Some of the most common questions that we get asked by clients at the start of the process are ‘how long does settlement take?’ and ‘when can we settle?’.
There is no simple answer to these questions, as there is a plethora of factors that affect the settlement timeline.
We know buyers and sellers are eager to settle ASAP. However, allowing a little extra time can be key to ensuring everyone’s expectations are met and settlement happens on the due date.
The first factor we look at when considering the timeline to settlement is your specific Contract of Sale.
Your contract may specify a fixed settlement date, or it may refer to a more variable date such as ’21 days from finance approval’.
Fixed Settlement Date
Where you have a fixed settlement date, all parties will work towards being ready for settlement in time to meet this.
However, if you choose a date that is too soon, you run the risk of some parties not being ready in time.
Variable Settlement Date
Some contracts have a more fluid settlement date such as 21 days from finance approval or 14 days from issue of titles.
This means that you won’t know the exact date of settlement at the time you sign up the contract.
If the finance approval or issue of title runs early or late (e.g. the bank takes a little longer than expected to approve finance), that the settlement date is automatically calculated to accommodate the delay.
Similarly, if the condition (e.g. finance) is satisfied quicker than expected, settlement moves forward respectively.
Once the due date of settlement is known, it’s important to understand that there may be times where delays occur. This may result in settlement not taking place on the scheduled due date.
Quite simply, many contracts just do not allow enough time between acceptance and settlement.
Generally, there are two banks involved in a settlement.
- The seller’s bank, for the existing mortgage is known as the discharging bank.
- and the buyer’s bank, for the new finance, is the incoming mortgagee.
The discharging bank usually requires a minimum of ten business days to prepare for settlement.
Where a seller has multiple properties or complex finances, this can blow out to fifteen or twenty business days.
Once the incoming mortgagee has issued finance approval, they then need to prepare mortgage documents. The buyer must sign and return these to the bank before they can settle.
Most lenders require ten to fifteen business days for this process. However, depending on the complexity of the loan, even more time could be needed.
Holidays or absences
Often, buyers or sellers are not readily available to sign the necessary settlement documents.
Most paperwork can be prepared prior to departure, but advance notice will be required by your settlement agent to arrange this.
To avoid holidays or work trips impacting on your settlement, be sure to let your conveyancer know that you’re going away. By notifying them ahead of time the necessary arrangements can be made for you sign the paperwork.
If your buyer is also selling their existing property, you might find that the two settlements need to coincide.
Any delays on the related settlement may in turn cause your settlement to be delayed.
Ideal timing for settlement
Whether you’re buying or selling, we recommend that you always have a chat to your bank or finance broker prior to entering into a contract. They’ll be able to review your financial situation and determine what steps need to be taken for you to buy or sell the property.
Usually, 28 days from the contract date is sufficient for the buyer to obtain their finance approval.
Settlement to follow 21 to 28 days later should allow everyone, including the banks, enough time to be ready to settle.
Be sure to be proactive during the settlement process:
- Sign and return your paperwork to your settlement agent and bank as soon as possible
- Respond to emails and telephone calls promptly
- Let your conveyancer know immediately of any changes in your circumstances or plans.
The Metro Settlements Difference
One of the benefits of nominating Metro Settlements that our Licensee, Katelyn is most proud of is
our conveyancers handle a portfolio of files which is smaller than the average conveyancer. They have more time to dedicate to each client, and can more easily detect and avoid possible problems.”
Metro Settlements will work with you to manage expectations, and communicate with all the various parties. Your conveyancer will be in constant contact with you, and will keep you up to date throughout the process.