Settlement day can be a highly stressful, but exciting event, especially for first-home buyers.
But preparation is key to a worry-free settlement day.
What is settlement?
Settlement day is the transfer of a property’s legal ownership from the seller, or vendor, to the buyer, and usually occurs around four to six weeks after property contracts are signed.
The vendor receives their payment via a trust account (although this may take 24 hours).
The buyer receives the property’s keys along with all property maintenance, insurance and utility cost responsibilities.
These responsibilities begin immediately, regardless of whether the buyer is moving into the property right away or it is tenanted in the short or long term.
What happens on settlement day?
The buyer’s lender will “draw down”, or debit, the loan they approved.
The buyer must also pay all remaining fees and costs incurred as part of the property purchase such as legal fees; transfer or stamp duty; and Mortgage Lenders’ Insurance (LMI).
As the lender is working behind the scenes on settlement day, so will the buyer’s and vendor’s conveyancers or solicitors.
These two people will liaise with each other on the day, coordinating funds transfers and the signing of various documents.
They will also make final financial adjustments such as who pays for what when it comes to council rates and utilities, and organise this paperwork.
Once all payments have been confirmed, conveyancers will ensure the property’s title deeds are transferred from the vendor to the buyer and lodge this paperwork with the titles office.
How to prepare for settlement day
Buyers will need to ensure the following:
A final property inspection is completed as close to settlement day as possible.
Final funds are transferred well in advance of settlement as financial transfers, especially to another lender, can take several days.
That all legal and mortgage paperwork is signed and approved.
Vendors buying and selling at the same time, which is often the case, should aim for a simultaneous settlement, or the settlement of both properties on the same day.
This ensures an expensive bridging finance loan isn’t needed and there is no need to find alternative accommodation which requires a double move.
Either way, vendors will need to have moved out of their home by settlement day and have all utility disconnections organised as after this day, they are no longer legally allowed to enter the property.