Property Settlement: Everything You Need to Know When Buying A Home

Property settlement is the most exciting step in the home-buying process. It’s when ownership is officially transferred from the seller to you. But what exactly happens on settlement day? And how can you prepare for it? Typically, you’ll have an expert Sydney conveyancer manage the process. But in the meantime, this guide will walk you through everything you need about property settlement, from the steps to what you should expect on the day.

By the end, you’ll be ready to approach settlement confidently, knowing what’s ahead and how to prepare.

What is Property Settlement?

Property settlement is the legal process that finalises the transfer of ownership from the seller to you as the buyer. It’s when you pay the remaining purchase price balance, and the seller hands over the keys. But it also involves other steps – like legal advice and paperwork, transferring funds, and registering the title.

The timeline for property settlement is agreed upon when you sign the contract of sale. Settlement periods are usually between 30 and 90 days. However, depending on what you and the seller negotiate, they can be longer or shorter. 

During this time, both parties get their affairs in order. The seller finalises any remaining property obligations, and the buyer organises finances, inspections, and all the necessary legal paperwork. While the settlement process might seem technical, understanding how it works will ensure you’re prepared when the time comes to take ownership of your new home.

What Happens on Settlement Day?

Settlement day is when all the legal and financial support loose ends come together. It’s the day you officially own your new home and receive the keys.

Here’s a step-by-step breakdown of what happens during the settlement process:

Conduct the Pre-Settlement Inspection

In the week leading up to settlement day, you should conduct a final inspection of the property, known as a pre-settlement inspection. This is your last chance to make sure the home is in the same condition as when you signed the contract. If you spot any issues, such as missing fixtures or property damage, you can address them with your solicitor before a settlement is finalised.

Transfer the Funds 

You usually pay your deposit before settlement day to secure the property. This money is held in the real estate agent’s trust account before being transferred to the vendor upon settlement (or earlier, if agreed). On settlement day, your lender will provide the remaining purchase price balance, transferring the funds to the seller’s representative. The amount may include adjustments for council rates and water bills, prorated according to the handover date. The seller is responsible for these costs until settlement, after which you take on the responsibility as the new owner.

Pay Stamp Duty

Stamp duty (also known as transfer duty) is typically paid on the day of settlement, although in some states, you can pay it up to three months after. Your conveyancer will ensure the payment is made on time.

Sign All Documents

On settlement day, both parties’ representatives exchange and verify the final documents, including transferring the property’s title. Once signed, these documents are submitted to your state or territory’s land titles office to officially register you or your partner as the new owner.

Collect the Keys

Once the paperwork and funds have been exchanged, the real estate agent will hand over the keys to your new home. Now, you are officially the owner. Time to pop the champagne and start planning where the couch goes.

Did you know? As the buyer, you don’t need to be there on settlement day. Your legal representative (usually a conveyancer) meets with the seller’s representative and your lender to handle the exchange of documents and funds. They’ll let you know when it’s all complete, deal with any issues, such as missing signatures or funds, and keep you updated throughout the process.

How to Prepare for Settlement Day

While your team should do the heavy lifting on settlement day, there’s plenty you need to do in the lead-up. Organising everything ahead of time makes settlement day a smooth experience. Here are some tips to ensure you’re ready:

Engage a Conveyancer Early

Once you’ve decided to purchase a property, you should engage a conveyancer to help. A conveyancer is a licensed professional specialising in property law and managing the legal aspects of transferring ownership. It’s their job to ensure everything goes smoothly. They’ll guide you through the sale’s legal aspects, including preparing the contract of sale, conducting title searches, and managing the paperwork on settlement day. If you’re looking for a top conveyancer near you, look at our Sydney, Melbourne, and Brisbane shortlist.

“We always recommend that first home buyers use a good property solicitor for their first purchase. It can be the difference of a few hundred dollars in cost upfront. However, it could save you tens of thousands of dollars and heartbreak down the line if the person you use misses significant repairs that need to occur on your property.”

–   James Haywood, Approved Property Finance

Organise Your Finances

Make sure your loan is approved (a mortgage broker can help here) and that you have all the necessary funds available for settlement. This includes the remaining purchase price and additional costs like stamp duty, legal fees, and Lender’s Mortgage Insurance (LMI) if applicable. It’s a good idea to double-check with your lender that everything is in place a week or two before settlement to avoid last-minute surprises.

Take Out Insurance

Don’t forget to arrange building and contents insurance before settlement day. Most buyers arrange for their insurance to start on or before the settlement date, so the property is covered as soon as they take ownership. The last thing you want is to move in and discover a burst pipe or storm damage without coverage.

Arrange Movers

It sounds obvious but book your removalists early to lock in conveniently. Moving companies can get booked out, especially around peak periods, so securing your movers well in advance will save you stress.

Set Up Utilities

While your conveyancer will notify the council and water authorities of the change in ownership, it’s your responsibility to set up or transfer utilities like electricity, gas, and internet. Organisations can take time, so don’t leave it to the last minute. Doing this in advance means everything will be ready when you move in – so you’re not left cooking dinner in the dark on the first night.

What Happens After Property Settlement?

So now you’ve got the keys and moved into your new place. You’ve set up the TV, unpacked a few boxes, and probably ordered takeout to celebrate. But what happens next? Here’s what you can expect:

The Title is Transferred into Your Name

Once settlement is complete, the transfer of the property title will be registered with the relevant state or territory government agency. They’ll update the public records to reflect your ownership. This officially makes you the new owner, so you can rest easy knowing the property is legally yours.

Post-Settlement Wrap-Up

After settlement, your conveyancer will send you a final report outlining the settlement details. This will include a breakdown of the costs and confirmation that the property is now in your name.

You Start Paying Your Mortgage

After settlement, your lender will draw down on your home loan. They’ll debit the amount paid at settlement from your loan account. You’ll then start making regular mortgage repayments based on your agreed terms.

Common Settlement Delays and How to Avoid Them

Every homeowner hopes for a smooth settlement process. But even with the best preparation, sometimes unexpected delays can occur. Here are a few common issues and tips on how to avoid them:

• Financing issues: Delays in securing your home loan or last-minute changes in your financial situation can throw a spanner in the works. To avoid this, double-check with your lender a week or two before settlement that everything is ready.
• Incomplete paperwork: Missing or incorrect documents can delay settlement. This is especially true if critical details like signatures or payments are overlooked. Work closely with your conveyancer to ensure all paperwork is complete and accurate well before the settlement date.
• Problems with the final inspection: If your final inspection reveals damage or uncompleted repairs, this can delay things as the issue is addressed. That’s why it’s best to conduct the inspection about a week before you pick up the keys – it gives you enough time to resolve any problems without pushing back the settlement date.
• Seller-related delays: Sometimes, the seller experiences delays on their end. They might need extra time to move out, or there could be complications with purchasing a new property. If this happens, the settlement date may be renegotiated. The contract may sometimes include a sunset clause, which outlines what happens if settlement is delayed beyond a certain point.

The Property Settlement Process (During Divorce or Separation)

Property settlement also involves the legal process of dividing property and financial resources between parties after a separation, divorce, or when completing a property transaction like buying or selling real estate.

In family law, property settlement involves dividing all the property, including assets like the family home, bank accounts, superannuation, and personal debts. This process can apply to married and de facto couples, where de facto relationships are those where partners live together on a genuine domestic basis but are not legally married.

Whether in a de facto relationship or a marriage, property settlements ensure that assets and liabilities are divided relatively based on direct and indirect financial contributions and non-financial contributions such as unpaid work in the home.

Property settlement is the final phase of the sale process for property transactions, where property ownership is officially transferred from the seller to the buyer. This involves completing all legal and financial arrangements, such as paying stamp duty, settling any outstanding financial agreements, and registering the property title in the court registry.

Step-by-Step Breakdown

Initial Steps

The first step in any property settlement is gathering all necessary documentation. This includes property deeds, financial records like bank statements and tax returns, superannuation details, and information about any personal debts. Being organised from the outset is crucial for a smoother process.

Valuing Property and Assets

Accurately valuing your assets is an essential part of property settlement. This includes everything in the asset pool, from the family home and investment properties to personal items and financial resources. Professional valuations might be necessary, especially for real estate or complex assets like businesses. It’s also vital to consider superannuation, which is often one of the most significant assets and can be split between parties as part of the settlement.

Negotiation and Mediation

Before resorting to court, it’s essential to try negotiation or mediation. These dispute-resolution methods can lead to a mutually agreeable settlement without the stress and expense of court proceedings. During mediation, a neutral third party helps both sides communicate and reach a fair agreement. In many cases, genuine negotiation can result in a written or informal agreement that reflects both parties’ wishes and is quicker to finalise than a court order.

Court Proceedings (if necessary)

If negotiation fails, court proceedings become the next step. This process can be lengthy and involves presenting evidence, cross-examining, and awaiting a judge’s decision. The court considers all relevant factors, including any evidence of family or domestic violence together, to determine a fair division of property. Court orders issued are legally binding and enforceable, ensuring that both parties comply with the settlement terms.

Finalising the Settlement

Once the court decides that an agreement is reached or a court order is made, the final steps involve formalising the settlement. This includes drafting and signing legal documents, transferring ownership of assets, updating property titles, and making necessary financial arrangements, such as splitting superannuation payments.

Conclusion

Property settlement can seem daunting, but with the proper preparation and understanding of the process, you can make it through without any stress. Each step brings you closer to owning your new home, from organising your finances and conducting a final inspection to receiving the keys on settlement day. Stay calm, work closely with your real estate agent and Sydney conveyancer, and you’ll be unpacking quickly.

FAQs About Property Settlement

What is property settlement?

Property settlement is the process where the legal ownership of a property is transferred from the seller to the buyer. It involves signing paperwork, transferring funds, and registering the property title in your name. This is the final step before you officially own the property.

Do I need to attend the settlement in person?

No, you don’t need to attend court or settlement in person. Your conveyancer or solicitor will handle everything on your behalf, including exchanging documents and funds. You’ll be informed once the process is complete, and you can focus on moving in.

How long does the settlement process take?

The settlement period is usually between 30 and 90 days, but it can be shorter or longer depending on family law and what’s agreed upon in the contract of sale. This time is used to sort out legal, financial, and practical details before settlement day.

What happens if there’s a problem during the final inspection?

If you find issues during the pre-settlement inspection, like damage or missing fixtures, notify your conveyancer immediately. They’ll address the issue with the seller to ensure it is resolved before settlement. This first dispute resolution may involve repairs, compensation, or delaying settlement.

When do I need to pay stamp duty?

Stamp duty is typically paid on settlement day, but in some states, you can pay it up to three months later. Your conveyancer will arrange the payment and ensure it is processed on time to avoid delays.

Can settlement be delayed?

Yes, settlement can be delayed for various reasons, such as financing issues or problems on the seller’s side. If delays occur, your conveyancer can negotiate a new settlement date. Some contracts include a sunset clause to limit the time and how long settlement can be delayed.

When will I receive the keys to the property?

You’ll receive the keys to the family home on settlement day after all documents are signed and funds are transferred. Your real estate agent will usually hand them over once everything is complete.

When do I start making mortgage payments?

Your mortgage payments typically start immediately after settlement. Once your lender draws down on the loan and transfers funds on settlement day, you’ll begin making regular repayments according to your loan agreement.

What happens if I don’t have enough funds on settlement day?

If you don’t have enough funds to complete the settlement, it can delay the entire process and may incur penalty fees. To avoid this, ensure your finances are fully arranged well in advance and confirm with the family court and your lender that everything is in order before settlement day.

What is an adjustment in property settlement?

An adjustment refers to the pro-rata costs for council rates and water bills divided between the buyer and seller based on the settlement date. Your conveyancer will calculate these adjustments and include them in the final amount payable at settlement.

What happens if the seller hasn’t moved out by settlement day?

If the seller hasn’t moved out by the agreed settlement date, your conveyancer can negotiate for compensation or a delayed settlement. This situation should be addressed quickly, as you can take possession of the property once settlement is complete.