Understanding settlement and how to negotiate the right date for you

If you're preparing to sell your home or an investment property you may be wondering what settlement is and what settlement day actually involves.

Settlement is the final step in selling your property and the point where the ownership of the property is officially transferred from you to the buyer.

This article will help you understand exactly what settlement involves, and why it's important to negotiate a settlement date that is right for you.

What happens on settlement day?

The settlement date is the actual day when your property officially passes into the ownership of the buyer by finalising all paperwork. As a seller, this is the day you receive the balance of the sale price for your property and hand over the keys to the buyer. 

The settlement day is specified by the you in the contract of sale after consultation with the buyer. 

Settlement day is the actual day when your property passes into the ownership of the buyer

What is a settlement period?

The time period leading up to settlement day is known as the settlement period. 

This period begins when you sign and exchange contracts of sale with a buyer. Neither party is legally bound until signed copies of the contract are exchanged. The buyer then often has a cooling off period of five working days during which they can withdraw from the transaction.

Thereafter a lot of legal documentation needs to be to be processed and exchanged between the two parties legal teams. This is the primary reason why a sale often requires a settlement period of weeks or even months.

Learn: How much does a conveyancer cost?

Who does what during settlement?

If you're using a conveyancer or solicitor, they will handle all the relevant paperwork and legal documentation associated with settlement. They will also liaise with your real estate agent as well as the buyer’s legal team to ensure all the conditions of the contract have been met, and that all legal documents are signed, submitted and in order.

Your conveyancer or solicitor will handle all the relevant paperwork and legal documentation associated with settlement

How long does settlement take?

Depending on where you live, settlement can take anywhere from 30 days to 90 days. This allows time for the paperwork to be finalised, and for you to prepare to vacate the property, including scheduling movers, packing and having the property cleaned. 

Buyers use the time preparing to occupy your property.

Depending on where you live, settlement can take anywhere from 30 days to 90 days

How to negotiate the right settlement period for you

The key to a stress-free settlement is to leave enough time for everything to happen. It also makes sense to choose a settlement period and settlement date that suits you and the buyer.

Bear in mind that once you choose a day for settlement and sign the contract the date is fixed. You are able to change it, but the buyer is not obliged to agree. If you are selling at auction you detail the settlement period and date in the contract, and bidders may approach you to see if it is flexible.

The key to a stress-free settlement is to leave enough time for everything to happen, and to choose a date that suits you

Common barriers to a fast settlement

There are a number of potential roadblocks that can hold up settlement. The most common delays include:

• Banks taking time to process and return documentation
• Incomplete documentation
• Delays with one party lodging documents

Get the right team to avoid delays to your settlement

Delays are not uncommon for a settlement as there are so many variables to coordinate.

If you want your settlement period to go smoothly without any hiccups make sure you have an experienced team working for you. Combine the skills of an experienced local agent with a conveyancer or solicitor to look out for your best interests and help make sure everything runs smoothly.

Planning on selling? Then use our Smart Seller’s Guide to help you navigate the process with the least amount of stress.