When purchasing a home, the settlement process is the last hurdle before you can finally own the house that you've always dreamed of – the final stage of a property sale, where the buyer settles the payment of the contract and legally takes possession of the property.
The settlement period begins from the day the contract of sale is signed by both parties, and the length of the settlement is already indicated in one of the clauses stated in the contract. Because the length is mutually agreed by the seller and the buyer, the time period can be negotiated, and the actual number of days is dependant on the discussion between the two parties.
That said, the length of the settlement period typically lasts between 30 and 90 days. The most common time period for settlements in different states is 60 days, except in New South Wales where it is 42 days.
Keep it long or keep it short?
The goal of having several days for the settlement period is for you and the seller to conduct the required processes to conclude the home purchase.
For most buyers, the time it takes to get a mortgage approved should be taken into consideration. Typically, lending institutions require two to three weeks to provide you with the approval for your loan.
Once you have a lender's approval, it will take some time to receive and sign all loan documents and have them sent back to the bank for final review. Any missing information or casual error can delay the process for a few days up to a week.
If you are looking to make a more complex transaction – like buying off-the-plan – it would be wise to suggest longer settlement period due to the additional requirements you have to settle.
Generally, the rule of thumb is to keep the time period tight but allow a little bit of leg room in case of any unforeseen circumstances. Typically, a 60-day settlement period is long enough to accommodate most buyers' needs.
Choosing the best time
Before agreeing to a specified date for the commencement of the settlement period, you have to make sure that you have already inspected the property inside and out and that you do not miss anything that might an eventual concern.
You can read more about this in our detailed breakdown of settlement day, but know that you will definitely want to check the following things: appliances like the heating and cooling systems, the hot water system, walls, light fittings, window and floor coverings, locks, keys, and automatic garage door controls.
The goal here is to make sure that the property is in the very same condition it was in when it was sold to you.
Once you've completed your final property inspection, you can now either agree to the settlement date proposed or suggest a time that works better for you.
You should bear in mind that once the contract is signed, you will not necessarily be able to negotiate another settlement date very easily. While you can ask the other party for a time extension or a change of date, the seller has every right to ignore your request. This applies to private transactions and purchases through auctions.
Carefully find a common ground between you and your seller to ensure the ease and convenience of the settlement process.
Tip: Making the process smoother
There are several things you are highly encouraged to do before the settlement process begins. When done properly and timely, these things will be able to help you go through the settlement process with your mind at ease.
First, secure insurance for the property. Insurance will protect you should anything happens to the property during the settlement period.
As mentioned earlier, you should also be able to make a final inspection of the property before the settlement process. Check with your conveyancer that all the measurements and boundaries they match what is stated in the Certificate of Title. If anything puts you in doubt, raise the matter with your agent and the seller as soon as possible.
You can also do a title search to make sure what you are buying is legitimate.
Being thorough and accurate in filling out documents, cheques, and other files is of the utmost important in transactions like this. See to it that every document has the correct spellings and is organized. A misspelt name on the cheque, for example, can delay the settlement process.
The most important thing is to ensure that your pockets are ready. Understand the fees surrounding the sale of the property. For instance, you have to be aware that you will be accountable for paying for the land transfer duty.
Once you reached the final day of the process, you will be able to receive the keys to your new home and start another chapter in your life.