The property settlement process explained

The term ‘property settlement’ refers to both the process of transferring legal ownership of a property’s title from its seller to its buyer, and the stipulated period of time in which this process occurs. It’s also the final stage of the homebuying process.

This means you’ll reach the settlement period after making an offer on a property, signing a contract of sale and successfully navigating the home loan process.

While settlement day could potentially only take up a few hours of your life, the broader settlement period will typically be much longer than that.

Settlement day is when all the loose ends finally get tied up. It’s also when your home loan’s funds are paid to the seller, and the documents to transfer official ownership of the property to your name are handed over.

The involved parties (i.e. you, the seller, your respective solicitors and/or conveyancers and the lender) will typically complete this together at an agreed date and time and is usually completed digitally.

That being said, you don’t necessarily need to attend yourself; your conveyancer or solicitor can act as your legal and financial representatives during the settlement day proceedings.

During this meeting, you or your representatives will generally have to:

• Transfer the funds necessary to purchase the house
• Sign and exchange the final pieces of documentation with the seller and their representatives
• Register the transfer of ownership with the relevant state or territory government
• Pay any applicable stamp duty on the transaction (if you live in a state or territory where transfer duty is payable on settlement day).

Once this is all done, settlement will be finalised, and you’ll take possession of the property.

Settlement can be a lengthy process, typically taking up to 90 business days However, the specific length of your settlement period will be influenced by:

• The state or territory you live in. Different parts of Australia have different average property transaction timeframes.
• The complexity of the property transaction. For example, buying off the plan will generally require a lengthier settlement period than a conventional property purchase.
• The settlement period length desired by you and the seller. You and the seller will likely get a say on the length of the settlement period.

You and the seller will generally be able to negotiate a longer or shorter settlement period (among other special conditions), but don’t decide on too short a settlement period as lenders and the conveyancers have a lot of work to do during this period and need time to do it.

Otherwise, you could risk the whole transaction falling through on settlement day due to ill-preparedness or a paperwork error.

Things that can go wrong on settlement day typically fall into one of two categories: money problems and documentation problems. Some potential settlement day issues include:

• The balance of the purchase price hasn’t arrived yet
• Documentation has been prepared incorrectly
• One party is missing or hasn’t finalised all the necessary documentation
• The buyer hasn’t insured the property yet (banks generally won’t let the loan be drawn down on until this has happened).

The best way to prevent these issues is simply being prepared and having your documentation and financial matters sorted well in advance of settlement day.

Preparation is essential for settlement day, so you and your conveyancer and/or solicitor should ideally be in regular contact during the process.

However, settlement day preparation isn’t just about sales contracts and transfer documents – you’ll typically also have a slew of more mundane considerations to take care of, including:

• Taking out the appropriate insurance policies
• Getting your utilities sorted, like energy, internet and, potentially, gas
• If needed, arranging for a final, pre-settlement inspection of the property to confirm it’s in the same condition as when you signed the contract of sale
• Packing and booking the movers for the big day.

If you can handle all of that, you should be on track for an issue-free settlement day.

Yes, lenders generally refuse to let buyers finalise the settlement process until they’ve insured their new property. A buyer can take out a home and contents insurance policy for a property they’re buying once they’ve signed the contract of sale.

As this happens well before settlement day, you should generally seek to insure the property you’re buying as soon as possible after signing the contract of sale.

Yes, you’re generally allowed to inspect the property before settlement day. In fact, you’re generally encouraged to do so as part of your due diligence as a buyer to ensure the property is in the same condition as it was when you agreed to buy it.

Delayed settlement can occur if neither party is able to meet the settlement date. This could happen for several reasons; for example, the funds necessary to complete the transaction haven’t arrived yet, or there’s an error or delay with a necessary piece of paperwork on either party’s side.

Some states and territories have grace periods of varying lengths within which the settlement can be delayed by without either party incurring a penalty. However, some places have no such grace periods, so be sure to check with your state or territory’s government revenue office.

If settlement is delayed long enough to incur a penalty, the terms of this penalty will be stipulated in the contract of sale that has been signed by both parties. Penalties can range from an interest charge to the loss of your upfront deposit and termination of the contract.

In the event of a late or delayed settlement, the buyer and seller may be able to negotiate a new future settlement date.

You can’t prevent the other party from potentially making mistakes, but you can do your part by ensuring that you’ve done everything necessary and have all the appropriate resources on hand to facilitate a problem-free settlement day.

Technically yes, you can move in as soon as final settlemessnt is concluded and you’ve collected the keys. Whether you’ll want to do this may vary depending on whether you’re ready to move in and if your utilities are connected. But in the eyes of the law, you’re now the owner of the property and can do as you please!