What really happens on settlement day?19 May, 2016
So your conveyancer has called you to let you know that ‘settlement has been booked’…
But what exactly does that mean? And what actually happens on the settlement date for it to be ‘settled’?
Once all parties are ready for a property settlement, including the buyer & seller, and their banks, a day and time is set for the settlement booking. Settlements must take place on a business day, usually between 11.30am and 3.30pm, at a time that suits all parties.
On the morning of settlement, the buyer & seller’s settlement agents liaise with each other, and determine the exact amount due to the seller. They factor in the adjustment of rates and taxes, any rent that might be owed (if the property has a tenant in it) as well as any other costs owing to either party.
The seller’s settlement agent then instructs the buyer how they want the bank cheques drawn for settlement. Sometimes, the seller’s bank will collect the bulk of the funds, with another bank cheque being requested to cover the real estate agent’s commission and settlement costs. Other times the seller might require a few more cheques. Perhaps they’re paying out other debts or the sale proceeds are being divided between more than one seller. The seller is entitled to three free bank cheques. Any extra, they need to pay for (usually around $10 per cheque).
In WA, most property settlements are still done manually (as opposed to electronically). This means that at the booked settlement time, the buyer & seller’s settlement agents and the seller’s bank meet at the buyer’s bank’s office in Perth CBD. The buyer & seller themselves do not need to be present at settlement, as their respective settlement agents will attend on their behalf.
At the settlement, the buyer’s bank hands over the bank cheques that the seller’s settlement agent has requested earlier that morning, in exchange for the title deed to the property. They will also receive the Discharge of Mortgage document from the seller’s bank (if applicable), along with the Transfer of Land, which has been pre-signed by the buyers & sellers, to lodge with Landgate.
Once the seller’s settlement agent and the seller’s bank are satisfied with the cheques they’ve received, and the buyer’s bank is satisfied with the documents that they’ve received, then the property is considered ‘settled’.
It is at this point that your settlement agent will call you with the good news that settlement has taken place! They’ll also call the real estate agent to let them know that settlement has been completed and the key handover can be arranged.
If the property is vacant, the buyer may collect the keys immediately after receiving this phone call. However, if the seller is living in the property, they have until 12pm the day following settlement to vacate.
For sellers, your settlement funds will be deposited into your nominated account by close of business of the day of settlement. As the deposit is a bank cheque, it will take up to three business days’ to clear in your account. Your settlement agent will also send you a copy of the deposit receipt for your records.
I hope this helps you to understand what goes on behind the scenes on your settlement day. If you have any further questions, don’t hesitate to call us on 08 9371 0088.
The information contained in this blog is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from your Conveyancer.