What happens on settlement day?

You’ve been through the hard yards of inspecting properties for sale, arranging finance and putting in offers, and now you’re almost at the finish line – you’ve signed a contract for a home, and it’s about to become yours. Settlement day is almost here, but what exactly does that mean, what do you need to do beforehand, and what else should you be aware of?

What is a property settlement?

Property settlement is the legal process by which ownership of a property transfers from the seller to the buyer. It is the process by which the funds required to complete the purchase of the property are transferred to the seller (typically by the buyer’s bank or other lender) and important administrative tasks are completed.

As settlement is typically complex, most home buyers will engage a conveyancer or solicitor to assist. These professionals will generally be able to do such things as carrying out due diligence checks related to the purchase, liaising with the seller’s representatives, and ensuring that the necessary paperwork is completed and legal requirements are met.

The length of time taken for the settlement process varies, although it is typically between 30 and 90 days, and the process comes to completion on what is known as ‘settlement day’.

→ Read more: What is a home loan settlement period?

What happens on settlement day?

Settlement day is the day on which the buyer of a property assumes legal ownership, and the required funds are transferred to pay for the property. There are a number of tasks that your lender and your solicitor or conveyancer will carry out on or before settlement day to ensure the process runs smoothly and the funds for the purchase are transferred as required.

What does your lender do on settlement day?

On settlement day, your lender will:

• transfer the remaining purchase price of the property (less any deposit you have paid) to the seller, and notify them.
• register a mortgage in your name against the title of the property, noting the amount now owing on your home loan for the purchase.

What does your solicitor or conveyancer do on settlement day?

On settlement day, your solicitor or conveyancer will:

• consult with your lender to make sure the necessary funds for the purchase of the property have been transferred to the seller.
• register the transfer of land and the new mortgage with the relevant title office in your state or territory.
• make sure any existing mortgages on the property are discharged, and any previous persons who had rights or caveats over the property are removed from the title.
• ensure that all clauses in the contract of sale between the buyer and seller have been fulfilled.

How do you prepare for settlement day?

On settlement day itself, you will likely not need to do much, assuming that you have engaged a solicitor or conveyancer to act on your behalf. This is because they and your lender will normally take care of the required administrative tasks and transfers of money. Prior to the day, though, there are some things you will need to take care of, including making sure that:

• you have engaged the services of a solicitor or conveyancer to act on your behalf in the settlement process, should you require one, which is generally advisable,
• you have arranged finance and you have the money you will need to cover such things as stamp duty, lenders mortgage insurance (LMI) and other expenses,
• you have signed the contract and agreed on a settlement date with the seller,
• you have completed a building, pest and final inspection of the property to make sure you’re happy with it and that it is in the same condition as when you signed the contract, and
• you have arranged appropriate home insurance to cover the property.

Can you inspect the property before settlement day?

Typically, buyers will have the opportunity to conduct one final inspection of the property before the purchase is complete. Usually this is done anywhere from the morning of settlement day to several days before.

The reason that this inspection can be important is that the seller is expected to hand over the property in the same condition in which it was purchased, so the buyer will therefore have the opportunity to make sure nothing has changed at the property and contractual conditions have been met. ANZ notes that if the condition of the property has changed by the time of your final inspection, you may be able to ask the seller to fix certain aspects of it before settlement.

What should you look out for at a pre-settlement inspection?

When conducting your pre-settlement inspection, it is important to make sure that the house is in the same condition as when you signed the contract, and in particular, to take note of key factors such as:

• Fittings and appliances: When conducting your pre-settlement inspection, it is important to make sure that appliances and fittings, such as pool pumps, stove tops, air conditioners and electric garage doors, are functioning properly and in the same condition as when you initially inspected the house.
• Special conditions: When you entered the contract to purchase the home, you may have included special conditions – for example, requiring the seller to have the home professionally cleaned, or to fix a broken lock. An inspection will allow you to ensure these conditions have been met as you and the seller agreed upon.
• Inclusions and exclusions: It may be the case that your contract of sale specifies which items are to stay with the house (inclusions) and which are to be removed (exclusions). An inspection will allow you to ensure that any items such as a dishwasher, which were listed as inclusions, have not been removed.
• Damage to the property: It is also important to make sure there has been no significant damage to the property since you previously inspected it.

Your conveyancer or solicitor may be able to advise you on what to look out for at a pre-settlement inspection. They may also potentially be able to assist you in determining a course of action if any issues or breaches of the contract are uncovered at the inspection.

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