Once contracts have exchanged, both sellers and buyers are awaiting settlement day.
Settlement periods are a standard of 42 days (6 weeks) but can also be 4, 8 or 12 weeks. Some periods can even be up to 6 months. It differs from case to case! During this time period, both parties' solicitors or conveyancers are making enquiries, undertaking searches and preparing documents to get everything ready for the settlement day. On settlement day, the sale is effectively complete for both seller and buyer.
As most of you only buy and sell houses rarely, we have compiled some key tips for you about the three important steps to get you from exchange of contracts to settlement day as smoothly as possible:
STEP ONE: Organise a Pre-settlement inspection
We always advise our clients to undertake a final, or 'pre-settlement', inspection of the property that they have purchased. The aim of this inspection is to ensure that nothing has been altered and/or damaged since the contracts were exchanged. This should always take place as close to the actual settlement day and time as possible to avoid the possibility of any changes to the condition happening after your inspection, as once the property settles you obtain the property in that condition and do not have any recourse for damages. If it's not possible on the day, an inspection a couple of days before is fine, however we would also suggest asking for the agent to view the property on settlement day to give you the final peace of mind.
What to look for during your pre-settlement inspection:
- Make sure the property is vacant and clean.
- Check that everything is working as it should, including any appliances, switches, air conditioning units, lights and fixtures.
- Check against the 'Inclusions' on the signed front page of the contract. All 'Inclusions' that have been marked, should still be in the property and should not have been removed.
What to do after the inspection
Once the inspection is complete, you should give feedback and instructions to your solicitor/conveyancer. This will either be that all is ok and you're happy on the condition and ok to settle, or that there are damages to the property or inclusions removed that need to be rectified as soon as possible. Ideally they should work with you to get them resolved before settlement occurs, rather than delay the settlement (but they can talk you through options if this happens).
STEP TWO: Documents and cheques exchanged
The settlement day is when the paperwork and the funds are sorted for the property to change ownership from buyer to seller. Your solicitor/conveyancer will advise you of your obligations in this regard.
In a nutshell, this process involves the payment of the remainder of the purchase price for the property from the buyer to the seller, or by the buyer's lender (if a mortgage is involved). Any previous mortgage held by the seller for the property is also discharged at this time.
STEP THREE: Ownership exchanged
The Real Estate Agent will be will receive an 'Order on the Agent' from the seller's solicitor to confirm that the property has officially settled. This instructs them to release the deposit monies they have kept in their trust account to the seller, in addition to any interest accrued during the settlement period (usually split between buyer and seller). They will also take their commission and any agreed marketing from these funds.
Occasionally, reimbursements will be organised in regards to council rates or taxes paid. The seller will pay up to and including the date of settlement, but is usually paid by the buyer for the portion of the rates during which they will take ownership.
Once this has been received, the keys to the property are then released to the buyer, which means the property is now theirs. Buyers can have removalists ready on this day but some delays can occur so this should be considered on settlement day.
Hot Tip: Don't stress! The settlement process and different terminology can get confusing! If you hear terms such as 'Requisitions on Title' or 'Transfer Document' or 'Mortgage', always refer back to your Solicitor/Conveyancer or Mortgage Broker. They will be able to give you professional guidance so each step of the process and all paperwork involved run smoothly and always in your favour.
Please always feel free to ask us if you are unsure on anything on (+612) 9960 1066 or enquiries@pkproperty.com.au, we would be more than happy to assist with answering any questions you may have!