Many banks are currently taking longer to process property transactions, so it’s wise to allow more than 21 days between finance approval and settlement date.
The behind-the-scenes work of the banks, such as arranging mortgage documents, is vital to settlement occurring. In the past month or so, we’ve noticed an increase in the amount of time banks are taking to carry out these tasks.
This is likely a result of two main factors:
- Short staff – Some banks, hungover from the global financial crisis, are not yet running at full staffing capacity. While banks will gradually adjust to increased activity in the property market, short staff remains an issue for some lenders, who experience longer processing times as a result.
- Communication with the eastern states – Many smaller lending institutions are based in the eastern states and rely on solicitors to correspond with them from Perth – making it necessary to allow extra time to mail settlement packets and other important documents across the country. As smaller lenders become an increasingly popular choice, more people have to account for these longer ‘booking periods’.
As a result, longer-than-usual processing periods have become increasingly common.
Without being accounted for, these increased processing times could lead to a delayed settlement, and the party responsible may incur penalty interest.
To avoid delaying settlement due to bank processing times, consider allowing extra time before settlement date. While contracts traditionally specify 21 days between finance approval and settlement date, I suggest a settlement period of least 28 days.
Your situation will vary depending on the banks involved and the situations of each party, but by allowing extra time you can maximise the chance of an enjoyable settlement.
Image by Ruben Schade via Flickr.