9 steps to a smooth and successful property settlement

Step 1 – Choosing a Settlement Agent

A settlement agent will protect your interests during the settlement process. They can also be a valuable resource in matters such as understanding clauses on the Offer and Acceptance Contract. Most real estate agents will refer you to a settlement agent if there are none appointed by the time it comes to writing up the Offer & Acceptance, though you are not required to go with this recommendation, and may choose your own.

The real estate agent selling the property is obliged to act in the best interests of the seller. Make it your business to protect yours.

You can do this by either;

• Nominating your preferred settlement agent on the Offer and Acceptance document,
• If you wish to appoint your own, but have not yet decided whom, you can specify ‘TBA’, to be advised. Let your real estate agent know as soon as you have one appointed, verbally and by fax or email.

It’s a good idea to decide on a settlement agent prior to buying or selling a property. They can provide you with independent advice on the sale process if it’s required.

The wording of a Contract can have a large impact on how your settlement is conducted. Clear, precise conditions outlining required actions and who is responsible for them will reduce the potential for disagreements and delays.

Tips for the Buyer

1. Take nothing for granted. The presence of a dishwasher during your inspection does not mean it will be there come settlement. Avoid conflict by carefully assessing the property and listing all the items you consider fixtures or fittings in the contract. These items may include; carpets, window and light fittings, dishwashers, TV antennas, clothes lines, garden sheds, security systems and air conditioners.
2. The real estate agent selling the property is obliged to act in the best interests of the seller. Make it your business to protect your own.

Step 2 – Receipt of the contract by the settlement agent

It is important that the original copy of the contract be provided to the buyer’s nominated settlement agency at the earliest opportunity.

The real estate agent will usually organise this but it is a good practice to send them a copy yourself to ensure the settlement agency is able to get to work at the earliest opportunity.

The settlement agent is required to then:

• Make an assessment of any potential risk to you and assist in eliminating or minimising this risk. The most common of these is insufficient time being allowed to ensure contractual obligations are met, which may incur penalty interest for late settlement.
• Ensure any potential conflict of interest is disclosed in the contract. This is generally that a real estate agency regularly refers their clients to a particular settlement agency.
• If the property is strata titled, such as a unit, ensure copies of the required disclosures have been provided.
• Examine the title search to identify any easements such as neighbour access, or encumbrances such as a mortgage, which will need to be removed at settlement.

Tips for the Buyer

• Complete payment of the deposit to the sellers real estate agent by the specified time.
• Ensure that your application for finance is submitted early. If you are eligible for the First Home Owner’s Grant, which is lodged on your behalf by your lending institution, ensure your lender is just as prompt submitting your application. Until written confirmation is received by the settlement agent, the contract/transfer of land cannot be completed at the First Home Owner rate.  This may require the buyer to pay the full stamp duty and seek a refund once approved.
• Complete any conditions that require action by you early on. For example, you may wish to run a small business from the property so a condition of the contract requires you to establish with the relevant council that this is possible.
• Ensure you have the required Stamp Duty amount at least 10 working days prior to the due settlement date. If you are having difficulties with stamp duty, discuss the issue with your settlement agent.

Tips for the Seller

• Decide the entity or whose name you wish to register the property in before you buy. It can be an expensive and time consuming exercise to change your mind after the contract is signed.

Step 3 – Give your agent Authority to Act

The settlement agent is required to obtain a valid Authority to Act from the seller, buyer or both, depending of course on their engagement.

Both parties need to read all documents carefully, ensuring you understand what it all means. The wording of these documents can be confusing; if unsure contact your settlement agent as soon as possible to get clarification. The documents should be completed, signed and returned to the settlement agency.

Once given written consent your agent will ensure the contract is lodged for assessment at the Office of State Revenue, or stamped, within the necessary time frame to avoid the possibility of penalties being applied.

Step 4 – Special Conditions

Your settlement agent will follow up any special conditions of your contract, such as pending financial approval, deposit payment, termite or building inspections and any on-site maintenance stipulated.

Tips for the Seller

1. Clarify agent commissions and selling costs
2. Ensure the buyer has organised any inspections required by your contract
3. Make sure you have met your contractual obligations as you could incur penalty costs if settlement is delayed.

Step 5 – The Unconditional Contract

A contract becomes “unconditional” once the purchaser has received finance approval and the relevant inspections have been conducted.

Now your settlement agent’s work begins in earnest. The buyer’s agent will ensure any identified encumbrances such as mortgages are settled, and the buyer is clearly aware of the identified covenants or easements.

A preliminary settlement statement showing the gross amount of the loan undertaken will be drafted by the buyer’s settlement agent. This will be forwarded to all relevant parties.

The seller’s settlement agent will provide them with a Disbursement Authority containing authorisation and instructions on how the proceeds of the sale are to be applied.

Your agent should also clarify for you the following :

• State Revenue – land tax liability
• Water Authority – adjusted water rates, availability of services and any orders and requisitions on the property.
• Local Government Authority – property rates (for prorata adjustment up to settlement), and any orders and requisitions.
• Strata Company (if applicable) –  Strata Levies, any special levies
• Issue requisitions on the title (if applicable). Undertake any additional enquiries that may be necessary to satisfy special conditions on the contract.
• Undertake any other required enquiries such as Western Australian Planning Commission for any proposals for road widening.

Tips for the Buyer

• Read your loan documentation carefully to determine the extent of fees and charges the lender is entitled to charge – these charges may be deducted from the gross amount of your loan. These expenses should be budgeted for.
• Note that the lender will only advise your settlement agent of the net amount of the loan (after deduction of fees and charges) on the day, or the day preceding, settlement.

Step 6 – Transfer of Land & other documents

The settlement agent must prepare any pending documents as soon as practical. These include the Transfer of Land, transferring  ownership of the property from the seller to the buyer, upon receipt of the payable Stamp Duty.

A “final” settlement statement will be sent to the buyer and their lender. The settlement statement will show all monies left owing before settlement, as well as the due dates for payment and source of funds, if available.

It is important to allow sufficient for the seller’s settlement agent to send out and receive the Transfer of Land prior to the due settlement date. As a general rule the buyer’s settlement agent should forward this so it is received by the seller’s settlement agent a minimum of five working days prior to the settlement date in the metropolitan area, or 10 working days prior in the country or interstate.

Tips for the Buyer

1. Ensure your settlement agent secures any applicable rebates or concessional stamp duty allowances once it has been established the buyer is eligible. Inspectors from the Office of State Revenue conduct random checks; fraudulent claims are liable to criminal prosecution.
2. Keep in regular contact with your lending institution to ensure there is no delay in the preparation of their loan and mortgage documents and that the documents are made available for signing as soon as possible.
3. Deal with any unsatisfied conditions that may require further action.
4. Check the settlement statement as soon as it is received to ensure that any additional funds that may be required to be paid are available. The purchaser is responsible for the portion of water and council rates, adjusted from the due date of settlement to the end of that financial year. Sometimes this can come as an unwelcome surprise.

Tips for the Seller

1. It is up to your settlement agent to ensure all water and council rates, plus arrears, are brought up to date before or at settlement. Unpaid amounts will be held back at settlement and this may effect the amount available for a subsequent property purchase.
2. Your agent will request, in writing, the deposit, less commission and advertising costs, from your real estate agent to ensure these funds are available at settlement.
3. Respond promptly to concerns raised by your settlement agent. You may be required to provide documented proof of the completion of any contractual conditions. 

Step 7 – Prepare for settlement

Your settlement agent will be taking care of many matters to ensure that the settlement will take place on the due date. These tasks include:

• Ensuring that all contractual requirements have been met and conditions have been completed satisfactorily.
• Taking the buyer through their Final Inspection. Ideally this inspection should be carried out somewhere between 4 to 7 days prior to settlement.
• Look through any unusual and/or complex documents from the seller’s settlement agent that will be tendered at settlement. A good example of this is an Application for a Change of Name where a seller has got married and now goes under her married name.
• Communicate with all parties to ensure they will be ready for settlement by the due date and time.
• Ensure all necessary monies are held or will be collected at settlement.
• Having someone knowledgeable on your specific case present at the settlement to make sure the correct monies and documents are exchanged.

If the settlement is called off for any reason your settlement agent will act as soon as possible to resolve the problem and to arrange a new settlement date and time at the earliest convenience.

Tips for the Buyer

• During your final inspection ensure any necessary repairs have been attended to and that all gas, electrical and plumbing appliances are in good working order.
• Contact your real estate agent to make arrangements for collection of keys and confirm possession arrangements for the property.

Step 8 – The Settlement

Advise your agent of your contact details leading up to the settlement date. If something unanticipated occurs, this could save a substantial inconvenience that would occur if the settlement was called off.

Your agent will now lodge the Transfer of Land, and any other applicable documents, to record the transfer of ownership. Notification will be given to the buyer and their real estate agent so the keys of the property can be released to the buyer.

The property is required to be vacant possession by 12.00 noon of the day following settlement if it is the seller’s principle place of residence, or as soon as settlement takes place if it is not.

Step 9 – After settlement

Almost there! Your settlement agent will now be doing some “tidy-up” task such as;

• Follow up receipt of any withheld funds, make the necessary adjustments, effect payment as required and forward a final statement, plus any surplus funds held, to the buyer.
• Ensure that all funds have been disposed of as required and that there are no further monies held by the settlement agent.
• Confirm in six weeks’ time that the transfer of ownership has been processed and correctly recorded.

Final thoughts

Although we have tried to outline the settlement process detail as possible there are numerous matters and variations that can arise that are not mentioned here.

Remember, your settlement agent is paid to help you through this process. When you have any queries call your settlement agent for assistance immediately.