What Happens on Settlement Day When You Buy a Property in NSW?

After weeks of contracts, finance, searches, emails, signatures and being asked to provide the same identification approximately 250 times, settlement day has finally arrived!

So what happens now?

For the buyer, surprisingly little.

You don’t need to attend settlement. You don’t need to sign anything on the day. You don’t need to meet the vendor somewhere and exchange an enormous cheque for a set of keys.

Your main job is essentially to keep your phone nearby and wait for us to tell you that you own a house!

Behind the scenes, however, quite a lot is happening.

What Exactly Is Property Settlement?

Settlement is the point at which the purchase is completed.

The balance of the purchase price is paid, the vendor’s mortgage is dealt with where applicable, the transfer is lodged electronically and the property becomes yours.

Most property settlements in NSW now take place electronically through PEXA. The participants in the electronic settlement can include:

• your conveyancer;
• the vendor’s conveyancer or solicitor;
• your lender; and
• the vendor’s lender.

Everyone has a job to do before settlement can proceed.

Our job is to make sure the legal and financial side of your purchase is ready and coordinate with everyone else involved.

Your job? Please answer your phone if we call.

That’s genuinely helpful.

What Happens Before Settlement Starts?

By settlement day, most of the work should already have been done.

Your conveyancer will have prepared the matter for settlement, liaised with the other side and your lender, dealt with the required searches and enquiries and checked the settlement figures.

The vendor’s representative will be doing the same thing from their side.

If you’re borrowing money, your lender also needs to be ready to provide the funds required for settlement. If the vendor has a mortgage, their lender needs to be ready to discharge it.

So while settlement itself may appear to happen with the click of a button, there has been quite a lot of work getting everyone to the point where that button can actually be clicked.

What Are Settlement Adjustments?

Before settlement, we calculate the financial adjustments between you and the vendor.

These commonly include things such as council rates, water charges and, where applicable, strata levies and land tax.

The purpose of the adjustments is generally to make sure each party bears the appropriate amount of those expenses under the contract.

This is why the final amount required at settlement won’t necessarily be as simple as:

Purchase price – deposit = amount owing.

There will usually be other figures moving around in the background. We calculate and check those figures before settlement.

You do not need to arrive armed with a calculator.

Do I Need to Attend Settlement?

No. There is no physical settlement for you to attend.

Gone are the days of representatives sitting around a table exchanging bank cheques and title documents.

Settlement now takes place electronically, which means you could be at work, at home, interstate or overseas while your property settles in NSW.

In fact, you could spend the entire settlement completely unaware that several conveyancers and banks are frantically doing things in PEXA.

Which is probably preferable.

What Should I Be Doing on Settlement Morning?

Ideally? Not much.

Make sure we can contact you if necessary and make sure you’ve completed your final inspection.

If you’re providing any of your own funds towards settlement, those arrangements should already have been made before settlement day.

Settlement morning is not the ideal time to announce that the money is currently sitting in another bank account with a $5,000 daily transfer limit.

That creates the kind of excitement we try very hard to avoid.

When Should I Do the Final Inspection?

The final inspection is generally carried out shortly before settlement.

This is your opportunity to inspect the property and make sure it is in the condition required under the contract. You should check things such as:

• whether the agreed inclusions are still at the property;
• whether there has been any damage since you last inspected it;
• whether the vendor has removed their belongings where vacant possession is required; and
• whether anything specifically agreed between the parties has been dealt with.

If you find a problem, contact us before settlement.

Don’t wait until after you’ve collected the keys and then send us a photograph of the missing dishwasher.

And please don’t negotiate a solution directly with the vendor or agent without telling us. There may be contractual implications, and we need to know what’s happening before the transaction completes.

What Happens in PEXA?

PEXA is essentially the electronic workspace where the legal and financial parts of settlement come together.

Before settlement can proceed, the relevant documents need to be prepared and signed, the financial figures need to be balanced and the participants need to be ready.

When everything is in order, the financial settlement occurs and the transfer is lodged electronically.

You don’t need to understand the technical mechanics of the PEXA workspace. That’s what you’re paying us for.

If you’d particularly like to understand it, we’re very happy to explain it. But if your only question is “Did it settle?”, we completely understand!

What Happens If Settlement Is Delayed?

First, a delay doesn’t necessarily mean something has gone terribly wrong.

• Sometimes a lender isn’t ready.
• Sometimes a settlement figure needs to be changed.
• Sometimes another participant needs to complete something before settlement can proceed.
• Sometimes PEXA or another system decides that settlement day would benefit from a little additional drama.

Depending on the issue, settlement might proceed later that day or it may need to be rescheduled.

If the delay means a party isn’t able to settle in accordance with the contract, there can be contractual consequences, including interest or other rights depending on the circumstances.

If there’s a problem, we’ll tell you what’s happening, what it means and what needs to happen next.

This is also why we recommend not organising your entire day on the assumption that settlement absolutely cannot move.

Most settlements proceed as planned. But property transactions occasionally have other ideas.

When Do I Get the Keys?

Ah, the keys. The part of settlement day everyone has actually been waiting for.

Once settlement has completed, we’ll let you know and notify the selling agent that the keys can be released.

Until you hear from us, resist the temptation to hover at the agent’s front door.

As soon as we have confirmation that settlement is complete, we’ll give you the good news and you can arrange to collect the keys.

And just like that, weeks of contracts, emails, banks and conveyancing are forgotten.

It’s all about the keys now… Fair enough. Honestly, we get it!

Should I Book Removalists for Settlement Day?

If you can avoid it, we recommend that you don’t.

Most settlements proceed as planned, but delays do happen. A bank may not be ready, a PEXA issue may arise or something else entirely may decide that settlement day needs a little more excitement.

If you have no choice but to move on settlement day, try to build as much flexibility into your arrangements as possible and make sure your removalist knows that settlement timing can change.

And please don’t arrange tradespeople to start work at the new property on settlement day.

Painters at 2pm. Electrician at 2.30pm. New flooring being delivered at 3pm. Settlement scheduled for 1pm.

We can already feel our blood pressure rising.

Our preference is simple: settle first, collect the keys, then unleash the removalists, tradespeople and renovations.

There will be plenty of time for chaos once you actually own the property.

What Happens After Settlement?

Once settlement is complete, we’ll report to you and confirm that the purchase has settled.

The transfer has been lodged electronically and the process of updating the title records follows.

You can collect your keys and take possession of the property.

Utilities, moving boxes, furniture assembly and discovering that your couch doesn’t fit through the front door are now your responsibility.

Our part is considerably less exciting. We’ll complete the remaining conveyancing requirements and finalise your matter.

What If I’m Selling and Buying on the Same Day?

Then settlement day has a few more moving parts.

If the proceeds from your sale are being used to fund your purchase, the transactions need to be coordinated.

Generally, your sale needs to settle so the required funds can flow through to your purchase.

When everything happens as planned, it’s relatively seamless. From your perspective, you sell one property and buy another.

From our perspective, we’re watching two PEXA workspaces and hoping everybody’s bank behaves themselves.

If your sale and purchase are linked, make sure your conveyancer and broker know that from the beginning.

Do I Need to Contact Council or Water After Settlement?

The change of ownership is dealt with through the conveyancing and registration process.

You don’t need to personally ring every authority on settlement afternoon to announce that you’ve bought the property.

There will, of course, be practical things for you to organise yourself: utilities, internet, insurance arrangements and changing your address.

But the legal transfer of the property is part of the conveyancing process.

You can concentrate on finding the box containing the kettle.

Settlement Day Should Actually Be Pretty Boring

For us, a good settlement day is an uneventful one.

The figures balance.

The banks are ready.

PEXA settles.

We send you the message: “Congratulations, your purchase has settled.”

You collect the keys.

That’s it.

It may feel slightly anticlimactic after weeks or months of buying a property, especially if it’s your first home.

But boring settlements are our favourite kind!

At MG Conveyancing, we act for buyers across Sydney and the Central Coast, from the Inner West and Northern Beaches to Gosford, managing the conveyancing process from contract review through to settlement.

We’ll explain what you need to know, keep track of what’s happening behind the scenes and let you know as soon as the property is officially yours.

Buying a property in NSW? Send us the contract before you sign and we’ll take you from contract to keys… hopefully with a very boring settlement day!