When you buy or sell a property, the best case scenario is that everything will go as planned. There will be no paperwork errors, no misplaced documents, and settlement day will go off without a hitch. Unfortunately, this is not always the case, and there are times when either the buyer or seller – or even both parties – may need to change the settlement date.
What can cause a settlement date change?
Even after a contract is signed there are plenty of problems that can arise between signing the contract of sale and settlement day.
Here are some of the frustrating and potentially costly issues that can cause change of settlement date.
1. Bank problems
While the homebuyer may be relying on their bank to approve their home loan application, the seller may need to discharge their previous mortgage before the property can be transferred to a new owner. This means settlement cannot occur until the bank has done its part, so if either the buyer or the seller has a delay in returning or delivering important documents, or if there are any other paperwork errors, settlement may have to be delayed.
2. Difficulty selling another property
Another common cause for delay arises when a contract is dependent on the sale of another property. For instance, to be able to fund the purchase of the property, the seller may have to first succeed in selling their current house.
3. Final inspection issues
As the settlement date approaches, the real estate agent will usually arrange an inspection to allow the buyer to see the property before finalising the payment. In some cases, the buyer might discover an issue during the final inspection of the property that was not there earlier – say a faulty door that has not been fixed.
4. Late documentation
During the conveyancing process, a range of documents must be submitted to the relevant government bodies by both parties. If either the buyer or the seller is late in returning completed paperwork, delays can be inevitable.
- third party issues – such as a caveator not removing a caveat
- the seller not vacating the property on time, or not being able to locate the certificate of title
- Any solicitor/conveyancer error – such as one party’s settlement agent being held up in traffic on settlement day.
How can you change the settlement date?
As with any legal processes, things can go wrong in property settlement. Because of this, even if the contract is already signed, you may still be able to change the settlement date for some unexpected or urgent reasons. But you can only do so with the other party’s consent. Remember that the other party has no obligation to agree to the new terms of the contract. If, for any reason, this becomes necessary, it is important to notify everyone involved as much as possible.
Any changes in the contract must be made through a formal, written and legally binding variation.
Common variations to the contract include:
- changing the settlement date to allow for an early or later settlement
- adding or deleting terms or conditions
- any other changes that require both parties’ signatures or written authority
To lessen the likelihood of a dispute arising after any of the above variations is made to the contract, such as change of settlement date, each party should ensure that both parties know:
- that the other party has agreed on the changes
- what the changes exactly are
- the consequences of making the changes
- the costs associated with making the changes
- what will happen if one party does not observe the changes made
Take note that the party who requests the variation is typically the one who will shoulder the associated costs.
A selling agent or a legal representative can conduct the negotiations for a new property settlement date on behalf of the buyer and the seller. And when negotiating, the two parties should choose a date that works for both of them. A tip for both parties is this: Do not agree to a settlement date where you will be unavailable all day.Although you have representatives that can do the job for you on the big day, your presence is still a must!
Due to the fact that a signed contract is legally binding, there is nothing that can stop the sale of the property at this point. Once a new date for the settlement has been set, the sale must go ahead. Ideally, as your conveyancer or solicitor is paid to ensure that everything will go smoothly, there will unlikely be any more issues on the settlement day itself.
How can you prepare for the settlement date?
As the saying goes, "an ounce of prevention is worth a pound of cure." In other words, it's always better to work towards making sure you don't need to change the settlement date if possible.
To ensure that the settlement goes off without a hitch, the buyer and the seller will both have a bit of work to do before the day. Despite having different to do lists, if both parties are on the same page, then everything should fall into place.
For the buyer
First of all, inspect the house before the settlement date to make sure everything is as it should be. Check that all the items listed in the contract are still there. Another thing to do is to arrange building and contents insurance. Give yourself ample time to look for an insurance plan that works for you and covers your house and valuables. Check with your conveyancer or solicitor the plan of the property so you can secure that the documented measurements and boundaries are accurate.
Also, do not organise furniture delivery on the settlement day itself – it will be a logistical nightmare if a delay happens.
For the seller
The most important thing you can do is to make sure your settlement agent and finance manager are available to help you complete the property sale.
Double check if you have completed all the necessary finance documentation. Another thing to do is to ensure that all your furniture and other belongings are removed from the house and, if you have plans of moving to another house that settles on the same day, consider finding accommodation elsewhere that night just in case.
Expect that the buyer will want to do a final inspection of the property a day or two before the settlement date. As such, you should make sure that the house looks as it did – or even better – when the buyer last saw it.
To wrap it up, it is indeed possible to change the settlement date. In reality, it is not a particularly unusual situation for the settlement to be moved, as a property sale is not only between the buyer and the seller but is also organised with banks, real estate agents and solicitors. When you have that many moving parts, delays can sometimes happen.
Even so, the best thing to do is to agree on an appropriate settlement date right from the start and stick to that date as much as possible.