What to expect on settlement day
What is settlement?
Settlement is where that massive chunk of money you've borrowed from the bank gets handed over to the vendor, and in return, you get the keys and a bunch of paperwork which enables you to be registered as the new owner of the property. “It is the finalisation of the sale/purchase. This is your ‘signed, sealed, delivered’ moment. After settlement and the lodgement of paperwork, you will officially be the legal owner of your new home!” says lawyer Ken Fung from Conveyancing.com.au.
How long is it?
Generally speaking, the settlement period is usually 30 to 90 days, and is a date agreed by both parties and stipulated in the contract of sale. It 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.
Settlement is a legal process involving financial representatives (bank or lender) and legal representatives (conveyancer or solicitor) for both buyer and seller. “Conveyancing refers to everything that needs to be checked, searched, signed, and certified,” says Ken, which is why a conveyancer should be engaged when you first start looking to buy property. They are essential during this final phase.
Consumer Affairs Victoria says, that “you are entitled to inspect the property at any reasonable time during the week before settlement.” So, you’ll also need to be in touch with the estate agent to arrange the final inspection, which is to check the property is still in the same condition it was on the day of the sale. The estate agent is also the one who hands over the keys.
If you’re buying a brand-new home, you may want to get a building inspector to conduct a final inspection to make sure all Australian Building Codes have been met. 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."
Finally, if settlement day is also moving day, you’ll also be dealing with removalists.
What’s happens financially?
“Settlement is when the buyer pays the balance of the purchase price to the vendor,” says Ken. “Your conveyancer will confirm with your bank to make sure they’re ready to provide and transfer the amount required.”
Other bills you need to pay on the day include land transfer duty, commonly known as stamp duty, and if you have it, lenders mortgage insurance. Stamp duty, which can be tens of thousands on top of everything else, is paid at settlement, usually electronically. While in some rare cases you have up to 30 days from settlement to pay this, the title to the property – that piece of paper saying it is yours – will not be transferred to your name until you have paid this in full.
To calculate how much you might be up for, check here.