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What happens on settlement day?

By Addy Whitburn

You looked for months, attended auction after auction and finally secured a winning bid on your dream property.

Somewhere in between the champagne and the celebratory Instagram posts, you try to wrap your head around everything you need to organise. Insurance, removalists, conveyors. The list seems endless.

Before you’ve had a chance to catch your breath, it’s settlement day. But what does that even mean?

What is settlement?

Settlement is the official process conducted by the legal and financial representatives of both you and the seller. While the length of the process varies from state to state, it usually takes anywhere between 30 and 90 days.

The time it’s likely to take your bank to sign off on your mortgage is one of the main determinants of the length of your settlement.

Need to know: The process of buying property

What happens on settlement day?

Settlement day is the day you assume legal ownership of your home. Taking place on a date agreed upon by both parties, it involves your settlement agent (solicitor or conveyancer) and your lender meeting the seller’s representatives to sign the final documents of the sale.

Once the documents have been signed by both parties, they’re sent to the titles office to register you as the new owner of the property.

Melbourne home owner Alice Hodges recently settled two properties within an hour of each other.

Hodges’ conveyancer, Jo Richmond from Law554, says all the documentation was taken care of well before the settlement date. “We like to do this so we can check the paperwork and make sure it’s executed by all parties,” she explains.

“Where there’s a bank involved we start talking to the bank to figure out if there’s any shortfall that the client needs to provide at settlement.

“We let the client know that they’ll need ‘x’ amount of money and they need to nominate a bank account from which to withdraw the shortfall. On our advice the bank will withdraw those funds.”

Hodges was worried about these funds. Despite assurances from Richmond and her bank that everything was in order, she was stressed prior to settlement day.

“I’m now slightly embarrassed at how much I was stressing beforehand. I bet conveyancers and mortgage brokers see this all the time,” she says.

How do you prepare for settlement?

According to Richmond, the hardest part of settlement day for her clients is packing up and cleaning the home and disconnecting and connecting the utilities. “We take care of the paperwork so they can get on with the cleaning,” she says.

“Probably two weeks out from settlement we’re trying to finalise our figures in relation to council and water rates.

“We write to the council and water authorities advising them of a change of ownership, but [clients] have to ring up and get their gas and power connected.”

You should also carry out one final inspection of the property before settlement day. If you can’t do it yourself, or don’t feel confident that you’ll know what to look for, you can hire a professional to conduct the inspection for you. The point of the final inspection is to ensure the house is in the same condition it was when sold.

You don’t actually need to be present on settlement day, as your representatives can take care of all documentation and financials. However, you will need to oversee the removals process.

“We let clients know 7-14 days beforehand when the settlement times are scheduled, to [give them time to organise] their moving company,” Richmond says.

Hodges says she let her removalists “know that they’d have a couple of hours rest in between loading our truck from our old place, and delivering it to our new place (pending settlement)”.

“They were fine with that and had done it before.”

How long is a settlement day?

Hodges was told everything had been successfully processed roughly ten minutes after both scheduled appointments.

“What a relief. The best bit was being told, ‘congratulations – go and get your keys!’”

Hodges believes that being prepared guaranteed a speedy settlement. The way she sees it, making sure her conveyancer and mortgage broker had everything they needed before settlement day was crucial to the smooth transition.

“You really need to do everything they say, and give them everything they need. Then it’s out of your control.”

When an agent contacts you to let you know the date and location of settlement day, it’s worth asking them for a short checklist of things you need to before your representatives sign on the dotted line.

What can go wrong?

Richmond says hiccups rarely occur, but when they do, they’re usually resolved on the same day.

“There have been instances of clerks turning up at settlement missing a document. If those things happen, everyone scrambles together to try and solve the problem as soon as possible.

“Sometimes settlement is pushed back to allow the offending parties to rectify the problem. We always work to settle it on the same day that it has been scheduled because we know that most of the time people need to move into the property.”

What happens after settlement?

After settlement, your lender will draw down your loan, debiting the amount they’ve paid at settlement from your loan account.

Richmond says she sends a final reporting letter to her clients after settlement, to inform them that settlement was completed and the money was received on their behalf.

“We also write to the authorities advising them of the change in ownership. Where there is a bank involved, the bank will report a breakdown of the loan distributions.

“There’s not much to do for them except enjoy the home.”

Hodges says aside from a couple of minor things like nominating a bank account for the sale proceeds, there was nothing left to do except celebrate.

“Once you’ve got the keys, you can unpack and enjoy your new home.”

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