Well done! Most of the hard work in the process of buying a home is done, and you're a lot closer to full-fledged home ownership!
You’ve assessed your financial situation, scoured the property market, found the right home, put in an accepted offer or were the highest bidder at auction and now you’ve reached settlement.
This guide will take you through what to expect on settlement day in Australia and how to make sure everything goes as smoothly as possible.
Once that's done, the next step is the fun part — move-in day!
Moving into a new home can be stressful (especially if it's your first time)! But not to worry. You can minimise any hiccups with a bit of planning and preparation. We've included a checklist at the end to help you along the way too!
What is settlement day?
The settlement process officially transfers property ownership from the seller to the buyer. It usually takes place on settlement day, which is the day that the buyer becomes the official owner of the property.
During settlement, the buyer and seller will finalise all of the financial details related to the sale. This includes paying any outstanding debts on the property, transferring utilities, and settling any other associated fees.
Once this is done, the property is officially transferred to the new owner, and they can move in!
What should be completed before settlement day?
Just as a recap, here are some things you should have already done in your home-buying process before moving on to the property settlement phase:
- Found the right home loan lender. You may have worked with a mortgage broker or gone directly to a lender, and you would have submitted your home loan application to get pre-approval or conditional approval. You would also have discussed loan repayment rates, whether interest rates will be calculated at a variable rate or fixed rate, and any other terms (e.g. if you involve a guarantor).
- Researched and applied for first-home buyer schemes, if you are eligible. There are schemes, such as the First Home Owner Grant (FHOG) and the First Home Super Saver Scheme, designed to provide financial help to Australians buying a home for the first time.
- Arranged and completed building inspections. Professional inspection providers can assist you and provide you with inspection property reports. This should involve examining the property for safety or structural problems and defects, as well as conducting a building and pest inspection (e.g. to ensure it's free from termites).
What happens on house settlement day? A step-by-step guide
Although the settlement day occurs on a specific date, the settlement period starts a little earlier than that.
Therefore, there are actually 2 phases to the property settlement period:
- Exchange of sales contract
- Settlement day
What happens on house settlement day? A step-by-step guide
Although the settlement day occurs on a specific date, the settlement period starts a little earlier than that.
Therefore, there are actually 2 phases to the property settlement period:
- Exchange of sales contract
- Settlement day
Step 1: Exchange of a sales contract
At the start of the settlement period, the buyer and seller both sign the sales contract (also called "exchange of contract". This also means that the property sale process is legally complete.
The buyer will also need to pay a deposit at this point, which will be held in trust by the conveyancer.
Your real estate agent, solicitor, or conveyancer will facilitate this whole process.
Once contracts are exchanged on private sales, there will be a cooling-off period (usually 5 business days, but this can vary between states).
During the cooling-off period, the buyer can withdraw from the sale by giving written notice. However, there will usually be a financial penalty — which will usually be a percentage of the property purchase price.
Note that there are some differences between auctions and private sales. For example, cooling-off periods do not apply to homes bought at auction and the contract is usually unconditional. This means you'll need to have your finances formally approved before attending the auction.
After the exchange of contracts, there will be a period of time (usually several weeks) for you to sort out your finances before settlement day. This will mean:
- Getting an unconditional loan approval from your lender. You'll need to satisfy specific conditions and provide information like credit card loans, pay slips, and showing you have funds in your bank account.
- Your lender will also need to get a valuation for the property as they will base the loan-to-value ratio (LVR) of your loan on the property value and not the sale price.
Once you've got a formal home loan approval, you can inform your solicitor that you're ready to arrange a settlement date.
Step 2: Settlement day
Settlement day usually takes place around six weeks after the contract of sale is exchanged. But your conveyancer or solicitor may be able to help you negotiate the settlement timing with the seller if needed.
On this day, this is what will happen:
- Your lender will release funds for your home loan.
- Transfer documents will be lodged with the respective land registration office in different states. The property title will then be transferred to the buyer's name.
- You'll receive the keys to your home.
You'll also need to have money ready to cover settlement, including:
- Legal fees
- Conveyancing fees
- Transfer duty or stamp duty
- Any other upfront extra costs (e.g. lending charges like lenders mortgage insurance (LMI) or loan administration fees).
How long is the settlement period?
The whole property settlement period varies between states. But generally, it might be 4-8 weeks between the exchange of contracts and the actual settlement day.
How to prepare for settlement day
Before settlement day itself, you'll need to get several things ready, so everything goes as planned:
- Contact your solicitor or conveyancer to do a final review of what needs to be paid on settlement day. They will usually provide a settlement statement outlining details like the adjusted council, water, and sewage rates.
- Ensure payment details on cheques are correct.
- Organise your finances. Ensure that you've obtained unconditional approval for your home loan. You'll also need to have enough money available to cover all of your expenses on settlement day.
What is a pre-settlement inspection?
Settlement day usually happens around six weeks after the exchange of contracts. So just to confirm that the property is in the same state it was in when you did your final inspection before the exchange of contracts, you can conduct a pre-settlement building inspection, usually about a week before settlement day.
If you're not satisfied with the condition of the home, contact your legal advisor for help.
What can go wrong on settlement day?
(And how to avoid it)
Although things will most likely go as planned on settlement day, it's good to prepare for any unforeseen circumstances.
Here are some things to be aware of and how you can avoid or address these issues:
Problems with paperwork or mortgage release
Ensure that all your paperwork is filled in accurately and have all required funds are ready and accessible.
Also, start talking to your lender early, so everyone is clear about eligibility, the steps to getting your loan and the timeframes involved. Be proactive, keep in contact with your lender leading up to the settlement date, and promptly address any issues.
Problems on the seller's side
This usually includes problems like property defects and delays in moving out. Of course, these are factors that are out of your control as the buyer.
But it's important to be aware of the possibility of delays on settlement day and to have contingency plans in place if it happens.
Speak to your legal advisor immediately to understand your rights if such problems arise (these vary with various state governments). For example, the buyer might have the right to terminate the contract and have their deposit returned if the seller is unable to fulfil their parts of the contract.
Should you move in on settlement day?
Many Australian first home buyers are under the impression that they have to move in on settlement day. However, this is not always the case.
There are a few things you need to take into consideration before deciding whether or not to move in on settlement day.
Even if you have everything organised and ready to go, delays can still arise on the side of the buyer. They might not be ready to hand over the keys. Or you might have discovered some issues with the property during the pre-settlement inspection.
If you're confident that you can handle all of the organisation involved on settlement day and there won't be any delays from the seller, then you can consider moving in on the day itself.
But if you prefer to stay on the safe side, it's probably best to wait until things have calmed down a bit.
Most experts would recommend waiting at least a day or two after settlement day to move into your new property.
Checklist for move-in day
Let's say that everything went as planned on settlement day, and you're now ready to move into your own home!
It can be an exciting but stressful time as there are many things to organise and prepare to move.
But not to worry! We've put together this checklist below of everything you need to do before and on the day of moving in. This will ensure that everything goes as smoothly as possible and that you don't miss anything important.
Before moving in:
- Organise home and contents insurance for your new place.
- Arrange for your belongings to be moved into your new home. Book removalists or ask friends and family members for help.
- Change your address with all relevant organisations (banks, utility companies, local council for council rates, etc.)
- Cancel or transfer your existing services (internet, phone, etc.)
- Arrange for internet, phone, and electricity to be connected at your new property.
- Pack up all of your belongings and label them clearly. Don't forget to start packing early, so you're not rushing closer to the date!
- Create a moving day checklist. This will help ensure you don't forget anything important during the move.
- Pack a box of essentials for the first few days in your new home. This box should include things like toiletries, sheets, towels, and snacks.
- Have a garage sale or sell any unwanted items online.
- Complete any major renovations first! This will be much easier when your possessions aren't in the home yet.
- Clean your new home before you move in — this is a key step, especially if you did renovations.
- Check with the local council about parking permits and any other restrictions that might apply on move-in day. For apartments, you might need to contact the strata management company to inform them you're moving in so they can arrange for the lifts to be booked out for you.
- If you're moving on your own, book your moving vehicle beforehand.
On move-in day:
- Meet the movers (or whoever is helping you) at your old home and help them load up the truck.
- Drive to your new home and unload your belongings.
- Don't forget to do a final check of your old home and the truck to ensure you didn't miss anything!
- Unpack all of your things and put them away where they belong!
