Buyers are usually eager to move into their new property as soon as possible, and sellers are generally keen to gain access to the proceeds of the sale quickly. Despite this, it’s important to leave an appropriate amount of time for settlement to be completed.
It’s not uncommon for settlement to be delayed because of a foreseeable issue with the transaction. When a delay occurs, the seller or buyer are often charged costly penalty interest.
To avoid such costs, carefully consider whether the regular 21 days for finance and 21 days for settlement will be enough, taking into account the unique attributes of the property transaction.
For example, you should consider allowing extra time for settlement if:
- The seller is overseas. Overseas sellers need to travel to an Australian consular to sign certain documents, and are required to deal with original documents only. Both of these take extra time.
- A tenant is in the property. When tenants are on a fixed term lease, they generally can’t be evicted before their lease expires, and a 30-day termination notice must be issued. To terminate a periodic lease, the landlord must give the tenant 60 days notice.
- There’s a caveat on the Title. Caveats and other encumbrances can take negotiation to remove, which may be time intensive.
- There’s a mortgage on the property. Ensure enough time is allowed for the seller and their bank to discharge the mortgage.
- Settlement is near a public holiday. Long weekends and other holiday periods, such as Christmas and Easter, put strain on the banks. With less staff and/or less working days in a week, banks may struggle to complete the vital documentation needed for settlement to occur.
Consider the above factors, and any other factors that may affect settlement, when deciding how long to allow for settlement. By doing so, you’ll help to avoid inconvenient delays and costly penalty interest.
Image by Doug88888 via Twitter.