The Settlement Process of Buying & Selling Explained.
My how the time’s flown by since your offer was accepted. You’ve got your finances in order, undertaken due diligence and conducted all the necessary inspections; exchanged Contracts of Sale; paid your deposit, taken out home insurance and spent hours thinking about all the wonderful things you’ll do in your new home. And now you’re approaching settlement: the last hurdle you jump before the keys to your new home are in your hands.
R&R Property list & sell in the Midcoast NSW region. The settlement period in New South Wales is 42 days (6 weeks). This is generally stated in the Contract of Sale with the countdown beginning the day Contracts are exchanged. But as the settlement date is also mutually agreed by both vendor and buyer, it can be negotiated. The reasons for requesting a longer settlement are many and varied. Often the sales/purchase process is a bit of a conga line with buyers and sellers seeking to dovetail dates with those of the properties they too have sold/purchased, so there’s often a bit of too-ing and fro-ing. Buyers may also seek a lengthy settlement to fit with an interstate or overseas move, or because they’ve fallen in love with their new purchase but need to sell their current property. And it’s not uncommon for buyers seeking to maximise their purchasing power to offer a shorter or longer settlement in order to appeal to the vendor’s desire for a firm sale. Sometimes this works, sometimes it doesn’t, and settlement becomes a lesson in compromise.
A change in settlement length has the best chance of succeeding if the lines of communication between the buyer, their legal representative and the Agent are kept open and honest. It’s important to know that if you need revised settlement date, then this must be negotiated prior to signing and exchanging your Contract of Sale because once this exercise has taken place, the terms are pretty much set in stone and the seller has the right to ignore your request and that can lead to a whole lot of pain depending on the reason you’re seeking a longer settlement. The flip side is that if you’d like a shorter settlement, you need to have everything in place well in advance and while a quick settlement sounds terrific, if something goes wrong such as a bank problems, difficulty in selling another property, or even seller delay – yes, that happens – such as when a tenant hasn’t vacated an investment property, your best laid plans can easily go astray. For buyers, it could well mean penalty interest for each day the settlement is delayed plus receipt of the dreaded Notice to Complete which gives a further fourteen (14) days but clearly reinforces the urgency to make settlement happen. Failure to complete has some pretty serious consequences including potential loss of deposit. A buyer can issue tardy vendors with a Notice to Complete and terminate the purchase if the sale does not complete and retrieve their deposit, but in reality no one wants to find themselves in either position.
Yes, there are unforeseen circumstances, but the ‘5P’ rule is the best guide: proper preparation prevents poor performance. So, once you’ve found your dream property, make sure you have the right team of legal professionals working for you. They will guide you along the path to having everything in place and ensure you have allowed enough time to ensure the settlement process passes seamlessly. On settlement day, there is nothing like the feeling when your agent calls and you hear those words, “Congratulations. It’s all yours.” Welcome home!