What is Settlement?
Settlement can be a confusing term for prospective homeowners as well as sellers. You may be more familiar with another phrase: closing. Either way, it’s the last leg of the journey before a home is officially purchased. Documents are signed and exchanged, keys are released, and at the end of it, the business is settled – the name should make some more sense now.
Of course, like everything else that comes with buying a home, settlement is a little more in-depth than just handing off the keys and saying “here you go, enjoy”! In technical terms, the settlement is the process that officially transfers the ownership of the property from one person to another, and the last day of this period is known as the settlement date or the settlement day.
It may be easier to think of it like this: “settlement” is every day between the agreement to sell and settlement day, when the property is finally sold.
Who Determines the Length of Settlement?
Settlement length is determined in the contract of sale, and typically lasts between 30 and 90 days, depending on the agreement between the buyer and the seller laid out in the contract.
What Happens on Settlement Day?There are a few things that occur on settlement day:
- The buyer will pay the full price of the home to the seller. If a lender is involved, say for a mortgage, the buyer will sign their home loan documents will actually take out the mortgage they arranged to purchase the property.
- If applicable, the mortgage for the new property will be officially registered against the new property title, meaning that it has been officially enacted and is on the record.
- The seller and the buyer will complete the Transfer of Land paperwork. This includes the bill of sale, the deed to the property, and other documents related to the sale -- property reports, inspections, and so forth.
- All rights and titles over the property will transfer to the buyer on the settlement day, but not until everything has been confirmed to be in order. Once that is the case, the settlement is officially noted in writing,and the keys will be released to the buyer.
- The buyer will also be responsible for paying council rates and stamp duty on the newly purchased home.
When is the Settlement Date?
The buyer and their agents will have figured out the specific date and time for the settlement with the seller and the seller’s agents (solicitors, etc). This day is the day the buyer is officially recognized as the new owner, and can legally take possession of the property.
So settlement begins when the buyer and the seller come to an agreement for the sale of property, and it ends on settlement day. If that’s confusing, just think of settlement as the time to make sure everything's in order before both parties and their representatives meet to sign all the relevant paperwork, the time period for everyone involved to make sure every T is crossed and every I is dotted. Settlement typically lasts between 30 and 90 days, but that can depend on the specific state and the details in the contract.
What else Happens During Settlement?Settlement is the time for the buyer to make sure they are completely happy with the property before they pay for it. This makes sense -- after all, no one wants to be on the hook for a home that turned out to not be exactly what was advertised on offer by the seller. It also gives the buyer enough time to actually alert financial institutions, like banks, that the relevant paperwork should be drafted up and signed. But it’s not all paperwork and signatures, and there are “other things that buyers should be using their settlement time for,” including:
- A Final Inspection:
During the contract negotiations, buyers and sellers will come to an agreement about the state of the property during the sale, and a final inspection of the property by the buyer as close to the settlement date as is possible is essential. You wouldn’t want to buy a house from someone who claimed they’d fix the moulding only to begin moving in and see the seller hadn’t, would you?
- A Title Search:
You can’t buy something from someone if they can’t sell it to you, and the relevant parties will make sure the property title is all clear to be sold to the buyer during settlement.
Can the Settlement Date be Delayed?
While it can be frustrating to have to wait 30 days or more for the settlement to complete, there’s a reason that these things have so much space -- there’s plenty of room for things to go wrong, maliciously or otherwise. A bank could have misprinted the seller’s name on a cheque, for example, or perhaps you’ve accidentally scheduled the settlement date on your daughter’s graduation and can’t be in two places at once.
Let’s assume that, through no fault of your own, you would like to reschedule the Settlement date further in the future than agreed. Is this possible?
The short answer is yes, but it won’t necessarily be easy. Buyers and sellers alike can (and do) negotiate on settlement dates, but that usually occurs before the contract is signed. If you’re already in settlement, you can still approach the other party about changing the date, but be aware that they are not under any legal obligation to change it. In other words, ask nicely.
What is Conveyancing?Quite simply, conveyancing is the actual legal act of transferring the title of a piece of property, so a conveyancer is someone who can draw up a deed conveying a title from one person to another. In other words, this is the person who will make sure buying or selling your home or property is done to a proper legal standard. They can also draft up mortgages, liens, and other related documents. Conveyance can also be referred to as a transfer.
It may be easiest to think of conveyance as the legal process for transferring home ownership from one person to another. Conveying property, if you will.