The gears on a crane

Settlement day: What really happens?

Have you ever wondered what actually happens on settlement day? Yeah, sure, you get a call from your settlement agent to tell you your property has settled. But what really happens inside the settlement agency black box in the hours leading up to that call?

Well, the answer to that question depends on whether you’re buying or selling.

Here’s what happens on a ‘typical” day for a seller.

The day starts out with the important task of confirming your loan payout figure. We need this payout so we can send cheque directions to the buyer’s settlement agent. These directions tell the buyer’s agent who you want cheques be paid to and for how much.

But most banks don’t issue a final payout figure for the mortgage until the morning of settlement.

That delay can place a lot of stress on the system because we need the payout figure before we can send our cheque directions to the buyer’s settlement agent so they can forward them to the buyers lender.

In many cases eastern states banks have a strict cut off time for the receipt of cheque directions. If a discharging bank (your bank) sends their payout figure to us after that time then the settlement will be delayed until at least the following day.

The Joint Form of General Conditions requires the buyer to provide up to three bank cheques. If you want more than three cheques the buyer will usually request payment to reimburse them for what the bank charges them (usually around $10).

Typically we’ll request a cheque to pay out the your loan, a cheque to pay the agent’s commission and advertising, and a cheque payable to you for the balance of proceeds.

Once we’ve sorted out the cheque directions we then perform a final check search that tells us if there’s been any last minute activity on the title. Where fresh activity is identified – usually the lodgement of a caveat – we’ll need to deal with it before settlement can proceed.

Usually fresh activity leads to a delay in settlement.

In most cases the check search comes back clear and we then move to a final audit of the file. This audit is performed by our licensee and is designed to limit the chance of the settlement being delayed through a procedural oversight.

We then prepare a settlement packet that will be used by our settlement clerk during settlement in the city. The packet includes:

  • Detailed settlement instructions. These instructions include the time and place of the settlement, the parties attending (usually the buyer’s settlement agent, the buyer’s bank, our clerk, and a representative from your bank.
  • A copy of the search.
  • Any documents our outside clerk will hand over (usually the Transfer of Land and the Seller’s Verification of Identity (VOI) declaration.

Settlement usually takes place at the buyer’s bank. Some of the big banks and many of the small have outsourced their new mortgage processing to agents such as SAI Global, Scott Ashwood and First Mortgage Services. Where one of these is acting for the buyer’s bank their office becomes the settlement location.

Our outside clerk will make their way to the location specified on their instruction sheet. Once all parties are present the settlement process commences.

Our primary interest in this process is to ensure the buyer’s agent hands over the correct money as per our cheque directions sent earlier in the day.

Once we’ve received the correct money and the other parties are happy the transaction is declared settled.

But the process is not yet complete.

Our outside clerk then calls the office to advise the conveyancer that settlement has been effected. The conveyancer then calls you to advise settlement has been completed.

The conveyancer then sends a confirmation text and fax to your real estate agent.

Our outside clerk then deposits any funds collected at settlement into the your nominated bank account.

Our licensee then records all receipts and disbursements against the your trust ledger.

The conveyancer then sends you a final settlement statement providing a full account of all monies received and disbursed on your behalf.

The lesson in all this craziness is to treat a confirmed settlement date as soft or indicative.

After all, it’s not settled until it is!