In a perfect world you select a property to buy, complete with white picket fence, and the settlement goes through on the agreed date without a hitch. But as we all know, we don’t live in a perfect world.
When you buy or sell a property you go through a ‘settlement period’, which is the time designated for the buyer to complete payment of the contract before becoming the owner of the home.
Up until the settlement goes through the home is the property of the existing owner.
And with a large home deposit at stake, you’ll want to ensure you choose the right period length.
How much time should I give myself?
Generally, settlement periods are 30, 42, 60 or 90 days.
In NSW a 42 day settlement period is the most common, but in most other places around the country it’s 60 days.
Just because it’s common, however, doesn’t mean it’s the best fit for your situation (or the seller’s).
You see, both the buyer and the seller must agree on the settlement period.
However, you may have competing motivations, so this can be tricky.
Whatever the case, just make sure you allow yourself enough time for conveyancing, bank financing approval, organising the move, undertaking requested repairs for the buyer, and negotiating settlements for your other property interests.
Also, keep in mind that if you buy the property at an auction, there will already be a settlement date indicated in the contract.
If you can’t meet that date, chat to the selling agent before signing on the dotted line to see if another date is agreeable.
You might push for a longer settlement period if:
– If you’re the seller and you’re still looking for a property to purchase
– If you’re a buyer and you haven’t yet sold your own home
– You’re selling and the buyer has requested you repair something
– If you have an upcoming event that you want deal with first (wedding, big overseas trip, etc)
– Someone is going guarantor on the loan or you’re purchasing through a family trust
– You’re buying off the plan, as the scheme has to be registered with the titles office
– You need to save more money as a buffer (especially if you’re upgrading or will be renovating).
You might push for a shorter settlement period when:
– You’re a seller who has already found another home
– You’re a buyer who has already sold your current home and needs to move quickly
– A holiday period or big event is coming up and you’re keen to move in beforehand
– You’d like to undertake work on the property sooner rather than later
– You need cash flow.
It’s important to get right
One-in-five property settlements in Australia are delayed by about one week so it’s important to give yourself a comfortable buffer.
While each party can request a settlement extension if a delay occurs, that doesn’t mean the other party has to agree.
This is where it gets a little tricky. Each state and territory has different laws, and every contract differs.
Queensland’s laws are probably the most stringent. For example, either the buyer or the seller can terminate the contract, sue for damages, and keep/lose their deposit if the other party is not ready to buy on time.
Other states have a little bit more leeway.
In NSW and Tasmania an extra 14 days can be given, in WA and SA buyers are given three days’ grace before penalty interest applies, and in Victoria a seller can immediately start charging a tardy buyer penalty interest.
So that’s negotiating a settlement period in a nutshell.
If you’d like to find out more about securing your dream home, get in touch, we’d love to help you out.
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