What to expect on settlement day

A property sale is said to “settle” when the property changes hands from one owner to another. While the buyer and seller don’t usually need to do much on settlement day, it’s worth understanding the processes that the solicitors, conveyancers, real estate agents and mortgage lenders are taking care of behind the scenes. 

What is the settlement period?

The length of time between a buyer signing a contract and the property changing hands is known as the settlement period. Buyers and sellers use the time granted by the settlement period to get their finances and legal affairs in order in preparation for the sale to be finalised.

The settlement period is often between 30 and 90 days, though it could be shorter or longer. A shorter settlement means the property can change hands sooner, which could be convenient if all parties are already prepared. But a longer settlement period can give buyers and sellers more time to get their affairs in order, such as if they need to sell one property to access the funds they’ll need to purchase the second.

Before settlement day, the buyer may need to:

• Get final approval for the home loan (this may require the lender to organise a valuation of the property)
• Prepare to pay extra expenses such as stamp duty, LMI, and other upfront fees and charges
• Organise building and pest inspections
• Organise home and contents insurance for the property
• Organise power, water, phone and internet services for the property
• Book movers
• Conduct a final inspection of the property

The process on settlement day

The process of settling a property sale is typically handled by solicitors and conveyancers, so the buyer and seller don’t need to be present or involved. The whole process may only take an hour.

The exact details of the settlement process may vary in different states and territories, but often will involve the following steps (not necessarily in the following order):

• The buyer’s mortgage lender will pay the required funds to the seller to purchase the property. This may include transferring the deposit from the real estate agent’s trust account.
• The seller will confirm receipt of the money in their bank account.
• The buyer will also need to pay any required upfront costs to the lender and/or the government, such as stamp duty, LMI, fees or other charges.
• The buyer’s mortgage provider will then register a mortgage against the property’s title.
• The solicitors or conveyancers of the buyer and seller will exchange documents and confirm that:
  1. any existing mortgage on the title to the vendor is discharged
  2. any third party or person who has rights over the property (a caveat) is removed
  3. all clauses on the sales contract are fulfilled
  4. the transfer of land and mortgage is registered with the title office in your state or territory.

Once the settlement process is completed, the buyer will be the property’s new owner, and take responsibility for paying the mortgage and any council rates or strata fees required.

Because the settlement process can vary depending on your exact situation, it’s worth consulting with your conveyancer or solicitor for more details on exactly what’s involved. Mortgage brokers and real estate agents may also be able to provide some general advice on what to expect when buying or selling a property.

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