What is property settlement and how long does it take?

What is property settlement and how long does it take?

May 29, 2024 | by DiJones

Ready to move into your new property? There’s one last step to take before you collect the keys: the settlement.

Property settlement lets you and your seller finalise terms for your move. It ends on a final day, on which you pay the remaining balance and take ownership of your property.

It’s a formal requirement, so you’ll need legal representation. In addition, it’s a chance for you to budget and plan your move.

But how do you prepare for settlement day? How much time do you need to wait? What do you need to know?

DiJones is a real estate expert in Australia. We often see clients feeling daunted by settlement, so we’ve created this article to help you understand the process. Let’s start by looking at what settlement means.

What does property settlement mean?

Settlement is the final step before you assume legal ownership of your new home. It happens after you pay your deposit and sign any contracts. You will pay the outstanding balance of your home’s purchase price to your seller on your agreed settlement day, and then you will become the official owner of the property. Settlement is a formal process. Your legal representative will take care of the details. Still, being informed about all the elements that go into a successful settlement will let you plan and budget for your move.

How long does settlement take?

Settlement always ends with ‘settlement day’. That is just the date you’ll pay the remaining purchase price balance to your seller and get ownership of the property. But there’s a lot of work to be done before settlement day. The whole settlement period normally takes approximately one to three months. This leaves enough time for you and your seller, plus the lenders and each of your legal representatives, to: - Finalise sales contracts with the correct settlement date and amount to pay. - Budget your money so you’re ready to pay on settlement day. - Complete a final inspection of the property. - Organise insurance for your building or contents to start from move-in day. But of course - as with anything in life - the actual time frame can vary depending on several things like what you find in your property inspection and the coordination between you, your seller, and each of your representatives.

What happens on settlement day?

Once all of the pre-settlement necessities are out of the way, you’ll reach your agreed settlement day. As the name suggests, this process shouldn’t take more than a full working day. On that day, your representative will meet with your seller’s representative to hand over the final documents and make arrangements for you to pay the final balance and claim ownership of the property. They will also review any necessary documentation to ensure that any existing mortgages or rights to the property are removed and that the seller fulfils any contingencies on your sales contract.

What factors affect settlement time?

As mentioned in the previous section, settlement usually takes 30 to 90 days, but this isn’t always a shoo-in. Your actual settlement time can vary depending on several variables. Let’s examine four you need to consider. 1. Contractual agreement Contracts might have contingencies that you need to iron out, such as subject-to-sale or finance clauses. While it might be easy to agree on the special conditions of a contract, the property settlement process might be longer if you need to work through disputes.

2. Financing If you need to secure a mortgage before you can pay the final balance, this can be time-consuming and extend the settlement process. To ensure the smooth completion of this process, we recommend having all of your financial documentation on hand and responding to requests quickly. 3. Searches and approvals Your final property inspection is an opportunity for you to uncover any problems with the home that your seller didn’t specify. While this is an essential part of any pre-settlement, it can also add a lot of time to the process, especially if you find problems that take time to resolve, such as damp, mould, or electrical issues. 4. Communications and coordination Finally, there’s the intangible. Many different people are working on your settlement, meaning it’s easy to lose time if one person isn’t keeping up. The deal can’t be finalised if one person is out of sync. So, to avoid any hiccups and unnecessary financial stresses, it’s important to stay on top of everything to ensure the property settles on the agreed date.

Understanding everyone's roles and responsibilities

Navigating the settlement process is a joint effort. Everyone needs to do their part to communicate effectively and streamline the process. We can break down the most important roles into four parts. Buyer The property buyer is responsible for organising their finances and making the payment on settlement day. This might include getting mortgage approval by the deadline outlined in their sales contract. Buyers also need to handle their final property inspection, whether by doing it alone or arranging for an inspector to take a look at the building. Seller The seller will provide all the documentation (like title deeds and property certificates) to the buyer’s legal representatives. They also have a duty to address any property issues you bring up when conducting your final inspection. Aside from this, your seller should also be readily available to contact to make sure any negotiations go smoothly. Conveyancers and solicitors Both seller and buyer will have financial representatives who handle the details of the settlement for them. These representatives will take care of the whole settlement, handling deadlines, reviewing contracts, performing inspections such as land title searches, and providing legal advice to guide clients through the process. Lenders The lender reviews the mortgage application and determines eligibility to receive finance. They will usually transfer mortgage funds on the day and ensure requirements are met for the transfer of ownership. While they may not be as closely involved in the process as conveyancers or solicitors, they’re an important piece of the puzzle because the day of the settlement hinges on their cooperation and communication.

Tips for a smoother settlement

Settlement can feel a bit manic. Here are a few things to prepare to make the process go smoothly. 1. Have a checklist for property inspection There’s a lot to think about when planning your move, not least making sure you’re getting the property in the same condition you bought it. You should have a checklist for everything you want to assess. You often won’t find any obvious problems until you take a closer look under the hood. Ask these questions: - Is the hot water working? - How about heating and cooling systems? - Is the structure suffering from any damage, both internally and externally? - Are there any moisture problems in the house? - Do all keys work as they should? - Does every appliance provided work properly? Problems with moisture and internal wiring can be tricky to spot, so if you don’t feel confident, work with a building inspector who can check for any hidden defects before you reach settlement day.

2. Sort your insurance ahead of time You should line up your home and contents insurance policies well in advance. You can prepare so that your coverage starts on the day you claim ownership of the property. Aside from making sure the transition goes smoothly, sorting out insurance ahead of time means one less headache to worry about when you’ve got a lot on your plate while you move in.

3. Keep tabs on the process Settlement requires coordination. To ensure everything goes smoothly, you should keep in open contact with your representatives and your vendor’s real estate or settlement agent to make sure everyone is on track.

4. Choose an experienced conveyancer/solicitor Property settlement can be an intricate process. Look for a conveyancer or solicitor who understands your needs and has local knowledge of your area. Also, seek out someone with transparent fees so you aren’t caught unawares. You can check online reviews to find the best representative in your area. Look for qualifications that show they’re the right expert for the job. If in doubt, ask around for recommendations from friends and family.

What happens after settlement is complete?

Settlement day is over. What now? First, you’ll need to pay land transfer duty (previously known as stamp duty). This tax varies by state and territory. The value of the property will also impact this. The more expensive the home, the more you pay. Work out how much this tax will cost ahead of time so you’re prepared. After these details are finalised, you will receive the keys to your new dream property and will usually be free to move in. Remember that once you have ownership, you’ll immediately be responsible for fees like council and water bills. Plus, you’ll need to start paying back the money you loaned from your lender, so plan these costs into your budget.

Frequently asked questions

What is a ‘contract of sale’? This legal contract facilitates the transfer of home ownership between a seller and buyer. It outlines terms like purchase price and the date of settlement. The contract is legally binding, which is why both parties need a conveyancer or solicitor to handle the negotiation.

What is settlement day? Settlement day happens after contracts have been signed and the cooling-off period is complete. It is the day for the buyer to pay the remaining balance. Once that’s done, the seller will transfer over legal ownership. Both parties rely on their legal representatives to handle the details on the day.

What’s a title search?  This is the process of investigating a property’s ownership. A conveyancer or solicitor usually carries this out to ensure the seller is actually allowed by law to sell. They might do this by looking at public records to identify restrictions and encumbrances that could impact the transfer of ownership.

How soon can a new owner move in after settlement?  You can usually move in as soon as you have the keys, but sometimes, you may need to wait a few days before entering the property. These details should be outlined in your contract. If in doubt, contact your seller or representative to make sure everyone is on the same page.

Summing up

Settlement can be daunting. There’s no question. But with the right knowledge and a bit of prep, it doesn’t have to be. Understanding the settlement process basics and knowing everyone’s roles is a good start. In addition, choose a great local legal representative and keep in regular, open communication with them. Ultimately, these experts will be the catalyst behind the whole process. Need more support? DiJones is a real estate expert with thirty years of history helping Australian home sellers and buyers find and sell their perfect properties. If you want to ask any further questions or just fancy a chat, reach out today. We’ll be on hand to help.

DiJones Real Estate, together with their directors, officers, employees and agents have used their best endeavours to ensure the information passed on in this document is accurate. However, you must make your own enquiries in relation to the information contained in this document and seek advice from your financial advisor, broker or accountant to ascertain its application to your circumstances.
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