The final process involved in buying a home is the settlement process and it is also one of the most important.
This is when the formal documents of ownership are exchanged and as a buyer you become the owner of the property.
Settlement is set for a specific date and time in the contract and it is important that as a buyer you have all the necessary documentation in place to ensure that the settlement process progresses smoothly.
A simple mistake that can cause delays to the settlement process is when the contract is completed incorrectly by the buyer.
For example, the contract should clearly state the full legal names of the people purchasing the contract. Financial institutions are likely to request that the contract be varied if the full names are not stated. This could cause delays to the settlement process. The contract should also state the correct details of the title of the property. Incorrect title details can cause also cause delays to the settlement – or even worse, the wrong property being sold.
The contract should state whether the purchasers are joint tenants or tenants in common. This wording has very important implications for the ownership of the property. For example, if one of the owners should die, then the other owner under a joint tenancy arrangement would take sole ownership of a property. Under a tenants in common agreement, each owner can bequeath their share of the property to a separate person/persons in event of their death, in their Will.
If you intend to purchase a property but are not able to sign the offer and acceptance, you can nominate “an agent” to act on your behalf. The contract would then be written up in the name of the nominated person as agent for the actual buyer eg. John James Smith as agent for Sarah Louise Smith. You will however, as the buyer, be required to sign settlement and mortgage paperwork.
To avoid unnecessary delays, make sure that you sign all documents immediately and advise your settlement agency of any plans to travel during the settlement process. If you are out of the country for extended periods it may be wise to draw up and lodge a Power of Attorney document with Landgate. This will allow your attorney to sign all documentation on your behalf.
One of the most important tips when buying a home is to allow sufficient time for the settlement of the property when completing the contract. Generally, you should allow at least 21 days for finance approval, and then at least 21 days after that to allow the necessary documentation to be finalised. However during busy periods (such as End of Financial Year and the lead up to Christmas) these time periods should be extended out to 28 days.
If you allow insufficient time for settlement you could be financially penalised if the seller wishes to charge penalty interest for a late settlement. Providing sufficient time for settlement also allows your settlement agency to put the right amount of time into undertaking important background checks on the property, such as checking for outstanding council orders, easements and caveats on the title.
Another important tip is to ensure that all special conditions of the purchase are should be in writing on the contract and not made verbally. These conditions include issues such as termite/timber pest inspections and structural reports.
When buying a property, it is important that you include on the contract removable items (chattels) in the property if the purchaser wishes them to remain in the property. These items might include the dishwasher, clothes dryer, shelving, bar, fire place, pool equipment or outdoor spa. People can be disappointed after they purchase a property to find that items they assumed were staying had been removed.
Taking these simple steps to ensure the contract is written up correctly can save you a world of hassle when it comes time to settle.
[info_box]For a more in-depth look at the settlement process, see our popular Property Settlement 101 article.[/info_box]
Image by _sam_i_am_ via Flickr.