What stands between a smooth property transaction and your worst nightmare is your conveyancing agent’s experience.
That’s why, at Strand Legal and Conveyancing, we make sure that your hard-earned dollars go as far as possible when buying a property.
While many homebuyers do a great job negotiating an agreed sale price, many forget the property settlement process and it’s importance in creating a smooth transaction.
What is Property Settlement?
A Property settlement is the legal transfer of the property ownership from the seller to the purchaser. Whilst this seems complicated, it doesn’t have to be.
There are five distinct stages. These are:
- Execution of contracts
- Prepare for property settlement
- Pre-settlement inspection
- Finalising the transfer documentation
- Completion of the property settlement
Let’s look at each stage in more detail to understand their importance.
Exchange of contracts – step 1
Before a property transaction (sale or purchase) can occur, the sale contract needs to be signed by both parties. In Perth, the sale contract or offer and acceptance (OA) should comply with Real Estate Institute of Australia, (REIWA) regulations.
Your real estate agent facilitates this process and then forwards a copy of the Offer and Acceptance to your conveyancer.
After the Offer and Acceptance is completed, the buyer pays a deposit to secure the property.
Often you’ll read that the deposit is 10 per cent of the agreed purchase value. However, the deposit amount varies greatly depending on your real estate agent. Sometimes the deposit can be as low as $1000 or as high as 10 per cent.
“We generally see deposits of around $5000 to $10,000,” says Kerry Cable, Strand Legal and Conveyancing’s Business Manager.
Once you pay your deposit, your real estate agent or conveyancer holds these funds in a trust account until the sale is complete.
Why is the Offer and Acceptance document important?
Signing the offer and acceptance and paying the deposit is vital for two main reasons:
- Both buyer and seller are not legally bound to the sale until they sign the sale contract.
- There is no cooling-off period for properties bought or sold in Western Australia which means the buyer is legally bound to buy your property once the offer and acceptance contract is executed. But if you’re buying property in other States, it pays to check the cooling off period terms.
Get advice before you sign
At Strand Legal and Conveyancing, we understand that signing an offer and acceptance is one of the most significant financial transactions you’ll make. That’s why they recommend you seek advice before you sign.
“Even though the standard-form sale contract used by most real estate agents in Western Australia appears a simple two-page document, omissions and oversights can be costly,” says Kerry Cable.
Since many buyers elect to insert additional conditions like termite or building inspection clauses, it’s important to be aware of and understand the legal impact of additions to the offer and acceptance document.
Prepare for property settlement – stage 2
The time between executing the contract and settlement varies depending on several factors. Yet, many work on an average of six weeks. This time-lapse allows the buyer enough time to get their finances sorted. Meanwhile, the vendor (seller) gets ample time to meet any special conditions outlined in the sale contract—for example, complete repairs or maintenance on the property.
However, Kerry Cable cautions not to rely on having the entire six-week window because the settlement date will automatically move forward if finance approval comes through early unless stipulated otherwise.
“When you require a certain date for settlement, we recommend you specify that in the contract. If you’re unsure, speak to your conveyancer.”
Determining a stress-free settlement date involves leaving enough time for everything to happen.
Pre-settlement inspection – stage 3
About one week before settlement day, the buyer is allowed to do a final inspection of the property. As the buyer, your inspection should ensure special conditions requested have been honoured and that the rest of the property is in the same condition as when you executed the contracts.
When to inspect?
“Also, it’s important to note that different laws apply regarding pre-settlement inspection terms if you’re buying a home in another state,” says Kerry Cable.
Finalising the transfer document – stage 4
Before your settlement date, your conveyancer will confirm that all contract conditions are complete and that you are happy to proceed to settlement.
It is often at this stage that people discover there are additional agent fees, property taxes, duty and water rates to be paid.
Kerry Cable believes all settlement fees and costs should be transparent and itemised in the initial settlement estimate.
“Many people don’t realise settlement agent fees are not regulated. So that leaves room for unscrupulous operators to hide fees until the last minute.”
Your conveyancer will liaise with the other settlement agent and the banks to exchange documents and funds and ensure the registration of documents at the land registry. And assuming all goes to plan, you take legal ownership of the property. Finally, the keys are in your hands.
Completion of the property settlement – stage 5
When the change of ownership is complete, your mortgage lender provides you with a summary of your loan repayment, interest and any other bank costs necessary to finalise your home loan.
And that’s it. You’ve done it!
Your hard work has paid off and you are now the proud owner of a new property.