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First Home Buyer
What happens on settlement day when buying a house in Australia?
What happens on settlement day? Learn how property settlement works, what buyers and sellers can expect, and how ownership officially transfers on the final day.
Your successful bid at auction, or successful offer on a property, is cause for celebration. But even after signing the contract, there's another major step to take before you can truly call the property home.
Settlement day is the final step in the house buying (or selling) process. It's the date on which the sale is officially completed and the property is legally transferred from one owner to another.
Sound daunting? It doesn't need to. Put your mind at ease with this simple, easy-to-understand guide to what happens on settlement day.
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Providing accurate information and documents as requested by your conveyancing professional can help avoid your settlement being delayed.
What is settlement?
Settlement is the process of transferring ownership of a property from the vendor to the buyer. Simply put, settlement is the finalisation of a property sale between two parties.
What is settlement day?
Settlement day is the final day of the settlement period. It is the date the buyer is required to pay the balance of the purchase price to the vendor, after which the property title is transferred and the buyer becomes the legal, registered owner and can take possession of the home.
If buying through a real estate agency, you can usually collect the keys for the property from the agency office once settlement has been finalised.
What happens on settlement day?
Settlement day is usually a very smooth process that is carried out between your legal represenative, the vendor's legal representative and the lender (where applicable). The process generally involves:
- Funds owing released to the vendor (from the lender or nominated account)
- Legal documents lodged, transferring ownership of the property
- Mortgage registered on the property’s title (where applicable)
- Settlement confirmed and buyer and vendor notified
- Property keys released to the buyer by the vendor or the vendor’s agent.
How are properties settled?
Most property sales in Australia are now settled through an online settlement platform. This means property documents can be signed online, payments made electronically, and records lodged directly with Land Use Victoria.
How long does settlement take?
Settlement periods for existing buildings in Australia are usually between 30 to 90 days. The length of settlement is decided upon and agreed to by both the buyer and seller when signing the contract of sale.
The length of settlement allows both parties sufficient time to meet their financial and contractual obligations, plus organise the logistics of moving.
If you're buying off-the-plan, it could be a few years until you settle.
Newly built homes can greatly benefit from a final inspection carried out by a licensed building inspector prior to settlement.
Should I inspect the property before settlement?
Consumer Affairs Victoria says, that “you are entitled to inspect the property at any reasonable time during the week before settlement".
This inspection is to ensure that the property is in the same condition it was on the day the contract of sale was signed. If anything is amiss, contact your legal representative (lawyer or conveyancer) immediately to discuss the issue.
The final, pre-settlement inspection can be arranged by contacting the vendor's real estate agent.
Do new homes need a pre-settlement inspection?
Yes, newly built homes can benefit from staged inspections throughout construction and a final handover inspection before settlement.
An experienced building inspector can assess the quality of construction and any defects to ensure the home meets the Australian Standards.
Read more: An expert reveals the most common building issues in new homes.
Consumer Affairs Victoria advises to "use an inspection service with full professional indemnity insurance. This will protect you if the inspection misses a problem that must be fixed".
RACV Members can save with Rapid Building Inspections.
Do I need home insurance during settlement?
In Victoria, the vendor is generally responsible for the condition of the property up until settlement.
RACV Home Insurance cover for buildings starts from the settlement date, not the contract date, and applies once ownership officially transfers.
Having a good conveyancer or lawyer complete your settlement can make the house buying process easier and less stressful.
Who’s involved in the settlement process?
Settlement is a legal process involving financial representatives (bank or lender) and legal representatives (conveyancer or solicitor) for both buyer and seller.
As a vendor or buyer your involvment in the settlement process will be guided by these financial and legal representatives. You're responsible for providing them with the correct infomation and documentation as required, but they will complete the relevant tasks for settlement on your behalf.
This is why it's vital to engage an experienced conveyancer or solicitor, as they are the ones who finalise the property sale. They are also typically the person who will contact you once the settlement has gone through and ownership has been transferred.
What does a conveyancer do?
Your conveyancer prepares all documents required for the settlement transaction, checking and signing the transfer documents on your behalf for registration with the land titles office.
They also confirm any loan funds are ready to be released and that full payment will be made to the vendor on the agreed upon settlement date, along with any other bills owing to third parties (such as stamp duty and lender's mortgage insurance).
More: Everything you need to know about conveyancing in Victoria.
For vendor's, their conveyancer ensures full payment is paid to the vendor at their direction, less any payments required to third parties such as loan repayments or real estate agents.
Once the funds have cleared to the vendor, ownership of the property is transferred to the new owner at the same time.
Who tells council that a property has changed ownership?
Your conveyancer or lawyer will typically alert local council, water authorities, the State Revenue Office and owner's corporation (where applicable) once settlement is complete.
Council rates remain the responsibility of the seller up until and including the day of settlement. As part of your settlement, your conveyancer will draft a 'Statement of Adjustments' that fairly splits any costs that go with the property.
For example, a vendor may have already paid their annual council rates in full. If the property is sold halfway through that rates period, the buyer will take over ownership with six months of prepaid rates already covered. The Statement of Adjustments ensures this is accounted for at settlement, with the buyer reimbursing the vendor for their share of the rates.
It's important your conveyancer accounts for any debts the seller owes on the property prior to settlement so that you do not inherit them with the property.
Note: with the exception of water, connecting utilities to the property is the responsibility of the buyer. You can contact your preferred electricity, gas and internet companies prior to settlement to arrange for connections to occur on settlement day.
Almost all property settlements in Australia are processed electronically, meaning you can go about your normal daily activities on settlement day.
Yes, in theory you can move in on settlement day. In practice, however, this can be difficult as you cannot start moving in until the settlement has been finalised and the keys released by the real estate agent.
Delays to settlements can also occur which can derail same-day moving plans. For peace of mind, arrange moving in to occur a day or two after settlement.
Yes, you can arrange for the sale of one property and the purchase of another property to be settled on the same day.
This process is called simultaneous settlement. Benefits to simultaneous settlement include:
- Not having to pay two mortgages
- Being able to use proceeds from your sale to fund your purchase
Arranging a simultaneous settlement can be complex, however, and is best undertaken by an experienced solicitor or conveyancer.
No, in most cases properties in Australia are settled online via PEXA. This means you can carry out your normal day-to-day activities (for example, go to work) on settlement day. Once settlement is complete your legal representative will notify you.
Hiring a licensed conveyancer or lawyer to manage your settlement is technically not mandatory in Victoria.
However, most property settlements occur through PEXA which can only be accessed by accredited persons who are registered subscribers to the platform. This means that unless you yourself are a licensed conveyancer or lawyer, you will need to hire a professional with these qualifications to finalise your settlement.
Furthermore, settlement is a complicated legal and financial undertaking with serious consequences should things go wrong. Some contracts of sale may even stipulate that licensed professionals are used.
To avoid costly mistakes, it is generally advised that individuals enlist a conveyancer or lawyer when buying or selling property.
Most property settlements proceed smoothly and on time, though sometimes delays can occur. These delays can be caused by:
- Missing or incorrectly filled out documents
- The bank or lender not being ready.
Hiring an experienced conveyancer or property lawyer, as well as competing and submitting all paperwork required of your promptly can help prevent delays in settlement. Settlements can sometimes also be delayed around peak periods, such as in the lead up to major holidays.
The information provided is general advice only. Before making any decisions please consider your own circumstances and the Product Disclosure Statement and Target Market Determinations. For copies, visit racv.com.au. As distributor, RACV Insurance Services Pty Ltd AFS Licence No. 230039 receives commission for each policy sold or renewed. Product(s) issued by Insurance Manufacturers of Australia Pty Ltd ABN 93 004 208 084 AFS Licence No. 227678.
