has been properly discharged. 

Updating Of Records 

Following registration of the ownership transfer, a solicitor will ensure this is processed and properly updated with a new certificate of title issued to the buyer as proof. 

 

How To Ensure A Smooth Settlement Process 

Should any of the required steps not be able to occur on settlement day, this can mean a failed settlement. 

This can come with significant legal and financial consequences, including the collapse of a sale altogether and loss of deposit.

To avoid this we recommend:

Clear Communication

Make sure both parties agree on a clear settlement date and timeline in which this will be managed. 

Should issues arise, they must be discussed as a priority and a resolution sought as quickly as possible to avoid delays or complications. 

Careful Selection Of Representation

Be sure to research your choice of legal representation. Your solicitor or conveyancer must be properly qualified and capable of managing the settlement in the required timeframe. 

Look for representation that has a reputation for being thorough, reliable and committed to achieving the best outcome for their clients. Ask for recommendations from friends and also check online reviews and testimonials to find a trustworthy professional you can count on. 

Diligent Financial Preparation

If your finances are not in order as a buyer, settlement simply cannot proceed. This not only means ensuring that the balance of the purchase price is available on settlement day. 

You must also make sure there are adequate funds ready to cover stamp duty and legal fees, your solicitor should make you aware of exactly what is needed in regard to this.  

Detailed Attention To Documentation 

We know that reading the fine print may seem like something best left to your solicitor and while this is true in part, it is also important that you read it too. 

You must be across all terms and conditions and ensure you have completed and signed everything as required. Errors in paperwork can lead not only to difficulties with the settlement but may also leave you open to disputes or challenges afterwards.  

Smoother settlement

Build Your New Home And Enjoy A Smoother Settlement 

At Stop Renting Perth, we can help you enjoy an easier settlement through the building of your dream home. 

Skip negotiations with difficult vendors and potentially save on stamp duty and other costs by leveraging available government grants for new builds. 

With us, you can choose from over 70 home designs and build in your ideal suburb, with land available in locations all over Perth. We keep you up to date on all progress and work closely with your solicitor to ensure a smooth, fuss-free settlement. 

Learn more through an obligation-free consultation, scheduled at a time that suits you, call 0402 513 446 today. 

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