What Is The Property Settlement Process
Property settlement is the process of transferring property ownership from one owner to another. It is a crucial last step to selling a property that is best navigated with the help of a conveyancer or lawyer.
To help you understand this final stage here is a look at the five stages of settlement which we hope makes the next part of your sales journey a smooth one.
Step 1: Exchange of contracts
The first step to legalise the sale is to exchange sale contracts. There will be two copies of the sale contract, one for you and one for the buyer. You each sign one copy before they are swapped or as it is called in a few states ‘exchanged’. This process can be facilitated by your real estate agent, your solicitor or conveyancer. At the time the contracts are exchanged, the buyer will be required to pay a deposit, which is normally 10%, and this will be held in trust by the real estate agent or your conveyancer.
This step is important for a number of reasons:
- The buyer and seller are not legally bound until signed copies of the contract are exchanged
- If you sold your property at auction, there is no cooling off period and the buyer is legally bound to buy your property once the contract is exchanged
- If you sold by private treaty, there is normally a five-day cooling off period during which time the buyer can withdraw from the sale.This may have been waived, extended or reduced in your contract so it’s important to be aware of this
- Generally, a seller does not have a cooling off period, once the contracts are exchanged, they are normally bound to complete the agreement.
Step 2: Prepare for property settlement
The time between the contract exchange and settlement, varies, however the average time is normally six weeks which allows time for buyers to get their finances sorted, and for you as the vendor, to fulfil any special conditions that were outlined in the contract of sale.
For example, your contract may have stipulated that you need to complete repairs or maintenance on the property. You need to make sure these tasks are carried out before settlement day otherwise you risk being in breach of contract and the sale falling through.
Step 3: Pre-settlement inspection
As you approach settlement day, the new buyer has the opportunity to inspect your property. Whilst these are not compulsory, buyers usually want to use this time to check nothing untoward has happened to the property since they signed the contract. It also enables the buyer to check that you have completed any outstanding jobs required as part of the contract.
Step 4: Finalise the transfer documentation
On the agreed day of settlement, your solicitor or conveyancer will contact the buyer’s legal representative to ensure all conditions of the contract have been fulfilled. They will arrange for the balance of your loan to be paid off and the buyers home loan will be registered against the property title.
Your legal team will make sure that all necessary property taxes, land transfer duty and water rates are paid and once everything is settled, the transfer documents will be completed and lodged with the land registration office in your state or territory.
Assuming all goes to plan, the new buyer assumes legal ownership of the property and the keys can be handed over.
Step 5: Completion of the property settlement
Your legal team will notify you when the change of ownership is complete and your lender will provide you with a summary of your loan repayment, interest and any penalties which were necessary to finalise your home loan debt.
And with those five steps completed, it’s time to break out the champagne and celebrate, your property has officially been sold!
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